GFL Environmental Inc. Aktie

Thank you for joining us, and welcome to the GFL Environmental Inc. Third Quarter Earnings Call.

Before we begin, I would like to remind everyone that this call will include forward-looking statements within the meaning of applicable Canadian and U.S. securities laws. These statements are subject to a number of risks and uncertainties, including those set out in GFL's filings with the Canadian and U.S. securities regulators. Forward-looking statements are not guarantees of future performance, and actual results may differ materially from those expressed or implied in the forward-looking statements. These statements speak only as of today's date, and GFL does not assume any obligation to update these statements.

This call will also include a discussion of certain non-IFRS measures. A reconciliation of these measures can be found in GFL's filings with the Canadian and U.S. securities regulators. [Operator Instructions] I will now turn the call over to Mr. Patrick Dovigi, Founder and CEO of GFL. Please go ahead, Mr. Dovigi.

Thank you, operator. Good morning, everyone, and welcome to today's call. I'm joined this morning by Luke Pelosi, and together, we will be reviewing our results for the third quarter and updating our guidance for the year. The exceptional performance we delivered in the first half of the year continued through the third quarter, allowing for another top to bottom beat of financial expectations. The ongoing quality and durability of our operational performance, coupled with the closing of SECURE, allows us to raise our guidance for the third time this year and provides for an extremely compelling setup for 2027 and beyond.

Organic revenue growth accelerated 100 basis points over the second quarter, driven by core pricing ahead of expectations and 50 basis point improvements in both volume and commodity prices. Landfill volumes turned positive, including both C&D and Special Waste streams. Although we believe that construction development and expansionary manufacturing investment remain tempered, we remain well positioned to participate in the eventual recovery of these activities. Volatility in fuel prices continue to impact revenues, costs and margins. Third quarter diesel prices accelerated another 10% over the second quarter and were over 60% higher than the prior year. Our fuel surcharge mechanisms have proven effective at recovering the direct impact of higher diesel costs, although we are seeing a greater degree of indirect cost increases coming through transportation, spare parts and other cost categories.

Our industry-leading margin expansion would have been significantly greater if not for the impact of these fuel prices. Nonfuel-related cost of sales and SG&A cost intensity trended lower on a year-over-year basis for the seventh consecutive quarter and was achieved despite headwinds from M&A and higher landfill operating costs. This ongoing trend highlights the positive impacts from continued improvements in labor turnover and our ongoing focus on cost discipline. These benefits are in-part rising from process optimization along with the realization of self-help opportunities across our portfolio. Nowhere are these impacts more apparent than our adjusted EBITDA margin, where we delivered an industry-leading 125 basis points of underlying adjusted EBITDA margin expansion. To be able to raise our margin guidance for the second time this year despite the challenging macro environment and significant headwinds from fuel costs is a testament to the effectiveness of our strategies.

The third quarter also saw us closing of the SECURE acquisition. When we underwrote the acquisition, we were impressed with SECURE's market-leading platform of a difficult to replicate critical waste infrastructure asset in the familiar and attractive Western Canadian market. The transaction was also highly financially compelling, accelerating the achievement of our multiyear financial targets we laid out at Investor Day and enhancing our balance sheet and free cash flow profile to allow our maximum capital deployment flexibility. Since the time we announced the acquisition, we believe that the macro outlook for SECURE's business and the markets in which it operates in has materially improved and should provide for further upside to our investment thesis over the medium and long term. Integration of the SECURE business is well underway, and we remain confident in the ability to achieve the $25 million of underwritten cost synergies in the near term with opportunity for an incremental $25 million to $50 million of previously referenced synergies around disposal and cross-selling.

In addition to SECURE's physical platform, we are equally excited about the people and talent that have joined our team. As previously announced, Allen Gransch was appointed to our COO on September 1. Allen brings a proven track record of operational excellence that directly complements our long-term growth strategy. Across his nearly 20 years at SECURE, Allen was instrumental in establishing and implementing the company's strategic direction, including leading through transformational change, driving operational execution and building high-performing teams. Allen's proven leadership capabilities, extensive experience overseeing a large-scale diversified waste management platform and his broad skill set will make him exceptionally well suited to advance GFL's operational and growth goals.

Furthermore, with Billy Soffera staying on in the senior strategic adviser role, we will continue to get the benefit of his deep expertise as he remains actively involved in leading many of our corporate-wide value creation initiatives.

Before I pass the call over to Luke, I will walk through the quarter in more detail, I want to take a moment to discuss the ongoing strategic review. You would have read in the press release that the special committee has provided bidders with a final deadline of November 9 to deliver their updated proposals. I will tell you that we have undergone a very thorough process. We always find it useful to have highly sophisticated third parties come in and take detailed looks under the hood of our business, fresh sets of eyes can be critical to the perspectives of what they view. And while we have found that such processes are time-consuming and disruptive, the strong interest from globally recognized institutions is a testament to both our team and the platform we have built. Assets of this scale and quality have scarcity value. The special committee in conjunction with their financial advisers are continuing to evaluate the best path forward for the company. We expect to have a decision very soon, and so stay tuned on that front.

However, regardless of the path forward, the confidence we have in absolute earnings growth year-over-year, medium and long term should be a source of material equity value creation. While the committee completes its review, our team continues to remain focused on optimizing our proven operating model, including delivering on the Investor Day commitments of achieving low to mid-30% adjusted EBITDA margins and free cash flow conversion in the mid-40% range. The quality of our base business has never been more solid. The risk-adjusted growth profile has never been better. We have the right assets, we have the right people. We have the proven effectiveness of our execution, and we are going to continue to win. And we are going to keep fighting until we've done so.

I'll now turn the call over to Luke to walk through the quarter and guidance for 2027.

Thanks, Patrick. Good morning, everyone. Looking at the details of the quarter, Q3 revenue grew 27% over the prior year, driven by a 5.7% price, a 50 basis point sequential improvement in volume and incremental contribution from both surcharges and commodity prices. M&A added nearly 19%, mainly from the Frontier and SECURE acquisitions. Q3 volumes were nearly flat or approximately $10 million better than the second quarter. At the beginning of the third quarter, the restructuring of a large multifaceted recycling contract in Western Canada removed our obligation to provide broker transportation services on a pass-through basis. This resulted in a $13 million reduction in quarterly revenue, albeit with minimal impact to profitability. Excluding the impact of just this one contract, volumes for the quarter would have been positive 60 basis points.

As Patrick said, the volume performance was supported by the return to positive volumes of both C&D and Special Waste [indiscernible] landfills. C&D landfill tons were up 4.5%, the first quarter of positive volume since early 2025. This result was helped by the onetime cleanup of a closed transfer station in Western Canada, but even absent that benefit, C&D volume was modestly positive. Roll-off pulls were flat in the quarter as activity remains tempered. As a result, our volume outlook remains cautious. Q4 volumes are expected to decelerate on the lapping of EPR transition contracts in Canada and exiting certain ancillary services in the Midwest with underlying base volumes remaining relatively flat to modestly down.

Third quarter cost of sales before depreciation, amortization and integration costs as a percentage of revenue improved 70 basis points, excluding the impact of direct fuel costs and over 100 basis points when factoring in indirect fuel costs as well. SG&A cost intensity also improved 70 basis points when excluding D&A and transaction costs. The ongoing realization of efficiency in labor and R&M costs as well as operating leverage on our Corporate segment continues to highlight the effectiveness of the cost optimization strategies we laid out at our Investor Day. As expected, fuel costs were a drag on operating costs and margins. Average diesel costs were up over 60% in the quarter and spiked even higher in the first half of September, which resulted in a $5 million headwind to our original Q3 guide. We now expect the impact of elevated diesel prices to result in roughly $125 million of incremental costs for the year as compared to our original guidance.

Adjusted EBITDA margin for the quarter was 31.5%, 30 basis points higher than the expectations and nearly flat with the prior year, which was the highest margin in our company's history despite the meaningful headwinds from fuel costs and M&A. Elevated landfill operating expenses, primarily tied to [indiscernible] transportation and disposal costs were also a headwind to margins. Excluding these headwinds and considering that improved commodity prices were a 20 basis point margin tailwind, underlying consolidated margins were up 125 basis points from the prior year.

Adjusted free cash flow was $272.5 million, over 50% greater than the prior year. This result was 15% better than guide, partially on account of the 1-month contribution from SECURE that was not previously contemplated. With the closing of SECURE and the ongoing quality of our financial performance, we are once again increasing our guidance for the year. Assuming current FX, commodity and diesel prices, we now expect the following amounts for full year 2026. Revenue of $8.055 billion to $8.075 billion, adjusted EBITDA of $2.49 billion to $2.495 billion and adjusted free cash flow of $1.02 billion, inclusive of cash interest of $455 million and net CapEx of $910 million. Adjusted EBITDA margin increases 40 basis points over our previous guide to 30.9% despite the significant headwind from elevated diesel prices, which are assumed to continue for the balance of the year.

Absent the run-up in diesel prices, full year margin would have been over 31.5%, an increase of more than 150 basis points over the prior year. As always, the updated guidance does not include the contribution from any further M&A in the year. Our latest guidance represents annual growth of over 20% in revenue, 25% in EBITDA and 35% in adjusted free cash flow, industry-leading growth metrics by a material margin. Even more impressive is the fact that our setup exiting this year gives us a high degree of visibility to produce similar levels of industry-leading growth again in 2027.

I will now pass the call back to Patrick, who will provide some closing comments before Q&A.

Keeping the prepared comments intentionally short today as we think the results speak for themselves. I will just reiterate that our focus is singular and our path forward is clear. We already have a great setup for 2027 and any improvement to the macro environment will be incrementally additive. I will now turn the call over to the operator to open the line for Q&A.

[Operator Instructions] Your first question comes from the line of Sabahat Khan with RBC Capital Markets.

I guess thanks for the comments on the -- where the process stands. Maybe for you, Patrick, I guess, ultimately, sort of you founded the company, have a sense sort of how the process here evolves. Maybe if you can share some thoughts on ultimately what do you kind of want to do here? What are your thoughts on the process that's going on?

Yes. I mean, good question. I think ultimately, we want to keep winning and having fun, whether that's sort of publicly or privately. I think when I look back, we're coming up on our 20th year anniversary, and we were actually reminiscing the last few days just in terms of how the company was founded and went out to one of the original sites, and that was employees -- I mean, it's amazing. The same employees are there that were there 20 years ago when sort of acquired the first business, went back to the same scale that I used to work at on the weekends that you look at what's been built here, it's an exceptional team. And I've looked at -- gone back and sort of scratch my head and looked at the original private equity partners and sort of Genuity and Healthcare of Ontario pension plans and then [ Jeffrey Keenan ] and [ Neil Aaronson ] at [indiscernible] backed us and then [ Scott French ], [ Mark Rubenstein ], [indiscernible] backed us with the HPS team, which is now sort of at BlackRock, and then you had Ontario [indiscernible], GIC and BC Partners backing us in sort of 2018 as private companies. And I look at the returns that were generated for private equity shareholders and us alone. And I think they believed in this management team and had the philosophy that winners win and winners will continue to win. And whether that's -- whether we do that publicly or privately, I think that ability is there for us to continue winning. And I look at us going public in sort of March of 2020, the tombstone on my guess, first trade was just over $17. And today, we're roughly 3x higher than we were in 2020. So it's worked publicly as well. I mean I think the challenge in the public market is sometimes you have to make unpopular decisions for the short term. And I look back to this year, secure for some just not knowing what it was, was maybe an unpopular decision, and we had to do that over the last number of years.

But over the long run, and I think if you look at the equity value that's been created for our shareholders, it's been substantial. And sometimes those unpopular decisions are unpopular in the short term, but over the long term, we're going to continue to drive material equity value. And so selfishly as a private company, us and the management team would make a lot more money. We would probably have to not manage the quarter-to-quarter movements if we had opportunity to spend a little bit more on CapEx because that was the right thing to do or do a little bit more M&A and bring up leverage temporarily. That makes the business easier to run. The contrary to that is the liquidity opportunities that exist in the public markets. And I look back, it would have been very difficult for us to execute on SECURE if we were a private company. So those are the negatives of that.

That being said, when prices get dislocated like they were for a long sort of period of time, listen, there's a lot of smart capital sitting on the sideline that identifies winning management teams with a winning business in a great industry that they don't get the opportunity to buy those often. And I think I look at the stock price today, I mean, when we give the sort of breadcrumbs for 2027, like Luke was sort of mentioning you're going to get into. I mean, today, the business is trading at somewhere between 12x and 12.5x 2027. You just can't buy businesses of that size and scale for 12x to 12.5x. And you look back to what we've done since 2020, even going public, when we went public, the business was roughly $950 million of EBITDA. Today, the public company is about -- for 2027 is going to be about $3.125 billion to $3.150 billion in that sort of range. You have our ES business today, which we look at sort of the budget for 2027, roughly a $675 million EBITDA business, of which we own just under 40% of. And you have the GIP business today that's roughly for 2027 is going to be roughly $350 million of EBITDA. So you put all those sum of those parts together, we took $950 million of EBITDA and grew to almost $4 billion of EBITDA over the last 5.5 years to 6 years and tripled the stock price in an environment where we think the stock from a multiple perspective is materially undervalued.

So listen, I sit here, I said a lot, again, at the end of the day, this management team is going to continue winning and having fun. When I look at now the secure platform that we've added and what's happening in Western Canada, what's happening all over Canada. We just have multiple levers that are going to drive incremental value over the coming years. So whether that's public or private, either way, we're going to win. And when I look at free cash flow per share in a normal growth algorithm over the next 5 years, there's no path to which I don't think that free cash flow isn't close to a double. So free cash flow doubles over the next 5 years, what is that going to do to our sort of equity value if we remain a public company. And if we go private and because that's the decision that the special committee makes to bring that to a shareholder vote, then we have -- again, we've lived that world for 14-plus years as well, and we know what that entails. But I think I'm fine either way.

I think there's been a lot of great shareholder engagement, which has been great. We have a lot of great shareholders. And albeit some have different perspectives, they're all very valuable -- input that they have. And you have a very core group of shareholders that obviously who may have a little longer-term thinking in the back of their head and again, see the path forward to that there's material equity value creation sitting in front of them. And then you have other shareholders that might be a little bit short term that are prepared to take some capital at a lower price off the table and find the next opportunity. So the shareholder engagement we've had over the last couple of months has been excellent. And it's been enlightening. And the best part is everybody has been very supportive. So we'll see how it unfolds over the next week. But from my perspective, either way is a win, some pros and cons on both sides, and we'll see where it goes. But it's been a great exercise to go through anyways with these people sort of looking -- taking a deep dive in the business. So we'll see what happens.

Great. And then maybe just following on the last comment there, I guess, with the new sort of fresh eye that you alluded to taking a closer look at the business, has there been sort of anything uncovered in the business that you and the management have learned? And then maybe just on sort of the feedback from your shareholders, is that kind of the bigger buckets some are thinking maybe longer term, this thing thing public. Can you maybe just show us some additional color on what sort of the shareholders are coming back to you with as the process has gone on?

Yes. Listen, I just look at -- again, when you have world-class investors that see businesses across multiple sectors, I mean, their input is valuable, right? And I just look at a couple of tools that were flagged to us just in terms of when they bring in, again, not mentioning names, but they bring in sort of a Chief Revenue Officer of one of another strategic that is now working as a consultant and coming in and looking at our -- looking at our overweight charges, there's significant pricing opportunity still within the base business. So that, again, gives us a high degree of confidence that there's significantly more upside here.

Implementing tools like [ Harvey ] on contract management and keeping customers accountable to their contracts, et cetera, or we were just using it specifically on the legal side and picking other tools that will just -- again, all things that are just additive and incremental to our business that will make our business better. And which again just gives us more confidence in terms of the operating plan sort of moving forward. And again, going back 6 months, not to sort of harp on this, but the initial reaction when we bought SECURE was negative from some of the shareholders that really didn't understand Western Canada or the SECURE assets you had some of these organizations that were out actually looking at that opportunity independently because they love the scarcity value of those assets and the business that was being built and the amount of organic opportunities that existed to put capital at high returns on invested capital organically sort of in Western Canada. And again, sometimes you need to -- in order to be good, you need to be lucky, and we're a little bit lucky just given the timing of when we did the SECURE acquisition and then what's happened in the macroeconomic backdrop with the Middle East and Iran. And now with -- as everyone is seeing with our new Prime Minister in Canada, parties want to make Canada an energy sort of superpower and sort of break down the barriers of the red tape that we've historically had in Western Canada to be able to sort of expand that and put Canada back on the map again.

So that will create sort of incremental opportunity. Again, for us, that wasn't underwritten. So all those things give us a high degree of confidence in the plan sort of moving forward. And I think, again, going back to your point on shareholders, yes, you have top 10 shareholders, again, some longer-term thinkers and other shorter-term thinkers. Think shorter-term thinkers happy to take less money and sort of move on and look for other opportunities versus some of our Page 1 shareholders that have a perspective that GFL is worth sort of well into the 60s. And if you're going to continue executing on a plan, which they have no reason to believe we won't, given our track record over the last 20 years, both on the GFL side and now the recently acquired SECURE, that's going to yield an exceptional result as well. And again, free cash flow doubling over the next 5 years per share, again, you can do the math on what that does to the equity value. And if we get the multiple expansion that we believe we deserve as we come out of this potentially this AI trade that has affected the entire sector over the last sort of 12 months, I mean, I think you're going to have a winning successive public company as well.

But yes, I think it's been great to have the interaction with shareholders. It's been great to get new eyes on the company and have a lot of great discussions with new shareholders, both in sort of Canada, U.S. and Europe as well as Asia and the Middle East. We've had just a lot of great dialogue, and it's great to get a lot of that out there and put GSL on the map with a lot of different investors. And I think, listen, whichever way it goes, we're fine. And it will just -- but we want to bring the process to finality and sort of move on with whatever the decision that the committee and one of our largest shareholders decides to make.

Your next question comes from the line of Tyler Brown with Raymond James.

Just curious on how we should think about pricing into next year. I mean it sounds like you got some inflation creeping back in, particularly in indirect fuel. But how should we think about maybe pricing accelerating into next year? Because if I read between the lines, Patrick, it seems that maybe the take-private diligence has increased your conviction on pricing opportunities longer term? Just any thoughts there would be helpful.

Yes. I mean I think we have identified sort of incremental opportunity. As you know, we like to under-promise and over-deliver. And I think that's just another lever for us to continue doing that. And again, like I said, when we look at the sort of value creation opportunities that we laid out at our previous Investor Day, I think as we -- just again, as AI tools continue to come on, as incremental pricing opportunities continue to come on, again, that's just additive in sort of terms of the long-term plan. And maybe that -- while it was going to wind down in sort of '27, '28, those initial equity value creation plan, maybe we can [indiscernible] extend them with some of these sort of incremental opportunity and some of these other incremental AI tools that will allow us to, again, have a deeper dive into our actual customer base, looking at what each customer contract has, what we're allowed to do under each one of those contracts and summarizing in a form that allows us to basically better manage our business. And I think this is just relying on tools that are coming to the market. Every day, there's a new shiny object, but we're just trying to focus on the four or five things that will actually create that value without a lot of disruption.

Tyler, I'd just add sort of Patrick's comment. If you think about the upside incremental price we articulated originally, we said it was $40 million to $80 million to capture over the next sort of 3 or 4 years. That's what we had said at Investor Day. I think what Patrick is suggesting and we're feeling highly confident is that price is something greater than that. Now the ultimate magnitude will sort of remains to be seen. But I think between '25 and '26, you're seeing our out-performance as we are realizing those, what I call, surcharge opportunities.

Now going into '27, you have to remember this year, we're getting meaningful support at the price line from some of this EPR-related transition, right? And that you're going to lap in '27. And so I think you kind of got to back that out of your calculus. If our headline price this year is going to be a [ low 6 number ]. If you were to back out the EPR benefit, that would be more sort of low 5 to mid-5 number. So I think in a headline number, you might not see acceleration. But underlying, we continue to see an opportunity to take our normal course algorithm of pricing at a spread above our cost inflation and then achieving something greater as we are catching up to parity with where our peers are. And I just think the runway for keep adding something greater keeps sort of getting extended as we're sort of going out.

Okay. Yes. That is extremely helpful. And then, Luke, just in the release, you guys reiterated your commitment on getting to that mid-40% free cash conversion that you guys laid out at Analyst Day. If I look at your guide for '26, it looks like you're going to be around, let's call it, 41%. And if I put the pieces together, it's a little bit scary, but if I do, maybe that's like 43%, 44% next year. I don't know if you could confirm that. So when we talk about that mid-40s, is that more a 45%, 46%, 47%? Or what is the art of the possible in that number over the next few years?

Yes, it's a great question, Tyler, and you've always been good at math. And we think that is the sort of direction of travel. Now I'll just caveat this year's number of 41%, you're getting the last 4 months contribution of SECURE, which has like working capital recovery and a little bit of sort of abnormality because it's not a full year, right? So I think if you really the pro forma where we're at today, you're probably more at a 39%, 40% number exiting this year.

Now we go into next year, we think there's going to be expansion on that. Now I will have a ramp in cash taxes as becoming a larger cash taxpayer. But I see the path of next year being in that sort of 41% to 42.5%. I think that's what we had articulated pro forma for SECURE to be. And we'll continue to grow from there. I mean if you think about the whole 2027 framework, this year's growth being 20% revenue, 25% EBITDA, 35% free cash. With the setup going into next year, you have the opportunity to almost sort of replicate that. And you think about that, I mean, the top line growth organically is going to be mid-single digits. Now the exact pricing number, exact volume number remains to be seen, but that's going to be a number greater than 5%, right?

You think about the M&A rollover already in hand, you sort of have 15% in hand. So you're entering '27 with a 20% plus revenue number. If our '26 guide is $8.055 billion or $8.65 billion, 20% growth on that in the next year, that brings you to a $9.7 billion to $9.8 billion number, right? Now if you look at the margin line, what we have said and continue to prove is we have industry-leading organic EBITDA margin expansion. So if the industry has been doing 30 to 40 basis points, we sort of do 2x that, putting you at a 50 to 60 basis point organic margin expansion. The rollover impact of Secure should be roughly another 30 to 40 basis points. You have already a setup for, call it, 100 basis points of margin going into next year. That takes this year's 30.9% closer to 32% for next year. So if you take $9.7 billion to $9.8 billion of revenue at 32%, that should be that $3.12 billion of EBITDA that Patrick sort of referenced in his sort of commentary.

And then if you apply that sort of 41% to 42% free cash flow conversion, and that's just assuming the normal course drags the EBITDA across CapEx, interest, et cetera, that puts you at like a $1.3 billion plus free cash flow number. And I think there's a high degree of conviction in that, and it just sort of grows from there. So we're feeling very confident in that framework we previously laid out. And I think with the avenues of upside we keep speaking to as you get to '28 and beyond, I'm not ready to sort of cap what that ultimate free cash flow conversion number could be because I think there's runway to keep going north.

Your next question comes from the line of Kevin Chiang with CIBC.

Kevin, I'm not sure we can't hear you. Maybe you're on mute.

Can you hear me?

Yes. Now we can hear you.

Perfect. You've alluded to this a few times, just the upside to SECURE given some of the opportunities in Western Canada. Just wondering how -- if you're able to frame that as you think of what that upside could be relative to what you thought at the time of acquisition. If you look at some of the projects being proposed and if all goes well, let's say, you could have a 50% increase in kind of crude oil egress. One, is there a way to frame that upside? And then two, how do you think about your own capacity within SECURE to absorb that growth? Or does that require incremental investments as these development projects move forward?

I think it's a combination of both. Obviously, the waste assets we own can continue handling more volume generally. So again, that is just sort of all incremental upside. And I think Again, what Secure did very well, which I think was underappreciated by the public markets was the amount of opportunity they had to deploy capital with very high returns for their customer base. And as their customer base continues to expand operations, that affords the ability to deploy incremental capital into incremental opportunities at sort of high returns. And, again, East West pipelines, North South Pipelines, again, that is just going to be plus coupled together with some of these LNG projects and terminals, all of those are just going to drive incremental activity in Western Canada. And can I quantify that exactly today?

No. Do I know for sure that that's going to drive incremental volumes? Yes. I mean, we've seen this movie before. And not only [indiscernible] only help the SECURE business, but it will help all of the industry in Western Canada because it just, again, the macro sentiment in Western Canada, when it's positive, the flood gates open. And I think from a macro perspective, you're going to see a lot of great activity, not only around sort of our business, but even sort of whether that's in the Lower Mainland or whether it's in Edmonton, Calgary, et cetera, just that is going to drive incremental volumes and activity throughout the entire sort of region. So again, that was never the thesis for doing the acquisition because we like to on its own. But I think sometimes, like I said, in order to be good, you got to be lucky. And I think just given what's happened in the Middle East and some of that tension, I think that's -- and what's happened, obviously, with the U.S. and tariffs and the Canadian government now looking to sort of focus inward versus outward, that is driving sort of incremental opportunity. And we're seeing some of these opportunities already.

I think the challenge for us, going back to being a public company, you go back to being a private company, public market is very prescriptive in terms of how much CapEx you can spend in a year, et cetera, growth versus maintenance, et cetera. But I think we have to look at these opportunities as the same way we would look at an M&A transaction. And what are the returns, what are the paybacks and bucket some of these growth opportunities potentially as an M&A transaction, maybe you dial back some of your M&A spend to deploy more capital into some of these organic opportunities that we see that ultimately will drive higher returns on invested capital. So that's something we're thinking about and looking at as a company. And we -- listen, we are going to continue doing what's best for shareholders and what's going to drive the sort of highest return for our shareholders, again, whether sort of public or private. But again, those opportunities are going to continue to persist, not only in the secure book that we acquired, but also within our existing book, particularly in Western Canada.

Kevin, I'd just add, when we underwrite acquisitions, and maybe this comes out of our days of sort of higher leverage, while we look for upside cases, we really want to diligence downside cases, right, and see what that could be in a really draconian negative scenario. And for SECURE, while we very clearly articulated in the performance has shown, they don't -- not exposed to short-term volatility the downside risk was if WTi went down below $50, $45 a barrel for extended periods of time, that would, in time, lead to sort of lower production and activity in that part of the world, which could in time degrade earnings.

I think where we sit today have the benefit of a very high degree of confidence that over the near, medium and probably longer term, the opposite is going to be true and the level of activity and production and therefore, opportunity for SECURE assets is greater than otherwise. So to Patrick's point, quantifying what that upside looks like today is -- we're not prepared to do it, but it's something greater than what our underwriting case was, and we were really happy with our underwriting case.

Yes. And when [indiscernible] and Allen founded SECURE back in 2007, the actual year we started, remember, they started with nothing as well and organically built that business. So I mean, I think underappreciated how exceptional the team is there in looking at and identifying organic opportunities to build and scale that business. So again, you will see over the long run that this -- all of these -- if you look at all the regions we're operating in today, 10 provinces in Canada, 26 states in the U.S., we have a very unique ability here over the next number of years to really win. And I think you're going to continue seeing us deliver these type of results sort of year-over-year.

That's helpful. Maybe just a follow-up. Luke and Patrick, you've highlighted a strong organic growth pipeline and levers as we exit 2026 here. Just with the bigger EBITDA footprint, the step-up in free cash flow conversion, you painted, call it, a normalized M&A year being roughly $1 billion of capital deployment. Does that change next year, just given the improved liquidity profile, given some of the acquisitions you made in 2026?

Yes. If we continue to be a public company, depending on the stock price, I think moving into '27, you now have the unique ability to add share buybacks into a more material way in the sort of capital allocation plan. So yes, I mean, that's the beauty of the inflection point of where we are. If you look at the free cash flow growth and ramp, I mean, I think we have the ability to do a multitude of things just depending on where we are sort of in the cycle. But yes, I mean, in theory, for sure, again, if we look at the M&A and the organic opportunities that we'll have in sort in Western Canada, we will have materially more capital to deploy with the free cash flow profile now of the added SECURE business into the sort of portfolio. And as our business continues to grow, we'll sort of look at that. So I think we have multiple levers available to us in order to pull depending on what the situation is at the time.

And Kevin, I mean, as you're well aware, but now with the enhanced size and scale, the leverage impact of capital deployment is far more muted than it was before. And just illustratively, all other things being equal, if you end '26 at mid-3s leverage through EBITDA growth and free cash flow generation, you would delever sort of 30 basis points, 40 basis points going into next year and coming down to sort of a lower 3s number. If you deployed $1 billion into M&A of 8x just for round numbers, that would impact leverage by 15 basis points or 18 basis points. And so just to say the balance sheet capacity to now do that incremental capital deployment has never been greater. And so I think to Patrick's point, just providing us maximum flexibility in being able to execute on our strategies while very squarely adhering to the newer leverage philosophy that we adopted a couple of years ago.

Your next question comes from the line of William Grippin with Barclays.

My first one, and I get this may be difficult to address, but Patrick, you referenced in the past that sort of having visibility to kind of a path to monetizing this incremental equity value creation in the case of a take private, was kind of an important factor for you and I think the company. But I'm just curious, how are you thinking about the possible options and maybe how that could be structured now as this process seems like it's progressed a bit further?

Sorry, I'm not understanding the question. Monetizing what, sir?

Realizing this incremental equity value creation, right? You had in the past talked about maybe [keeping] IPO in the business if it gets [indiscernible] right?

Yes. So I think -- I mean that's the question. I think some of these -- if you are going private, I mean, that's obviously a big question in terms of do you create all this value sort of over the next 4 to 5 years and then take the business back to market and then public investors would miss out on that sort of value creation over the next 4 to 5 years and get the business back when it's probably 2x the size, right, if that's a path.

Or I think what's -- I think as these private vehicles get more sophisticated and it's more sort of long-dated non-closed end funds where it's sort of perpetual equity in continuation type vehicles where the money is just -- there's no closed-end fund nature, maybe the business actually never goes back to the market, right? So -- and then just given the amount of free cash flow that the business generates, you could find ways to continue [indiscernible] down stakes to incremental LPs as they come in at sort of different times. So I think that's always a challenge in a go private, one of the negatives. I mean the liquidity, like we talked about, is one of the positives of the public market. The negative part of the private markets is there's less certainty on sort of liquidity at various points in time. Now that's more of a Patrick issue.

I think that is solved for employees in other ways. I mean we've done that for 14 years. So this is not an employee issue. This is just like, hey, how do you monetize sort of your 28-plus million shares over time? I'm not a seller, so not really 47 years old. That's not really -- I'm not looking for Freedom 55 or Freedom 65 yet. So -- but I think over time, you need to think about that in the event that was. But I think there are products available that allows for that under these new constructs.

All right. I appreciate that color. And my follow-up here, you referenced an increase in Landfill operating costs in the prepared remarks. It's not the first time we're hearing about that this quarter. I'm just curious sort of what are the drivers there? And how are you thinking about your ability to recover those through price and to the extent there's any lag potential margin impact?

Yes. Well, I mean, I think starting point and a lot of people talking about leachate, it was very wet in many areas, right? And that's just a quarter-over-quarter difference that Michigan had x inches more rain than last year that can drive incremental leachate. So that's part of it. But I think what you're also just sort of seeing is as leachate management processing leachate is becoming more front and center, people are getting more sophisticated with where leachate should be going. Sometimes that's incurring further transport costs to get it there and the sort of light. So I think this quarter isn't necessarily reflective of a structural material ongoing headwind. It was about $6 million in this quarter. maybe sort of 3/4 of that is, call it, more sort of timing onetime and sort of 1/4 of that cost is just sort of incremental cost of [ trans ] and processing. But I think we have the benefit in an industry that we all sort of suffer the same fate, if you will, and that as incremental [ regs ] or other reasons drive operating costs higher, we need to recover those.

And you'll see us through our various pricing and other mechanisms ensure we're getting appropriately compensated for these sort of critical services that we're providing. So I think longer term, like anything, incremental sort of cost will just add to the broader base of cost inflation on which we use to set our overall pricing. But in a given quarter, you can get some mismatch between that cost incurrence and subsequent price recovery. But in time, I wouldn't expect you to have the same sort of headwind that you had and you'd be pricing above your cost inflation as we do for all of our costs.

Your next question comes from the line of Trevor Romeo with William Blair.

I had one on SECURE kind of the performance in the quarter. I was wondering if you could maybe talk about how much it contributed in terms of revenue and EBITDA. And anything you can kind of say on the maybe volume price split or just the core Disposal business versus maybe some of the other businesses in the quarter?

Yes. So I mean, again, we have 1 month of SECURE revenue contribution. It was around $150 million of revenue. It was just over $50 million of EBITDA, so sort of call it mid-30s plus EBITDA margins. You had that $25 million to $30 million of the free cash flow performance came from SECURE. Now sort of 1 month, I don't think is actually reflective, right, from a CapEx timing, working capital timing, et cetera. But I think the contribution, SECURE's profile for the year was they're going to do sort of $550 million of EBITDA and $1.5 billion of revenue. And I think they're very handily positioned to sort of being able to deliver that.

The distribution of that revenue across their Services is as we've previously sort of articulated, is a small sort of percentage of overall profitability coming from the sort of other lines of Specialty Chemical and Energy Infrastructure, but the majority of those revenues is the typical sort of waste and waste processing. And so I'd say sort of right in line with expectations. the team's Q4 outlook is in line with expectations, and we're finalizing budgets into 2027, but everything is turning out as anticipated with the opportunity for upside that we were previously speaking about.

And then maybe just a quick follow-up on kind of the -- follow-up, I guess, on M&A looking into next year and beyond. I mean if we're kind of thinking about a higher interest rate world, just curious for your thoughts on maybe how that influences your kind of aggressiveness on M&A as well as maybe the willingness among targets to sell if that's another incremental headwind for them. Is that kind of an incremental positive for you with maybe more targets coming to market?

Yes. I mean I don't think it's material enough that it really affects that much. I mean, yes, been move in interest rates. But when I look at our borrowing costs, like sort of in a worst case today, you're probably 100 basis points to 125 basis points wider today than you were maybe 6 months to 8 months ago. But from our perspective, that's not a forever thing, and we have mechanisms that I think can reduce that with swaps and other things sort of longer dated as well. So again, it's something to think about. I don't think it's sort of that material.

And I think when I look at some of these larger recent sort of businesses that have come to market that are sold on sort of the ES side, I mean you have ES businesses still continuing to trade at large size and scale between 13x and sort of 15x depending on sort of the market. And so I don't think it's really materially affected values all that much. But yes, something you obviously keep in consideration. And I think if we think there's going to be perpetually higher rates for a long period of time, then that may factor into that. But again, when we look at running that model, we obviously -- when we're looking at our returns, we model in what the actual cost of capital is. So it does get factored in and -- but we have to take a longer-term view on what we think rates are going to do. But yes, it factors in.

Your next question comes from the line of Stephanie Moore with Jefferies.

Maybe taking a step back, and I appreciate all the color you provided so far on this call. But let's just say if it does turn out where GFL ultimately remains public, I guess what should investors expect the next chapter of the company to look like? I guess, thinking what are the key strategic and financial priorities that you think can help drive the re-rating you believe, I think the company deserves?

Yes. Stephanie, it's a great question. And I think the reality is whether it's a sort of public vehicle or private vehicle, our path forward is relatively the same under both. And it's really executing on all that we articulated at the Investor Day and more. And I say and more because today, we've largely achieved those sort of 3-year targets we've put out. So we're just sort of resetting and going into higher levels from there. But it starts -- as I've said, always you think about the algorithm and start with the top line.

Patrick articulated this. But the industry has a very sound and stable top line organic growth algorithm. And we believe we have an idiosyncratic opportunity to do better than that very attractive industry algorithm as we benefit from the self-help that's available to us. Now that's mostly from price. But you've also heard us say we believe our market selection should drive incremental volumetric opportunities as well as we benefit from the fact that in the Western Canada, what should be passing there over the next sort of medium -- near and medium term. And then the U.S. Southeast where a preponderance of our business is just as a demographic benefit of being a place where sort of people are moving to.

So we think top line have a right to sort of win there organically. And I'll speak to all this organically before I talk to M&A. Then you look at the EBITDA margin side. I mean, if you think about our EBITDA margin performance over the past, call it, 5, 6 years that we've been public or 10 years, you want to take, I mean we've continued to produce outsized EBITDA margin expansion as we've demonstrated the efficacy of our strategies. And we see runway to sort of keep doing that. right? I mean you think about our results today, achieving -- I just gave a guide for '27 or these bright crumbs there, too. You're very squarely past the low 30s and moving towards mid-30s, and we see a lot of runway to sort of keep going there. The most exciting part of it for us is this inflection point that's been reached though at the free cash flow level, right? And really what that is, is now that you're sort of past the de-leveraging hump, if you will, as you go forward and you sort of effectively maintain an interest expense intensity on a relatively sort of flat basis to diminishing, you're getting significant idiosyncratic torque at the free cash flow line that is available for GFL and GFL alone.

And so you put that all together over the sort of next 3 years to 5 years, as Patrick suggested in the prepared remarks, you don't need to believe a lot to see close to 2x in the free cash flow per share level over that sort of period of time. And that is really what the next chapter is. We've built the business together pro forma with SECURE, we now have the balance sheet scale and the free cash flow profile to be able to very squarely execute capital deployment strategies without any longer having to be tempered by the sort of leverage considerations and just doing more of the same and now doing so with a sort of best-in-class asset base and a management team that has proven the effectiveness. We welcome Allen to the team that brings incremental horsepower, and we're just very excited and confident in the sort of go-forward opportunities to keep doing all of the items that we've articulated.

Your next question comes from the line of Bryan Burgmeier with Citigroup.

During the prepared remarks, you flagged $125 million, I think, in inflation from diesel. Just curious how much of that you expect to be kind of passed along effectively in 2026? And then if you see any kind of lingering catch-up in '27?

Yes, Bryan Burgmeier, great question. So if you look at it on direct diesel costs, what we sort of pay for the, we have about $100 million to $105 million incremental cost. And then indirectly, we calculate, and this is like third-party transport providers, et cetera, about another $20 million, $25 million. So you got about $125 million of cost. We're going to recover this year about $105 million, $110 million of that. So you have this sort of $20 million, $25 million exposure, which is really a function of those quick ramps, right? Because you take a month like September, where diesel jumps up very quickly mid-month, you have that sort of exposure, you don't get to recover it and ultimately until it rolls over. So we do feel confident in time when diesel rolls over, assuming that, that happens, you will recover that incremental $20 million, $25 million. But if you think from a margin profile for the year, we estimate diesel cost, and it's really that $25 million exposure plus the recovery of the other $105 million to be roughly a 75 basis point margin headwind this year. If we would have had full recovery, that would have been a 40 basis points, 45 basis point margin headwind.

I think that's consistent with what some of our peers have spoken about. And I think that's more a reflection of the maturity of their recovery programs. And that's just more opportunity for us. So we do feel confident that we will recover that when it rolls over. And as we continue to refine and mature our own surcharge programs, we'll be even sort of better protected as we go forward. But ultimately, diesel rolling over will be a margin tailwind for us.

Got it. Got it. Appreciate that detail. And then just maybe following up on Kevin's question. Is there anything that you would like to highlight on growth CapEx for 2027, maybe for either legacy GFL or Secure? I know it's quite a bit early -- so no worries if you don't want to comment. But Secure, I think, is spending over $100 million per year. So just curious if there's anything in the pipeline there.

Yes. I think that's probably -- we're still obviously looking through all the opportunities. I think legacy GFL probably has another $50 million to $75 million of the final ramp and sort of growth CapEx for sort of EPR and RNG. So that's winding down. And then for Secure, again, putting all of the opportunities in the blender, I think that's probably a safe number to continue to use. But again, like I said before, we're going to think about the growth CapEx spend similar to the way we would think about an M&A transaction at SECURE. And if there's high-growth opportunities with high returns on invested capital, we'll look at that exactly the same way we look at an M&A transaction, we'll bucket those spends together. And when we think about how we allocate capital, we'll allocate that in that capital bucket. So yes, so again, a lot of opportunity, still early days. But obviously, when we come out in February when we report Q4 and give detailed guidance for 2027, we'll have a better handle on exactly what we want to do.

Your next question comes from the line of Konark Gupta with Scotia Capital.

I want to go back to the strategic review process. And in fact, I wanted to understand in a simplified manner, I guess, like what's the process looking like? I mean how will it unfold here? You have November 9 as a deadline by a special committee. I mean if you see the bids and the updates come through by that deadline, like what's the next steps going to look like after that? And then will there be any potential, I would say, ebbs and flows or hurdles with respect to bondholders in that process? So any color [indiscernible] there.

Yes. I think these transactions are very complex. Again, we've done them multiple times. Obviously, a little bit trickier as a public company. As I've said over and over again, I'm not a seller. So I'm not really part of the process or the negotiation of whatever that is. You have other potential insiders that would potentially look at selling a whole or part. Again, that comes with its own set of complexities. And then you have a special committee that needs to arrive at a place that they feel comfortable that they can stand behind with their adviser in terms of coming up with what they believe is a number that represents fair value. So all of those things sort of have to align.

There's nothing more we can do as a company from a diligence perspective. People just have to arrive now at an answer that works or doesn't work. Like I said, I'm conflicted because at the end of the day, I'm not selling. So it's in someone else's sort of hands. And ultimately, that decision will be made. But the process from my perspective, has been very good on a multitude of fronts as a public company or a private company. Learning more about our business is always good. Having smart people looking at your business is always good. We've had a significant amount of engagement with our public shareholders that we probably wouldn't have had if it weren't for this process. And we've had a lot of dialogue with new potential shareholders around the company. So listen, it's been good. It's been a lot of work. It's been time consuming, coupled together with everything else we've been working on.

But no one in this organization shies away from hard work. And we're just going to continue doing the right things, and we'll see how the process unfolds over the next week. But from my perspective, management's perspective, we just want to get on with it. It's got to come to a conclusion, and we need to move on and sort of put the chapter behind us sort of one way or another. And that hence, the reason why sort of a deadline of November 9. I think it's not easy to get all these different groups together, and we've been in Toronto the last couple of days where everyone can actually sit down and have fruitful discussions and real discussions about sort of where things are at and what needs to be done. And hence, we put a pin in it. We feel confident that by November 9, we can put a pin in this one way or the other.

Okay. I appreciate the color there. And if I can just follow up, Luke, on the guidance bridge. So you can see -- I mean, your guidance has moved up on the back of recent acquisitions. So obviously, I mean, looking at -- if I look at the incremental margin on the guidance change, it's like 37% EBITDA margin and 59% cash flow conversion. I'm suspecting most of that is driven by Secure. Is there anything outside of SECURE that contributed to the guidance change for the full year?

Yes, Konark, thanks for the question. I mean obviously, a lot of moving pieces from the original guidance with where diesel has gone, FX has been bouncing around the recovery from commodities. But if you think about from the beginning of the year, if you think about the top line, originally, revenue was supposed to grow just under 6%, right, 5.8% was our original guide. And now we're saying it's 22%. So you effectively have 16% incremental revenue growth versus the original sort of guidance. So the 13% of that coming from M&A and 7.5%, 8% of that 13% or just under 15% is from SECURE. You have about 180 basis points from FX sort of the Canadian dollar weakening. And then left with like 120 basis points of what I call organic, right now that's mostly diesel recovery in commodities as price and volume are sort of a wash, right? Price is 40 bps, 50 bps better and volume sort of 60 bps, 70 bps negative. So a bit of a sort of wash. That's really what's happening at the top line. Now if you flow that down to the EBITDA line versus our original guidance, original guidance was just under 8% EBITDA growth, I think 7.8% EBITDA growth. And now we're saying 25% and change, right? So you have roughly 17%, 17.5% incremental EBITDA growth. So again, sort of 14.5% of that is coming from M&A, and that is a large contribution from SECURE.

You have 180 basis points again of FX, and you have roughly 100 basis point benefit from the commodity price. Diesel, as I was saying to Bryan, is about 125 basis point drag to EBITDA dollars for the year. And so again, that leaves roughly 100 basis points of just pure incremental organic EBITDA growth. And that's really the sort of margin piece that you have coming through. So obviously, SECURE is driving a component of this and taking that margin profile up. But there's a lot of other sort of pieces, including the underlying just organic margin expansion from a bunch of the cost levers and other optimization that we've been talking about on this call and previously.

Your next question comes from the line of Jerry Revich with Wells Fargo.

This is Jake Kooyman on for Jerry. So on the RNG EBITDA, I was just wondering whether you could comment on where it sits relative to the $125 million to $150 million range? And what are the in-service dates for the remaining facilities? And roughly how much RNG CapEx remains in 2027?

Yes. So I think we're -- again, like we said, somewhere between $50 million and $75 million. Some of that's EPR, but we probably have another $50 million to $60 million depending on the structure of the RNG projects. We expect the in-service dates for those to sort of come on late '27 through '28. And we have about half of that RNG EBITDA contribution in the P&L today and that other incremental half to come. over the course of sort of on through late '27 and through early '28.

Yes. I think the in-year -- so I mean, what we've said this year, $50 million in-year EBITDA [ in year ] from RNG, that's roughly right. We're actually a little bit behind, but directionally there. The next 4 projects that come on to Patrick's point, will be on the end of '27, probably no contribution in '27, just contribution in '28. That's another $40 million to $50 million of the EBITDA. And then the last 4 small projects is that remaining sort of $15 million to $25 million of EBITDA that comes on into 2028. And as Patrick said, the CapEx for that has mostly been manifesting through contributions into JVs, but the exact CapEx spend in the form thereof will be clarified for '27 guidance.

Your next question comes from the line of James Schumm with TD Cowen.

If you guys go private and then double the size of the business over 4 years to 5 years, can you talk about the challenges, if any, of going public again? Like you went through that process, I don't know, 6 or 7 years ago. How onerous would that be to go through that IPO process again?

I mean it's -- I always say it's very simple. It's -- again, while you have to have an operating plan, you can look at a business, you can buy a business, you can put whatever plan you want on a piece of paper, but then you have to figure out actually how you're going to monetize that. I think it's really just a function of how much leverage do you want to use as a private company. And I just say that's the biggest impediment to sort of going public and going public at the right price. I mean we live that. At the time when we went public with a $950 million EBITDA business when we went public in 2020, we do a very large IPO because the business we were operating the business of 6.5 to 7 turns of leverage. We had to use -- we had to do a $3 billion IPO, which is a very large IPO today. Now a large IPO 6 years ago to today, I mean, when you're talking about IPOs of $75 billion to $250 billion, maybe we're in a different market.

But from my perspective, listen, if the public markets want to see leverage somewhere between 3.5 turns and 4 turns, right, initially out of the gate, -- you just have to back off for what that looks like in terms of an IPO. And again, do you want to run the business at 6 turns of leverage and then have to do a -- take out 2 turns of leverage on an IPO and if the business is, call it, $6 billion of EBITDA, that means you have to fund to do a $12 billion IPO to de-lever? Or do you want to run the business with 4.5 or 5 turns of leverage where you only have to do a $4 billion IPO to get into that ZIP code where investors want to see leverage for the longer term. So again, you can [indiscernible] for that. You can underwrite that in your returns. You can -- do you have to run the business with 3.5 turns of leverage? No. But I think as a private company, you wouldn't run the business with 5.5 turns to 6 turns of leverage. I think you would keep leverage at 4.5-ish to 5 turns toggle between those as a private company. And then that sets up a very reasonable IPO if you want to re-IPO the business in 4 or 5 years.

The other thing is there is material free cash flow that comes off of this business, right? So you're going to have ultimately -- 1 turn of leverage doesn't do much. Like if you're thinking about an incremental turn of leverage, which is just call it $3 billion today, to borrow an extra $3 billion at sort of an interest rate of sort of 5% to 6%, you're talking about only an incremental $150 million of interest cost to run that incremental turn of leverage. It's not a material number. And the business still spits off hundreds and hundreds of millions of dollars of free cash flow at that, which would afford you the ability to delever and grow at the same time as a private company.

So a lot of different path, but nothing again, I think that's just the biggest impediment to maintaining that. And obviously, what you don't want is to have a bunch of scores to earth public investors today that think they were cited and then the business comes back to the market at 2x the value. So finding the fair value today would be a very important part because the last thing, I'm 47 years old, I have no interest in burning a bridge with public investors, although I believe it's trading at a material discount today. But again, those same anchors that are our top 10 shareholders today would have to be our same 10 top 10 or top Page 1 shareholders if you were going to re-IPO. So I think that's an important thing to do, and I'm cognizant of that, if that is the path chosen. So yes, that would be the only real impediment.

Okay. Great. And you actually answered my next question with that as well. Maybe just going back to the M&A, sort of what you're seeing there. Are you seeing any -- like we're hearing that maybe there's more -- and I'm talking about specifically Solid Waste M&A. Are you seeing more competition for deals on the Solid Waste M&A space? Are you seeing more like private equity competition? And is that sort of maybe driving up valuations?

I mean I've seen more private equity around ES assets with the recent run-up over the last 1.5 years, 2 years and sort of Clean Harbors execution and the fact that their multiple today is probably trading at a higher multiple than a bunch of the solid waste sector, which has driven confidence on the ES side that maybe on the Environmental Services business, things are where Solid Waste was maybe 15 to 20 years ago. So consolidation opportunities have stepped up.

Now that being said, I've seen valuations in that business move up on large-scale assets. I think if you think about businesses that are -- historically, what we do is acquiring businesses $1 million to $10 million of EBITDA, I haven't seen much of a change in that size of business. Where you've seen some change, I think, is in the upper end of the range when you're talking about businesses that are $75 million to $100 million of EBITDA where you've seen valuations step up because you have a private equity firm that could potentially get a management team and look to use that as a platform and then buy down that multiple with incremental less expensive M&A, right? So I think that's where you're seeing it. I don't really see it in terms of what our core business is and what we do sort of every day.

Your next question comes from the line of Shlomo Rosenbaum with Stifel.

Patrick, I want to ask you a little bit just about the impact of diesel more broadly. You talked about some of the indirect costs in terms of some transportation and some parts. But are you seeing any of that creeping into broader stuff like labor? And how are you thinking about that in terms of going into next year? We talked a little bit about pricing, maybe pricing coming down, and we've seen pricing come down since the last inflation run-up. But should we start to think that maybe that could start going the other direction in response to some potential inflation that's building because of the season?

Yes. I mean listen -- again, quick movements in fuel, knee-jerk, you're going to have to push through price. I mean I think going to Luke's point, annualized impact, probably $125 million, we recovered -- we will recover $95 million to $100 million of that. So there's a little bit of a lag sort of on municipal contracts and other things. I think like other businesses that have a transportation component to their business, again, whether it's parts, whether it's long-haul trucking, again, they're going to need to recover that. Those indirect costs will have to be recovered. So depending on what happens with fuel, yes, that could yield to incremental price that we need to put through in 2027 versus what we thought maybe 3 to 4 months ago.

But again, the industry whether it's [indiscernible] Connections, whether it's Waste Management, whether it's Republic, whether it's [indiscernible], whether it's the large independents or the smaller independents, we're all in the same boat. And I think the industry has shown a very good discipline around pricing and having to price appropriately to cover our sort of internal cost inflation. And you saw that through COVID as internal cost inflation declined, pricing came down. If inflation goes up, we will price accordingly, and we will do so in a disciplined fashion. No one is doing it in an egregious nature. And I think that's why people love waste. And you look at the results, again, Waste Connections printed an exceptional quarter. Waste Management, from my perspective, printed an exceptional quarter. I mean the industry is doing exactly what it's supposed to do in the face of whatever challenges is being thrown at us. A couple of years ago, it was labor. And now this year, it's fuel. And I think whatever gets thrown at us, we can handle and we can adapt to as an industry. And that's what we'll do.

Okay. Just for a follow-up, maybe, Luke, I think you talked about a $13 million contract that you exited. And I was wondering if you could give a little bit more of a description as to what it was. And it seems like it wasn't providing much profitability. So it sounded like it was somewhat empty calories. But is that the same type of impact of $13 million that we should expect or what's being incorporated in the guide for next quarter as well?

Yes, that's right, Shlomo. It's a contract where we provide a whole host of broad-based recycling-related services. We used to have a meaningful transportation component, whereby we were coordinating third-party [ trans ] and effectively just passing that through being a broker on that piece. As part of the restructuring of the contract, we're no longer doing that component of it. So although the $30 million of gross revenue is going away, the profitability of that was de minimis. And so you'll have that same impact in Q4 as well.

And so I think I said in the prepared remarks that Q4 volumes will decelerate and will be negative, but a big component of that is, again, just that $13 million again. And if you back that out and some other sort of puts and takes, you really have this base underlying volume kind of being sort of flattish.

Your next question comes from the line of Chris Murray with ATB Cormark Capital Markets.

Maybe just turning to some of the subs, especially GIP. When we listen to you talk about the process you're going through right now, I wonder if it changes your opinion of the Infrastructure business, especially as we've seen multiples in the construction space move up? And just trying to get a sense of what you would think fair value is on that. I know you guys mark-to-market the earnings, but just any thoughts around GIP or even the ES business would be helpful.

I think, again, multiples [indiscernible] with ES. I think again, the operating plan was very straightforward for that business. We had a 5-year plan, carved that business that was doing $475 million to $500 million of EBITDA inside the public company. Today, that over the last 1.5 years to 2 years has grown to $675 million. Over 5 years, we had a plan to grow that business to roughly $1 billion of EBITDA and have roughly 5 turns of debt on that business.

Now those businesses today are trading between 15x and 16x. So do I want to do something with that business today? Absolutely not. I think that would be very shortsighted given the operating plan and the plan we have for that business to continue growing that business over the next 2.5 to 3 years. But again, you run that math, take $1 billion of EBITDA, put a 15x to 16x multiple on that, will have roughly 5 to 5.5 turns of debt. There's, call it, $10-plus billion of equity value sitting there, of which we own 40%. If we buy it back at a fixed multiple of 1.8x, right, that we would owe the existing shareholders in that, roughly, you would have, again, $5 billion of debt, you would owe those other shareholders, roughly sort of $5 billion to $5.5 billion. You have $10 billion, you have $5 billion to $6 billion of equity value in that business in, call it, 2.5 years.

GIP, again, we carved that business. I was just doing over $200 million of EBITDA today that's grown to $350 million of EBITDA, has a very robust acquisition pipeline, a very large organic pipeline given the amount -- given where we've specialized our work, we've won multiple projects that are coming online. We recently got a quarry permitted in Newfoundland that's going to supply a lot of the Northeast into the U.S. all the way down to Florida [ corridor ] that will probably generate somewhere between $25 million and $50 million of EBITDA depending on how much volume we bring out of that quarry. There's just a lot of upside in that business. Again, planning to grow that to sort of $500 million to $550 million of EBITDA and then look to sort of, again, monetize a big chunk again. But again, we're 2 years to 2.5 years away from doing that on both of those businesses. Yes, you could do it sooner, but I don't see any reason why we would do that today and not continue executing that plan. And again, we just have -- again, like I said, I think between those 2 business over the next 2.5 years, you probably have in the neighborhood of $6 billion to $7 billion that will come back to GFL shareholders of value that will be created in those 2 businesses alone on top of the value that we create inside the public.

Your next question comes from the line of Adam Bubes with Goldman Sachs.

Wondering if you could just talk about your assessment of runway for M&A in the U.S. and relative attractiveness of the opportunities for Canada. And then without the public market scrutiny, how much M&A would you have the capacity and could you pursue based on the opportunity pipeline if you were private?

Yes. I think, again, if you're going to stay within the normal algorithm, right, if I roll out to 2027, I think between organic CapEx spend and M&A spend, you can -- and again, share buybacks, you could probably today, back of the envelope math, probably deploy $1.3 billion to sort of $1.4 billion and stay within sort of the leverage target that the public investors want. And over the next 3 years to 4 years, that as the business continues to grow, that number grows, right? So I think over the next 3 years to 4 years, that number will grow to somewhere closer to $2 billion that you could deploy, right? I think as a private company with -- if you had less of a focus on sort of leverage and maintaining those targets, I think that $1.3 billion to you could actually deploy somewhere between $2 billion and $2.2 billion a year, and that number would grow as the business grows.

So I think you basically have a $600 million to $700 million a year delta versus what you could spend as a private company versus a public company if you didn't have the scrutiny of maintaining that sort of leverage target. So I think that's really the real delta. And over a 5-year period, you spend an extra $600 million to $700 million, you're basically spending an incremental $3 billion over that period. And obviously, as a private company, you wouldn't be spending any money on share buybacks. So you could -- if you -- share buybacks that became a part of your capital allocation framework, you would be using that for growth projects versus share buybacks. So I think that's the real delta over the next 5 years.

Got it. That's clear. And then, Luke, you talked about adjusted free cash flow conversion potentially getting above 40% next year. When we just think about the flow-through to discretionary free cash flow, how much of that $1.3 billion of adjusted free cash flow could you actually realize on sort of an unadjusted basis? It sounds like there's $150 million, maybe plus million of CapEx. Any other big moving pieces we should be thinking about on that bridge?

Yes, Adam, we're going to have to wait to '27, as Patrick said, evaluating growth CapEx, that would obviously be a piece of it within Secure as you think about that bridge. But otherwise, ex that, you have the normal course items we've talked about before, right? You have leases coming off of that. We will have some integration costs, et cetera. So I think I know there's been focus on the delta between unadjusted and adjusted. This used to be a focus at our EBITDA line. And as our EBITDA grew, the relative impact of those adjustments staying flat on a degree of importance just diminishes.

And the same thing is happening at the free cash flow line now. I mean the overall lease and other costs that are a drag against that do not grow at the same rate as the free cash flow base, and you're going to get operating leverage on that. So you have to wait until '27 official guidance where we'll have the specific pieces.

There are no further questions at this time. I will now turn the call back to Mr. Dovigi for closing remarks.

Thank you, everyone, and I look forward to connecting with our Q4 results.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to GFL Environmental Inc. Second Quarter Earnings Call. [Operator Instructions] I will now hand the conference over to Patrick Dovigi, Founder and CEO. Mr. Dovigi, please go ahead.

Thank you, and good morning. I would like to welcome everyone to today's call, and thank you for joining us. This morning, we will be reviewing our results for the second quarter and updating our guidance for the year. I'm joined this morning by Luke Pelosi, our CFO, who will take us through our forward-looking disclaimer before we get into details.

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'll be making some forward-looking statements within the meaning of applicable Canadian and U.S. securities laws, including statements regarding events or developments that we believe or anticipate may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set out in our filings with the Canadian and U.S. securities regulators.

Any forward-looking statement is not a guarantee of future performance, and actual results may differ materially from those expressed or implied in the forward-looking statements. These forward-looking statements speak only as of today's date, and we do not assume any obligation to update these statements, whether as a result of new information, future events and developments or otherwise. This call will include a discussion of certain non-IFRS measures. A reconciliation of these non-IFRS measures can be found in our filings with the Canadian and U.S. securities regulators. I will now turn the call back over to Patrick.

Thank you, Luke. Our strong start to the year continued through the second quarter, yielding financial results ahead of expectations. Our ongoing exceptional performance in the face of an uncertain broader macro environment is a testament to the effectiveness of our growth strategies and the resilience of our business model. Moreover, the quality of our first half results allows us to raise our full year guidance for the second time this year. Once again, our price growth was ahead of plan.

The outperformance from pricing in the first quarter was driven largely by tailwinds from our recent growth investments and the ongoing realization of incremental pricing opportunities within our portfolio, which continued through the second quarter. We now have a high degree of visibility towards ending the year with pricing above 6%. Volume was also better than expected as a rebound in winter-related volume delays and EPR benefits more than offset the impact of lower C&D-related activity and special waste volumes.

Consistent with the first quarter, we believe the impact of broader economic uncertainty continues to be a drag on C&D volumes compared to prior periods, but we remain well positioned to participate in the upside when these volumes inevitably return. The significant rise in ongoing volatility in diesel prices have impacted margins due to the inherent lag in the fuel surcharge mechanism. The impact of elevated diesel pricing is seen not only in our direct fuel expense, but also in higher costs passed on to us from our third-party transportation providers.

Excluding the impact of sudden and significant rise in fuel costs, our operational and SG&A cost intensity as a percentage of revenue trended lower on a year-over-year basis for the sixth consecutive quarter. The ongoing realization of such operating leverage is a result of the growth and self-help initiatives we outlined at last year's Investor Day and was achieved despite headwinds from M&A and lower higher-margin landfill volumes.

The successful execution of our operational strategies more than overcome fuel cost volatility and other headwinds faced in the quarter. The team's relentless focus on pricing discipline, cost efficiencies and the ongoing maturation of our asset base is translating into industry-leading underlying margin expansion. Our Canadian segment realized adjusted EBITDA margins of 34% in the second quarter, the highest adjusted EBITDA margin the segment has ever achieved.

Consolidated adjusted EBITDA margins organically increased 35 basis points over the prior year despite a very tough comp. Recall, Q2 2025 was the highest Q2 EBITDA margins in our company's history. On M&A, we've been actively preparing for the closing of the SECURE acquisition. The final step before we can close the transaction is the Competition Bureau review, which remains on track and is well advanced.

Integration planning is progressing well. And as we've been spending more time with Allen and the whole SECURE team, we grow incrementally optimistic about the opportunistic and opportunities for the combined entity.

We remain confident in our ability to close the acquisition by the beginning of the fourth quarter and achieving the pro forma financial framework we previously highlighted. We closed 7 other acquisitions during the quarter, including Frontier and 6 tuck-ins, 2 of which are incremental to the base for which we previously updated guidance. Frontier's first quarter performance under our ownership has gone exceptionally well, and we remain excited about the many growth opportunities available to us in that fast-growing Texas market.

As we said on the last call, the Q2 acquisitions would temporarily increase leverage 30 basis points before we naturally delever back to the mid-3s by the end of the year. Our M&A pipeline remains robust, and we still think we can deploy an incremental $300 million to $500 million before year-end. With the significant success in the first half, we are raising our full year outlook for the second time this year.

Luke will walk through the details, but we are now expecting to deliver over 15% growth in adjusted EBITDA and nearly 20% growth in adjusted free cash flow over the prior year. Although the guide does not currently include any contribution from SECURE, if we were to close the acquisition in Q4, actual adjusted EBITDA growth could be greater than 20%. I'll now pass the call back to Luke, who will walk through the guidance update and the quarter in more detail, and I'll share some closing comments before we open it up for Q&A.

Thanks, Patrick. Revenue grew 16.3% in the quarter, inclusive of 6.4% organic growth, which was a 180 basis point acceleration over the first quarter. Continued price strength together with higher surcharge revenue tied to fuel cost recovery more than offset the anticipated headwinds from volume and commodity prices. Price growth in the quarter of 6.1% was 20 basis points better than planned, a result driven largely by accelerated realization of previously identified pricing opportunities, including the implementation of incremental fuel surcharges.

Regionally, pricing was 6.2% in Canada and 6.1% in the U.S. Our pricing success in the first half, together with our expectations for the second half of the year, now expect to yield a full year pricing number nearly 50 basis points better than the original guide. Volume in Q2 was almost 100 basis points better than planned with positive transfer station and residential collection volumes offsetting headwinds from landfill and the lapping of transitory MRF processing volume in the prior year.

We attribute the positive transfer station volume primarily to catch up from the Q1 winter weather impacts as broader C&D activity remains muted with external C&D and special waste landfill tons being down 10% in the quarter. With the ongoing macro environment, we now expect the C&D-related trends to persist for the balance of the year, and our full year volume outlook is being updated accordingly.

The acceleration of commodity prices at the beginning of the year has continued, and we saw market pricing in the second quarter $12 per ton higher than what we had factored into our Q2 guide. Current market pricing is up another $13 over the Q2 average. And if pricing remains at these levels, Q3 pricing should be approximately 20% better than the prior year. While our exposure to commodity price fluctuations has been significantly reduced post transitioning most of our processing activities to relatively fixed fee-for-service contracts, the improvement in market pricing will provide incremental tailwinds to revenue, EBITDA and margins in the back half of the year.

As Patrick said, the second quarter saw continued improvement in underlying operating leverage. Cost of sales before depreciation, amortization and integration costs as a percentage of revenue decreased 80 basis points, excluding the impact of elevated fuel costs. Ongoing efficiency and labor costs, supported by continued improvement in voluntary turnover as well as a 90 basis point reduction in repair and maintenance cost intensity more than offset the recent headwind from M&A.

Looking specifically at fuel, as anticipated, our direct cost per unit of diesel in the quarter increased nearly 60% year-over-year. The second quarter also saw indirect diesel cost impacts as our third-party transportation providers implemented incremental fuel surcharge, which resulted in a $5 million headwind to our Q2 guide. We are now in a position where our surcharges are generating sufficient incremental revenue to offset the higher cost tied to diesel prices, although until diesel prices once again fall, our results will be burdened by the unrecovered costs associated with the initial inflection in diesel prices at the beginning of the year.

SG&A cost intensity, excluding depreciation expense and other costs, improved 50 basis points over the prior year. As expected, we continue to realize operating leverage on our corporate segment as we continue to grow revenues off this relatively fixed cost base. Adjusted EBITDA margins were 30.4% for the quarter, inclusive of 65 basis point headwind from M&A. Adjusted EBITDA margins were 34% in our Canadian segment, up 20 basis points over the prior year despite negative impacts from fuel and commodities, which were headwinds in both of our geographic segments.

Excluding the impact of these exogenous factors and M&A, underlying consolidated Q2 margins were up 125 basis points from the prior year despite the mix impact of the lower high-margin landfill volumes and the 40 basis point margin headwind from the recognition of certain rebates in the prior year quarter that we previewed on the Q1 call. Adjusted free cash flow was $237 million for the quarter, ahead of our guide largely on account of the adjusted EBITDA outperformance as incremental investment in working capital was largely offset by lower-than-planned net CapEx and closure costs, all of which are expected to be timing differences that normalize by year-end.

In June, we issued USD 750 million of new bonds in preparation for the closing of the SECURE acquisition. The bond offering was significantly oversubscribed and was executed at the tightest interest rate spread ever offered for a bond of this type in our rating category, once again demonstrating the confidence in our credit quality held by the debt markets. By taking advantage of underlying interest rate differentials in Canada and the U.S., we were able to swap the interest payments back to Canadian dollars at a rate of approximately 4.5%, thereby reducing our overall effective borrowing rate.

Excluding the translational impact of the FX rate increasing 500 basis points versus our guide and ending the quarter at 1.42, we exited the quarter with net leverage of 3.9x, 30 basis points higher than the Q1 on account of the second quarter acquisitions and exactly in line with the guidance we previously provided. Q3 leverage will remain consistent with Q2, and the business will then naturally delever by year-end. Any rebound of the Canadian dollar against the U.S. dollar will further improve our reported net leverage.

Based on the strength of the first half and our positive outlook for the remainder of the year, we are pleased to be able to increase our guidance top to bottom for the second time this year. Assuming the current FX rate, commodity and diesel prices, we now expect the following amounts for the full year 2026. Revenue of $7.52 billion, adjusted EBITDA of $2.29 billion, adjusted free cash flow of $900 million, inclusive of cash interest of $445 million and a net CapEx spend of $850 million.

The new guidance assumes full year pricing increases to just over 6% and volume decreases to approximately negative 50 basis points, an outlook we think is conservative yet appropriate given the current macro backdrop. Any improvement to C&D activity will be a source of upside to the guide. Contribution from M&A increases by $10 million on account of the 2 incremental tuck-in acquisitions and FX related to M&A. Adjusted EBITDA margin increases 10 basis points over our previous guide to 30.5% despite the significant headwind from elevated diesel prices, which we now assume to continue for the balance of the year.

Absent the run-up in diesel prices, full year margin would have been more than 31%, more than a 100 basis point increase over the prior year despite headwinds from M&A and commodity prices. Any reduction in diesel prices in the second half of the year would be a source of incremental margin expansion. As Patrick mentioned, the updated guidance does not include the contribution from any further M&A in the year. SECURE alone could increase 2026 adjusted EBITDA by another 6%, and we also expect to close other tuck-in acquisitions before the end of the year, which will also be additive.

Specifically, as it relates to the third quarter of 2026, we expect consolidated revenue of approximately $1.99 billion at an adjusted EBITDA margin of 31.2%, 60 basis points ahead of the prior year when excluding the anticipated 100 basis point drag from fuel and M&A. Q3 adjusted free cash flow is expected to be approximately $235 million, inclusive of $165 million in cash interest and about $200 million in net CapEx. I will now pass the call back to Patrick, who will provide some closing comments before Q&A.

Thanks, Luke. We believe our consistent financial performance in the face of ongoing macro uncertainty continues to demonstrate the quality of our platform and the effectiveness of our strategic plans. 2026 is shaping up to be another year of industry-leading growth and the setup for the 2027 growth is even greater. Our business and growth prospects have never been better, and we continue to believe that GFL is uniquely positioned for exceptional value creation for all shareholders over the near term.

I will now turn the call over to the operator to open the line for Q&A.

[Operator Instructions] Your first question comes from the line of Sabahat Khan with RBC Capital Markets.

You mentioned in the release yesterday that the company has received some unsolicited potential take private offers for GFL and some media outlets had headlines earlier as well. To the extent that you can comment, could you maybe share what you're considering, how you're thinking about potential outcomes here?

Yes. I mean, I think, we -- when there's a dislocation in share price versus sort of intrinsic value, I think that affords others the opportunity to sort of potentially look at sort of a take-private transaction. I think from where we sit today, I think we feel slightly vindicated that I think all the intrinsic value we believe we've created has attracted others and who have approached us about taking the company private at a materially higher number than the company is currently trading for today.

So as you know, I'm very sort of well versed in the private equity world. I mean, 6 private equity recaps before GFL went public and then last year, recapping the Environmental Services business and the GIP business that sort of all mid-teens type multiples, right? So we know that world very well. I mean I think it's a testament to the business that's being built. And interestingly enough, two of these parties that approached us were doing a significant amount of work on SECURE and believe SECURE was an exceptional acquisition, which, as you know, the first couple of days after announcing that, we had a lot of explaining to do. But that being said, the Board has formed a special committee. The special committee instructed sort of management to explore the art of the possible.

I'm less focused personally on the sort of price out of the gate. I think, obviously, it's materially higher than where we're trading for today. But as most of you know on this call, I'm not a seller. I'm not a seller at $40. I'm not a seller at $50. I'm not a seller at $60. I'm not a seller at $70, and I'd be rolling 100% of my equity into whatever is sort of being proposed. I think there's a lot of opportunity here.

If you look at sort of the growth for '27, you look at the free cash flow growth, you look at the setup that we have, SECURE is putting up numbers, the best in their history. GFL is performing better than ever had. From my perspective, my motivation is to keep going and the parties that have approached us as a condition would like me to roll 100% of my equity into a new transaction. So what I'm focused on is, listen, there's two paths. One, there's an offer brought to shareholders, which would require sort of a majority of the minority because I would be being treated differently in terms of just I'd be rolling 100% of my stake.

And shareholders can have their say in terms of what they want. And if the fast money hedge fund type investors think it's compelling, then they can vote for something like that. If we've had a lot of conversations over the last couple of weeks with our largest holders. They have interesting views and perspectives on what the value is. And I think it's just a moment in time where we were caught up in this weird AI trade and SECURE and some of the arms that have entered the name pre-closing. But that exists today.

And the alternative is staying public as well, which, from my perspective, is a great alternative as well. I have no issue staying public as well. The real question is, would shareholders be happy with the price, which is materially higher than where it's trading at today. And as management and sort of insiders, can we create significantly more value in a shorter amount of time inside a private company? And my biggest focus is on not the next year or 2, my focus is on what that looks like in sort of year 5, 6 and 7.

How do we -- it's one thing to actually take a business private, and it's another thing to actually realize the value you've created. And I think we just need clarity in terms of how that's going to be realized, whether it's going to stay in perpetual private hands that have created this new marketplace that exists or is the thought to potentially relist the company in 5 or 6 years after we've created a whole bunch of incremental value over the next 5 or 6 years.

So that's what's sort of being discussed. But I do think the Board and management does feel vindicated that some of the smartest and largest institutions in the world that have the biggest pockets of capital believe this company is undervalued and can generate mid-teens to 20% IRRs, even paying a premium to where the stock is trading at today. And from our perspective, these are all the things we've been saying for a long period of time and sort of pounding the table. But from where I sit today, those are the two opportunities.

So as I said, the special committee has given us instructive to sort of go explore that, and we'll do that. My intent is, obviously, the focus is on getting SECURE closed. We'll run these in sort of parallel paths. There is no situation where we -- I saw some notes and we're paying some things on whether you could try and pay a break fee and walk away from SECURE or something. That is not -- these buyers that have approached us are -- they love the SECURE asset as much as they love the GFL business. So we are -- we'll continue -- my plan is not to sort of make a career of this. We want to get the answers relatively quickly and pick a path. But from my perspective, either path is a good path. And we'll just -- we'll decide what the right path is and whether it makes sense for myself and makes sense to sort of bring it to shareholders in the sort of near to medium term.

Great. I appreciate all the color. Maybe just switching over to sort of the kind of the outlook here for the back half of the year, maybe a question more for Luke. What incremental growth CapEx are you assuming in your updated guide? And maybe if you can share some color on how we should think about the cadence for the remainder of the year.

Yes. Thanks, Saba. Great question. In Q1, we said we're going to be looking to spend $200 million for the year. I think that number other than a little bit of FX adjustment, I think you got like $5 million higher on that through FX. That's still largely good. If you look in the quarter, we were a little behind on what we wanted to spend. Some of these projects, the exact cadence is a little bit outside of our control.

The one thing I'd note is with SECURE, if we get that done in Q4, as you may be aware, SECURE's capital allocation approach has been to deploy excess free cash into sort of growth capital as well. They did some in Q2. They're planning on a big amount in Q3, and there may be some spillover to Q4. So ultimately, at the end of the year, pro forma for SECURE, we may be something a little bit higher than what stand-alone GFL is. But I think if you factor in FX, the $200 million gets a little bit higher, and it's going to be in and around that sort of ZIP code, maybe a little less, maybe a little bit more, but that number holds true.

Maybe just a quick one, if I can sneak in. The pricing commentary across the sector has been pretty positive. Your commentary this morning is pretty positive, pushing higher even through sort of relative to your initial guide. Is it just the customers are accepting that there is an inflationary environment, fuel is running up, and it's been maybe easier to pass through some pricing. Maybe you can just talk about what's happening in the industry with some of this positive pricing that you're seeing and your peers are seeing? And do you think it could continue into '27 from GFL's perspective?

Yes. I like the way you frame it at the end, Saba, because it's difficult for me to talk about my peers. But what we have said consistently is that we see an opportunity to continue to price above cost inflation to generate the spread we need to generate return on invested capital. And then in addition to that amount, we have opportunities within our portfolio above and beyond as we just continue to have, I'd call it, mispriced books of business. So we continue to demonstrate that in the quarterly results. I think the spread above cost inflation remains true and dear to everyone's pricing strategies, and I don't see that changing.

So the ultimate headline number may change if you look over a 3- to 5-year period, but again, focusing on that spread. And as we said, we had identified, I think we said in Investor Day, $40 million to $80 million of incremental price, probably a price greater than that. And as we keep doing M&A, that number grows. And a significant component of our outperformance is the effective realization of those opportunities. And at the end of the day, when you think about the 3-year outlook that we provided for Investor Day, I think we'll be able to capture a greater amount than what we had put down on the page at that time.

The next question comes from Tyler Brown with Raymond James.

Luke, Just there's quite a bit moving around in the guidance. I mean you've got FX, M&A volumes, commodities. Just in broad strokes, can you kind of bridge the guide -- the new guide versus the old guide? I'm kind of feeling that maybe FX, fuel, M&A and commodities are all helps, but then second half volume is a drag. But just any color there would be really helpful.

Yes, Tyler, great question. I appreciate with the magnitude, the upswing, there are sort of moving pieces. So if you think of the top line, pricing is now going to be just above 6%. So that's sort of 50 basis points up from our original guide. Now saying volume is going to be about negative 50 bps. So that's about a 75 bps decrease from the original guide that contemplated about 25 bps of positive volume.

Surcharge is now at 80 bps positive. So that's about 100 bps over the original guide, and that's just a function of the change in the diesel pricing. Commodity, we're now saying about a 10 bps drag year-over-year, and that's a 20 basis point increase over the original guide. So initially thought about minus 30. Now we're about minus 10. Again, recall, our sensitivity, we don't see the upside as much as we used to, but the benefit is we also don't see the downside.

And then M&A, obviously, a big one with Frontier and the other, that's now going to be at sort of 770 bps up, so 7.7% coming from M&A. That's about 520 basis points higher than the original guide. And then FX with the meaningful change, that's now considered to be a 40 basis point drag, so minus 0.4% from FX, which is about 170% higher than the original guide. The original guide contemplated 1.36. And now we're doing the first half at whatever it was and now assuming the second half at 1.40.

Yes. Okay. Perfect. Extremely helpful. The other thing that I think should maybe be highlighted here, unless I'm missing it, but the new guidance, I think, calls for margins to be virtually unchanged. But the old margins didn't include a very sizable headwind from fuel and call it, non-leveraging FX revenues. So could one imply that you are actually raising the underlying implied margins fairly substantially? Or am I misreading that?

No, Tyler, you're absolutely right. I mean if you think about the original guide, we were supposed to go to 30.5%, and that reflected 100 basis points of underlying at that time. And in that, we had our assumptions on fuel, commodity, all the externalities. When you look today, as you said, we're maintaining 30.5%, but now inclusive of a 60 to 70 basis point drag from fuel, a 30 to 40 basis point drag from M&A. I mean those 2 things alone is a 100 basis point drag above and beyond from where we started the year.

Now there's other moving pieces, obviously. If you think about special waste and C&D landfill volumes, that's net new headwind. I don't want to get into every little piece, but that mix, I mean, if you think about those incremental tons that are missing, that's very high margin flow-through, right? And so if you look at that original 100 basis points underlying, I think you're probably 2x that today, notwithstanding that the headline numbers saying at 30.5%. And that's why I think I'll circle back to Patrick's comment. I mean, I don't think the operation of the business has ever been performing better, and you're seeing that sort of come through in the numbers.

Yes, exactly. And then just real quickly, Patrick, last one on volume. How does the competitive environment feel? Have you seen any pickup in churn? Is there anything happening on the small hauler side that gives you any pause? Or is there any change in behavior there?

I mean we're in a competitive business as always. And I think there's certain markets that have different competitive dynamics. And of course, there's markets where we have to fight and we have to defend our business and defend churn. But there's a lot of other parts of our business that continue to be strong on ticket, continue to get pricing and churn at sort of all-time lows. Nothing any different than what we've seen in the last 20 years. So I think we just keep chugging along, again, picking the right markets where we want to operate that allows us to continue deploying the strategy. And I think that's what you continue to see from us and you will continue to see from us. So nothing out of the ordinary from my perspective.

The next question comes from the line of Kevin Chiang with CIBC.

If I could just dig into the U.S. organic growth in the second quarter. It was up nicely sequentially. And if I just look back outside of the elevated inflation period during the latter innings of the pandemic, I mean, this seems historical or looks historically high. I get pricing is good across the board, you have surcharges there, but are you hitting an inflection point in the U.S. in terms of some of the initiatives that you laid out at the Investor Day that might be driving maybe more outsized organic growth in the U.S. versus maybe what you see in Canada on a rate of change basis, just given Canada is a more mature market for you?

Yes. Thanks for the question, Kevin. It's a great one. I think -- if you think about overall organic growth, starting at price, I mean, the U.S. has consistently been a good pricing market for us and continues to be. And I think I said in the prepared remarks, it was both geographies around that sort of 6% level. I think the -- some of our books of business in the U.S. were probably more mature in some of the sort of surcharge initiatives. And so some of that outsized opportunity has been realized more in Canada, although there are net new geographies in the U.S. where that's also been an opportunity.

But on balance, I'd say the U.S. pricing is more driven by just strength of underlying core as opposed to the sort of implementation of net new surcharges. I think it really comes down on the volume story. And if you think about what we and some of our industry peers have talked about is this is this idea of intentional shedding post M&A. And so if you look for the period that you're looking at, I mean, the levels of revenue acquired in the U.S. were quite significant from 2020 through 2024, 2025. And following that, you do have the intentional shedding. And again, it's unsafe work. It's work that doesn't meet your return hurdle. It is tangential type ancillary revenue service offerings that we're not going to continue to do.

And so I think what's really happened is as the quantum of M&A sort of paused starting late '24 into '25, we had more quieter deployment of capital, you've no longer had the subsequent knock-on effect of that sort of shedding. And it's allowing, therefore, the volume metric to reflect just what's actually happening in the underlying business as opposed to being distorted. And I think it's a great data point and testament to the sort of quality of the market selection and the business that we have because once you remove the M&A-related noise, what you're left with is the normal course volume, which is going to be a plus or minus probably 50 bps type number and doesn't move around very much.

That's very helpful color. I mean just a follow-on, just looking at your -- you talked about operating leverage in your prepared remarks. If I look at kind of core cost as a percentage of revenue, you're back down to kind of a low 3% intensity. So maybe what you look like pre the ES spinout. Can you remind us where that can get to? Are you kind of at a level where you've kind of, I'll say, maximize the revenue absorption within that corp cost. So incremental top line growth requires a little bit more investment in corp? Or can you push that below 3%?

Yes, it's a great question, Kevin, and an area that we're very excited by because, I mean, again, -- that's a relatively fixed cost component that's derived primarily of sort of people and IT-related costs. Now when you think about the last 3 or 4 years, there was, as we articulated, a meaningful investment as we did a big large-scale lift and shift to cloud-based sort of systems, and we had dollars going through there that were transitory in nature. You've seen those sort of roll off, and now you're sort of left with a more sort of steady state dollars.

Now in that unit, if you think about where things like AI is going to bring productivity enhancement, that we anticipate to be an area where that's realizable. But regular way back-end shared services, whether that's HR and payroll, whether that's treasury, whether that's the IT group, efficiencies that should be able to come from sort of more automation and processes should yield the ability of that existing cost structure to take on even larger amounts of revenue. So I don't think we're at a position here today to say exactly where that is going, but I certainly don't think 3% is a floor, and we see a path even pro forma going into next year getting below that level. But certainly, we believe that's going to be, as we've articulated, a meaningful source of operating leverage for the consolidated margin as that cost bucket remains relatively fixed, and we continue to grow revenue and/or EBITDA at materially higher growth rates.

The next question comes from Tobey Sommer with Truist.

I wanted to ask a question about prospective M&A over the balance of the year. With the LBO news, is that influencing your conversations with businesses that you expect to be able to acquire over the balance of '26?

No, no impact. I mean, we're running the business normal course. There's no change to sort of strategy or businesses that we're speaking to, and it's irrelevant whether we were -- whether it was private or public and we just continue marching on as if we're running the business as is in the normal course.

Tobey, I'd say just to add, Patrick, the one thing I'd say that's most impacting M&A is, again, just our absolute commitment to sort of the leverage philosophies that we sort of talked about. I mean, unfortunately, when the Canadian dollar depreciates as much as it does, it puts this sort of temporary translational impact on our leverage. And so we're 10 to 15 basis points higher than we otherwise would have been, which factors into the amount of capital you can deploy into M&A. So that, I would suggest, is more the sort of balancing act that we're doing. But to Patrick's point, in his initial comments that he made, we're running going full force running our business, whatever the sort of capital structure of the business will be, but it's not going to impact how we're thinking about growth.

If I could ask a follow-up on -- you mentioned the tight spread and attractive rates in your recent fixed income offering. What do you think is contributing to that? And how does that dovetail into the potential IRR of an LBO should that come to pass?

Yes. I think -- listen, we've done exactly what we said we were going to do for over 13 years in that market, right? So we have a lot of goodwill in the market and always have and have always punched significantly above our weight on that side because we've always done what we said we're going to do, and we've continued to deliver. Now the beauty of the transaction we're talking about, there's not any material impact sort of on leverage of what's being proposed.

So for our debt investors, there's no real risk that this is being treated as a traditional LBO in the sense where you're going to have 6-plus turns of leverage and material rating decreases. So I think we are fortunate from that perspective. But again, you look at the art of the possible. I mean, again, even if we did need more debt capital to affect the transaction, which that's not really being proposed in sort of any material way, that market has supported us with 6 to 6.5 turns of leverage for a long period of time, albeit at slightly higher rates, that's where it sort of stood.

But again, that's not -- I wish sometimes our equity investors would understand the business as well as our debt investors, but this is life, and it takes time to sort of mature and understand. But that's not a market I worry about. And again, deep relationships for many, many years of doing the same thing sort of over and over again.

And Tobey, just to add to that, if you think the spread on that bond that we did was 134 basis points over the underlying treasury. Our investment-grade peers in the industry would be doing fixed income offerings at sort of 70 to 90 basis points over treasury. So you're looking there, I call it, a 40 to 50 basis point spread, and that's a pretax impact, right? So you roll that all through, and I've made this comment before, the benefit of becoming an investment-grade company is much less on the debt cost of capital. but rather on the perceived perception related to equity cost of capital. The debt markets are effectively already viewing us basically as an investment-grade credit, and we'll continue to march towards that direction.

The next question comes from Trevor Romeo with William Blair.

Maybe I'll have another one on kind of M&A. I think, Patrick, you said that the Frontier integration has gone exceptionally well thus far. So maybe you could update us on how that transition is going? What kind of growth opportunities you've identified thus far for that business? And then I appreciate the comments about the leverage that Luke just made, but maybe you could talk a little bit about what types of assets might be in your kind of intermediate term pipeline there for M&A?

Yes. So Frontier, that was well in hand. I mean we had a lot of time between sort of signing and closing on that. So I mean that -- the integration plan for that was well in hand before we hit the ground running day 1, effectively have that business transition over to our platform now. So there's been no -- interestingly enough, they ran a back-office software called Navisoft that we run as well. So the integration was very straightforward. Payroll has been sort of transitioned, health and benefits transitioned. So now looking at that business on our own KPI program.

And in terms of new opportunities, similar to what we said on the last call, we have a plan to double the size of the business there over the next 5 years, and that's a combination of organic and inorganic opportunities. There'll be some smaller tuck-in sort of M&A, and then there's some organic opportunities, both on the sort of landfill, recycling, transportation side that we think are highly compelling that is going to sort of bolstering that. So that is sort of well in hand and on plan. No issues, no red flags, all green flags at the moment. So that will continue moving in the same direction.

In terms of what the back half of the year look like from an M&A perspective, again, the big focus really is on tuck-in M&A that tucks into existing markets where we already have operating facilities, transfer stations, landfills, recycling facilities where we can internalize incremental volumes in those streams and leverage the fixed cost base facilities that we have. And that will make up the lion's share of the back half M&A.

At the same time, the M&A team certainly continues to work on other opportunities for sort of ES and GIP. And both of those divisions are putting up sort of record numbers as well organically. I mean, ES had the best -- they had the best June ever recorded sort of in company's history on sort of a multitude of fronts. And the same goes for sort of GIP, had the best June they've ever had.

So you have, basically, GFL, the public company, sort of firing on all cylinders. SECURE, again, posting the biggest and best numbers that they've reported in their history. And then our 2 sort of private businesses where we own the 40% stake and the 30% stake, putting up the best numbers that they've ever put up. So listen, we're feeling very good about sort of where we're sitting today. And I think there's definitely more opportunity than there are times. So we're just using our time wisely and finding the stuff that's going to -- and focusing our time on the stuff that's the most accretive to us as shareholders.

And then maybe a quick one for Luke. I think the updated guide, the free cash flow did have, I think, a little bit better conversion than your original guide. So maybe what's driving that? And then just looking beyond this year, I know you have SECURE that will come on at a higher conversion rate, but maybe would just love your latest thoughts on what kind of organic improvements in cash flow conversion you'd be looking for from here, especially as more of your RNG projects come online.

Yes, Trevor, great question. Thanks for that. For the current year guide on the free cash flow, obviously, the incremental EBITDA, you have the sort of flow-through of that. With the refinancing or recent financings of our debt, you've effectively taken a portion of interest expense that would have otherwise been associated with the growth and flatten that out. So that's going to roll over into next year.

So you're maintaining that $445 million cash interest despite the higher sort of EBITDA. Working capital, you're getting a bit of a benefit from FX, right, just the way the math works and -- because we're in a net liability position, the higher level of FX, while it's a drag, the leverage, as we spoke about, you're getting a little bit of benefit there. But it's really just leveraging that fixed sort of other items of interest, taxes, et cetera, as we keep sort of growing EBITDA. And when you roll that forward into next year, you're absolutely right, pro forma with SECURE, you're going to see this inflection point, bringing that free cash flow conversion of adjusted free cash flow divided by adjusted EBITDA north of 40%.

And really, with the incremental free cash flow profile, where the real benefit will come from is, yes, ongoing margin expansion all drops down to the free cash flow conversion line, but it's really being able to leverage a relatively now fixed component of interest as you're able to largely self-finance the growth from your own free cash flow and therefore, the eventual reduction of interest intensity in the free cash flow walk as we articulated at our Investor Day, is going to provide GFL a tailwind to free cash flow growth and conversion growth idiosyncratically because our other folks are already at that sort of lower leverage level. So too early to get into the moving pieces of '27, but certainly, there's going to be a meaningful step-up and an inflection point in all of those numbers, but particularly free cash flow.

The next question comes from James Schumm with TD Cowen.

Patrick, you've built the fourth largest solid waste company in North America, and you've done incredibly well financially. You've said that clearly, you're going to roll your stake. But can you just comment on maybe what you want to do in the future, maybe it's 5 or 10 years down the road? So specifically, like how much longer do you want to be the CEO of this company?

As long as I continue to see opportunity, you're going to see me sort of sitting in the seat or if people tell me that it's time to leave. I mean, started over 20 years ago now. I don't think I have a better opportunity than anything I see to continue compounding my own wealth over sort of a long period of time. And again, from where I sit today, and I keep saying it, maybe I sound like a broken record. If you see the condition of the business that it's in today, the shape we're in, where the free cash flow is going for 2027, the opportunities we have going into 2027 and beyond, if I look at the next sort of 5 to 10 years, there is a real opportunity to double the size of this business again.

And we have best-in-class operating systems, best-in-class management teams, what I call best-in-class markets. We have -- if you look at our 7 regions, all operating in similar sort of margin profiles in both Canada and the U.S. with a significant amount of opportunity. And by no means are we fully optimized in all these markets as well. So there's significant self-help opportunities in these markets to continue making the businesses better. So where I sit, listen, that's why I keep saying I'm not a seller.

So the public markets will move around in terms of what they believe waste companies are valued at or where GFL should be valued at based on things that we've done. But again, sitting in the seat for over 20 years, creating billions of dollars of value for shareholders, I think we have a very sort of proven track record of a model that works. And again, whether that's publicly or privately, it can be done in both.

The real question is, privately, can you just do things faster that you couldn't necessarily do in the public markets as quickly? And you're a dynamic management team like ourselves that likes to do things and create value over time. And we've done that, maybe sort of less popular things at times or people perceive to be less popular things at times. But I go back and I look at -- since being public, I look at -- we did a whole bunch of M&A in 2020 and 2021, increased leverage modestly, which, again, wasn't looked as favorably on.

But when I go back at those, those are the right decisions to make for the business if you're a long-term shareholder. And you're putting together -- Terrapure together with our ES business in the middle of COVID and bringing up leverage 30 or 40 basis points, which, again, penalized from a bunch of investors at the time. We went out and put those 2 businesses together and sold that for almost 15x, right?

So those are the right decisions. I think we know where -- how to create value. We know where to create value, and we do it in a very disciplined fashion that continues to sort of compound. And I think if you look at what's happened to the margin profile, the free cash flow profile of our business, the strategy continues to work. It's worked for 20 years, and it will continue to work for the next 20 years. So I'm here for the long run as long as people will have me. And again, I see a clear path to just materially increasing my own personal sort of equity value, and that's what we're focused on.

Great. And as you contemplate -- you guys kind of contemplate these two options, private or public. Maybe you touched on this, but what do you think is driving the discount in your stock today? And how can you address it? So is it free cash flow conversion or some of the things that you laid out was that you're just going to create value. And over time, the market is going to realize that value? Or are you sitting there evaluating, okay, well, if we stay public, if we do X and Y, we can get a more appropriate valuation to our stock?

Yes. I mean, listen, there's been -- I mean we've been public for almost 6 years now, right? And if you look at the math and sort of the dislocation in share price, there was 2 things. In 2022, levered growth became a very bad thing, and we were operating with higher leverage than all of our peers. And that was something that sort of had to be rectified, even though when you think about using an extra half a turn of leverage, again, I cite the example of the ES business. When we put ES together with Terrapure, buying that from a Canadian private equity firm at sort of 8 or 9x at the time and increasing leverage.

I think at the time, it was like 30 or 40 basis points and certain investors sort of throwing tomatoes at us saying, why would you do such a thing? Now that created almost $4 billion of equity value for us as shareholders when we recap that business. So again, you're not always going to be popular by doing the things you need to do to sort of create value. The easiest thing to do is sit here and do nothing and just keep compounding and growing at the sort of normal growth algorithm. But that's not our DNA. That's not what we've done. That's not how we built this business. We would have never built the fourth largest environmental services business in North America if we just sat around figuring out all the reasons why not to do things.

We generally find the reasons to do things that will work with the overall sort of strategy. So when you sit here today and look at the opportunities, I think this is a unique -- has been a unique period in time where you had the industry sell off around this AI trade. And then you had us our discount widening to the peer group, where we've always been sort of plus or minus a turn less or a turn more than the sort of peer group depending what was happening in the macro thematic theme.

And in this environment, what happened is you basically industry traded down 2 to 2.5 turns because waste has been out of favor. And then you had us trade down 2.5 to 3 turns because we're out of favor. Maybe it was a secure transaction, maybe it was just our lack of sort of industry inclusion, but there was a sort of broader sell-off where nobody liked waste, and that sort of -- that creates the opportunity for other people to come in that have significant pockets of capital, and it doesn't happen often, right?

So again, it happened in '22. It's happened -- so it's happened twice since we've been public. I always say math is math. We'll continue running the business, build the best business we can build. You'll continue seeing the margin expansion, continue to see us compound free cash flow, continue on the growth trajectory. And then eventually, math is math, the computers, you can't discount the math, right? And eventually, we get there.

So -- but in the meantime, you have this dislocation in share price versus what the intrinsic value is versus what other people can generate with these assets and returns they can generate creates this opportunities for other. And again, from my perspective, I feel completely vindicated when the smartest investors in the world with the biggest pockets of capital, the largest financial institutions in the world come back and say, this doesn't make sense. This is the sort of opportunity that we have.

And again, from my perspective, these are all the things we've been saying as a Board and as shareholders and management is why it makes sense. So listen, again, I'm focused on the upfront, but I'm also focused on what the path looks like in the future. If it leans towards, hey, we're going to re-IPO this, then we have a decision to make or I have a decision to make about whether that makes sense or not because I'm not sure how happy my public shareholders will be if I go out and take equity at sort of $50 a share and go that to $100 a share and then try and -- and then we're going to have to re-IPO that and they miss that big sort of lift for the big guys that have supported us. And we've had a lot of feedback from some of them.

And a lot of them, stay the course and be patient. That being said, you have others sort of banging on the door that see this opportunity. So we're weighing both of them. We're doing the work. But what's for certain is the business is worth significantly more than it's trading for today. So that's what we all know and that's what the conclusion is, and we'll just keep driving forward.

And Jim, I'd just add to Patrick's comment that you mentioned free cash flow conversion, that when we first went public in 2020, there was a lot of focus on our EBITDA adjustments. They said, well -- and to be fair, it was complicated. It was a fast-growing business. The structure we went public with was complicated. That at the time was when people said, "Oh, you're getting this complexity discount because of EBITDA adjustments". In time, that subsided and just we grew into it as we said we did, like, hey, this is going to pass and no one ever has really sort of talked about that very much.

Then '22, '23 comes along, all of a sudden with leverage, right? Folks are talking about leverage. And as Patrick just alluded to, that was a point in time. Today, yes, I get it with this quarter with translation impact step up, but largely folks aren't sort of talking about that sort of anymore. So free cash flow conversion, I guess you highlighted it because that's an area folks talk to. Okay. The free cash flow conversion is a little bit sort of lower than our industry peers. It is going to grow at a rate faster than our industry peers, full stop, right? And the math, as Patrick said, the math is math. It's very clear to see. It is going to go up from here.

And I -- why I give that context and background is I've never heard your initial comment, why is the stock trading discount. I never heard people say it's because of our market selection, it's because of our business, because of any of those sort of fundamentals. It really seems to be about sort of transitory inflection point in the math. Free cash flow conversion, if that's the remaining sort of item, that is going to improve at a rate far greater than the industry average. And so you'll see that in the 2027 guide and then in '28 and beyond. So I think that is a source of the confidence that Patrick has in that it's going to work because you don't need to believe a lot to see the improvement in that one remaining metric.

The next question comes from Bryan Burgmeier with Citigroup.

Just a couple of quick ones for me. First, you announced an update on a couple of RNG projects during the quarter. I assume those are kind of part of the 7 million MMBtus that were under negotiation during the 2025 Investor Day. Just curious if you can add any kind of details around the timing of those projects?

Yes. Thanks for the question, Bryan. Yes, those absolutely were included as part of our remaining sort of sites to come online. The expectation for all this was supposed to be late '27. I think with the pace at which things are moving, if there was some slippage into 2028, that wouldn't sort of surprise me. I think initially, Investor Day contemplated having that RNG price, which we called as now saying around $125 million in hand by 2028. I think it's probably more a run rate level by the end of 2028 as opposed to having it on Jan 1. But yes, those 2 projects with one of our existing partners that we have a great deal of confidence in is all part of the plan.

Got it. Got it. And then last one, and I'll go ahead and turn it over. Yes, I know the SECURE acquisition hasn't even closed yet, but maybe just from like a high level, do you think about SECURE maybe opening the door for a little more bolt-on M&A going forward. You've talked about organic kind of growth investments. Just curious about the inorganic side as well.

Yes, nothing material, nothing sort of outside the norm in sort of Western Canada. I think there's the ability to -- with the continued investment that you're seeing in Western Canada, both from the federal government level and the provincial levels and just sort of the broader financial community that's creating incremental opportunity from some organic -- incremental organic opportunities that we'll assess -- any way we would assess sort of an M&A transaction or any sort of organic opportunity from sort of return on invested capital perspective. But there'll be a lot of sort of incremental opportunity as you see in the financial results that they put out.

That business is firing on all cylinders, putting up sort of best-in-class numbers as well as the sort of biggest and best numbers that they put up in their sort of the company's history. So again, feeling really bullish about it in terms of the timing on the SECURE assets, again, as we said, targeting sort of October 1, plus or minus 30 days on that. But I think from where we sit today, we put in our final information request to the Competition Bureau in the last couple of days, and we'll just continue working that course. But we continue to see no issues in terms of any regulatory sort of hurdles there from -- at least from the seat that we sit in today. So everything is on track and moving in the direction that we all thought it would.

The next question comes from Konark Gupta with Scotia Capital.

My first question is to follow up on the prior discussion about the go private discussions you might be having. In light of those discussions, are you expecting to do some rationing on any of the usual initiatives like buybacks or dividend growth or even like M&A, including the SECURE deal?

No. Business as usual, no change. .

Okay. And then just on the ES and GIP minorities. Luke, if you can share your thoughts and outlook for '26 in terms of EBITDA and leverage ratio?

Yes, Konark. Thanks for the question. We've said previously, I mean, if you look at ES expectation that sort of $600 million with some M&A, maybe $625 million of EBITDA and we'll probably be in and around sort of 5.5 turns of leverage. On the GIP business, roughly $360 million to $380 million of EBITDA, and there'll be a sort of 4.5 turns leverage.

In terms of the ES call option -- someone had e-mailed the question in, that initial valuation of that done in December 2025 was so close to the ES recapitalization. We just used the equity value at the recap at that time. As a result, you're now just going to have that call option, the sort of time decay value being amortized every sort of quarter until you sort of revalue the equity as a whole. And we're going to do that sort of annually. As Patrick said, the direction of travel of both of those businesses has never been better. And with some accretive strategic bolt-on M&A, there's some equity value creation coming out of those as well. So we would anticipate sort of revisiting both of the marks at year-end.

The next question comes from Stephanie Moore with Jefferies.

Just one for me. I think you called out that underlying margin is running maybe 2x your original expectations. So we'd love to get a little bit more color there on what's running better than you originally expected. Is it labor? I think we all see pricing is quite strong, but we'd love to get just a little bit more color there and then kind of your expectations on underlying margin expansion for the remainder of the year?

Yes. Great question, Stephanie. I'd say where we take a great deal of comfort is the fact that it's not any one thing, but it's all of the things that we've been talking about. You start at the top line, obviously, pricing 20 bps better or 50 bps better than guide for the year, 20 bps for the quarter. That all flows through down to bottom line. So that's the sort of starting point. Obviously, volume and the nature of the volume is a headwind versus the original plan because those landfill tons that are missing, although C&D is a small component of our business, it is sort of accretive. So that's a sort of headwind.

When you look at the cost of sales bucket as a whole, the efficiency we continue to see across the major cost categories, whether that's transportation, whether it's labor is a function of both the optimization and densification of the business that we've done as well as the self-help initiatives that we sort of outlined. And it's all of those sort of pieces coming together when modeling for that, there's a pro forma of the way it's supposed to look, and you want to obviously bake in a degree of conservatism in that. And I think what we're very pleasantly surprised with is the rate at which we're actually being able to realize that.

As a part of it is that synergy capture from post M&A, right? And as we've said, the business has initially come in at mid-20s. And then as you do rerouting, as you do integration, you get that up to an accretive margin. And it's all of that sort of coming through. And so we are very optimistic about our ability to hit the targets and exceed that we had previously sort of set out. And the prior caller had asked next year, when you think about RNG as being another meaningful incremental sort of margin tailwind, you're really not even sort of getting that sort of benefit yet, and when we put that all together, together with the SECURE business, we were incrementally optimistic as to what the ultimate sort of margin profile of the business can be because of the effectiveness we're seeing in these sort of self-help initiatives that we had laid out.

The next question comes from Chris Murray with ATB Cormark Capital Markets.

Maybe turning back to that margin question and just maybe extending it into the 2027 or longer time frame. You sort of talked about the fact that I think it was a number of things, but you did talk about labor, you did talk about maintenance. Is this the best that it's going to get now we're just sort of moving into a being able to leverage the organization. You talked about densification, you talked about different things. But is there any additional opportunities on the self-help? Or are we kind of running to the end of those opportunities and now it's going to be just scale and leverage that you'll be able to drive margins off of?

Well, Chris, I think it's the opposite. I think we're just really getting started with the self-help. And Patrick sort of alluded to this. You got to remember, I mean, I think in that Investor Day presentation, we put 5 items. right? There's a team of people here working on 50 items or more at any given time, all of which could sort of be incremental and above. And then I think it's just the quantum of the items. I mean, I don't have the list in front of me, but I think like the procurement fleet-related bucket in that self-help was $30 million to $50 million.

Like early days, just looking at SECURE, we're seeing sort of meaningful incremental procurement opportunities for them, just leveraging our existing plan, not to mention what we might be able to do when we go to market with now that broader sort of spend as a result of the size and scale. So I think the earliness of the maturation of this profile gives us a lot of optimism as to how much more incremental benefit there can be. And then you think about AI and/or sort of technology-related things that would be net new to the industry, we're just scratching the surface of that.

So we take a great deal of comfort that we see a lot of runway pulling on the levers that the industry has already demonstrated to be highly effective and tried and true. And then as this sort of age of sort of technological enhancements is playing out so rapidly, undoubtedly, there's going to be meaningful incremental opportunity coming from that as well. So I would say we feel very well advanced and in hand in achieving the self-help that we set out. But I think the next time we come and do an Investor Day, we're going to have a whole host of incremental opportunities that will continue to be tailwind to outsized margin expansion above and beyond the normal course industry algorithm.

The next question comes from Shlomo Rosenbaum with Stifel .

I actually want to expand a little bit on the last question and the comment that you made, Luke, about some of the incremental opportunities that are out there with AI and some of the technology. It seems like there's a playbook that you guys are implementing that others have already implemented that gives you kind of some runway. But some of the other ones that are in the industry have already pulled those levers are talking more about some of the dynamic routing that they could do with AI that they're working on, some of the dynamic pricing by customer.

I was wondering if you could just kind of drill down, give us a little bit of insight as to, is that something that you guys are working on concurrently right now as well with what you're seeing? And are there other examples that we should be thinking about? Or is this a matter of like, hey, we have so much in front of us with the levers that others have pulled, we're primarily focused on those levers?

Yes, it's a great question, Shlomo. What I'd say is, and you articulate, we have a lot of opportunity low-hanging fruit right in front of us before having to sort of reinvent the wheel. And as you're seeing quarter after quarter, those are the opportunities we are sort of executing on and capturing.

Now obviously, we are very invested and engaged in AI-related technologies as well. But I do think we have a unique advantage where we're allowing some others to experiment and find some of those benefits, and we don't necessarily need to be the early adopter as we have so many other opportunities in our sort of pipeline.

Certainly, we're using AI in multiple facets of our business. But I'd say it is more in the early stages, and therefore, the financial benefits of that are not yet really flowing through in your margin. But from HR and recruiting, to pricing, to FP&A broader analysis, preventative maintenance, we have AI installations in all of these various sort of things, I'd say it's just sort of early days and where I take great comfort is if you extrapolate what the margin and cost savings implications of some of those applications could be, they're very large numbers. And so going back to the prior caller's comment, we're focusing on the sort of nuts and bolts of the self-help that we had articulated at Investor Day currently, while we are tangentially laying the groundwork for what will eventually be a much larger full-scale implementation of some of those AI automation initiatives.

Okay. And just as a follow-up, one of the themes we're just seeing in the earnings for solid waste is really higher pricing, and it seems like the first 3 companies have all talked about that. And then just the volumes just not being where people thought they were going to be for various reasons. And I don't know, Patrick, maybe you could talk a little bit. Is that just, hey, the macro we thought was going to get better. There's the Iran war that just kind of upset things and it's going on longer. Is there anything else going on? Just what's your take on what's going on with volumes?

I mean nothing specific. Like we said in the bad market, volumes down 1%, good market volumes plus 1% like that's the range. I mean, again, C&D, special waste volumes are soft. They get higher interest rates for longer. I mean you're looking at homebuilders and other ones, like just things are slower. And I mean, we've been calling that out for the last sort of 12 to 18 months that we saw that perpetually getting slower.

And I think on the C&D project, not necessarily felt at the same time because generally, those projects still have to finish and that volume sort of last to go and then last to come back as well. But there's nothing structurally any sort of issues in the market. And at the end of the day, we are pricing at the appropriate levels for the level of cost inflation that exists in the market. No one is charging egregious numbers or egregious pricing.

It's just like we know what our internal cost inflation are, we know what headline price needs to be to sort of maintain that spread. And that's what you're seeing. And I think the industry -- that's the beauty of this industry is it's very disciplined and everyone is focused on the returns on invested capital, look at it in similar ways. And I think that's how people are pricing and the market is supporting that.

And again, when you look at the average check size of our bills, on sort of a residential home, your average check size is sort of $25 to $40 a month. And if you're a commercial customer, average check size is $250 a month, whether that customer is taking 5% price, 4% price or 6% price, it's not a material amount in the grand scheme of things on a monthly basis. So I just -- I don't see any disruption coming from that side of the business either.

The next question comes from Adam Bubes from Goldman Sachs.

On the volume front, just a follow-up there. Are you able to parse out the performance this quarter between EPR-related volumes and underlying core volume growth? And then within the core volume growth, I think you did mention residential outperforming your expectations. So just any more color on volume performance by collection lines of business would be great.

Yes. Great questions. It's Luke here. So volume of 100 basis points better than planned, sort of negative 0.7% versus sort of negative 1.5% in and around there. It was supposed to be negative on a tough EPR comp, right? Last year's EPR ramped, we had some transitional volumes that we were sort of falling over. And then C&D softness obviously sort of persists and continues. As I said, the C&D and special waste tons were down sort of 10%, 11% year-over-year.

And if you look at it in terms of actual dollars, volume was minus $11 million, right? And if you look at that, landfill was about $9 million of those dollars and MRF processing, which really relates to sort of transitional contract I signed was about sort of $2 million on that. So it's really suggesting all else is flat, right? Now there's puts and takes in that. IC&I collection was sort of slightly down as residential collection was sort of slightly up, sort of offsetting it. But it's really that sort of C&D ending up at the landfill as well as some of that lapping sort of EPR, that was really the majority of it.

Within Canada, the positive volumes of Canada, some of that residential growth is EPR driven. So again, I think in terms of dollars, the Canadian segment was plus 0.5% up on volume growth, so positive volume growth. And in there was EPR. I think EPR had a smaller contribution of sort of $5 million to $7 million of that growth was EPR related and sort of EPR tangential really related to the collection contract side of EPR. But those are sort of the moving pieces. If you peel it all back, you really have the normal course business sort of being flat with some headwinds coming from those 2 items.

Very helpful. And then it might be too early to talk 2027, but just conceptually, can you help us think about growth CapEx next year and the trajectory on the EPR and landfill gas side?

Yes. So I think a little early for the '27 guide. Just conceptually, what we had said is GFL's growth CapEx is going to step down materially again next year, and that's going to be more in the sort of $75 million or $100 million, I think is what we had said sort of half of this year's number. Now what I'd just sort of reserve comment for is SECURE's model has been to deploy excess capital into organic growth opportunities in their book of business. So we'll have to evaluate that in totality.

But growth CapEx is going to come meaningfully down, as we said, '25 was the peak. '26 is sort of going to be half '25. Yes, there'll be some R&D dollars required in '26. Some of that manifests in the investment line as opposed to CapEx just by virtue of us actually making contributions into joint ventures. You will have some of that, but we'll have to get later in the year before we articulate. What I would just say is even inclusive of growth CapEx, the overall sort of free cash flow number is going to inflect meaningfully going into '27.

The next question comes from Jake Kooyman from Wells Fargo.

I'm on for Jerry this morning. So corporate costs were roughly $62 million in the quarter, which is roughly $250 million annualized. And you pointed to intensity going below 3% pro forma next year. So on the roughly $9 billion of pro forma revenue, that implies corporate costs under $270 million, essentially flat to today while absorbing SECURE's head office and 2,000 employees. So does that mean you're essentially assuming SECURE's corporate functions are substantially eliminated? Or is that saving already inside the pro forma framework you published? Any comments on that would be helpful.

Thanks for the question. I haven't looked at the math in that degree of rigor. What I would just say conceptually is our corporate costs really represent the centralized head office functions that support all of our business and geographies. So when we do acquisitions, something like SECURE, the field level support for those acquisitions is actually burdened within our segments, right?

So if you think about our reported U.S. and Canada segment, there's a meaningful amount of overhead costs in those buckets that doesn't actually sit in the sort of corporate offices. So SECURE will be similar. The vast majority of those sort of secure support costs are actually just going to be in the field as opposed to certainly in the corporate.

I think the math suggesting -- I mean, Kevin just asked directionally, there's going to be more M&A into next year that you have to factor in as well. But I would think about your corporate cost bucket ex sort of step changes from sort of a large acquisition or something is going to grow at a low to mid-single-digit number, while our top line is growing at a mid- to high single-digit number. And that is the basis on which you're going to get operating leverage. I'm not prepared to sort of commit to the actual dollars of corporate cost in '27 where we sit today.

There are no further questions. We have reached the end of the Q&A session. I will now turn the call back to Mr. Dovigi for closing remarks.

Thank you, everyone, and we look forward to speaking with everyone after we report our Q3 results.

This concludes today's call. Thank you for attending. You may now disconnect.

Good morning, and welcome to the Annual and Special Meeting of Shareholders of GFL Environmental, Inc. My name is Patrick Dovigi; and as Founder, CEO and the Chairman of the Board of Directors of GFL, I will chair today's meeting. On behalf of our management and directors, I would like to welcome you to the meeting.

In terms of our agenda, I will call this meeting to order shortly, and we will address some preliminary matters. After that, the formal items of business will be moved and voted on and the results will be announced at the end of the meeting.

I now call to order the Annual and Special Meeting of GFL shareholders. With the consent of the meeting, I appoint Mindy Gilbert to act as secretary and moderator of the meeting. Before the formal portion of the meeting begins, Mindy will provide some information on how the meeting will operate.

Thank you, Patrick. Voting on all matters at the meeting will be conducted by a single electronic ballot. Registered shareholders and duly appointed proxy holders can vote on each item using the electronic ballot feature available on your screen. The electronic ballot will be open for all resolutions at the same time.

If you have already voted by proxy, you do not need to vote again during the meeting as your vote has been recorded and will be counted by the scrutineer. Registered shareholders and duly appointed proxy holders who have already submitted a valid proxy and want to vote again by electronic ballot at the meeting will be revoking any previously submitted proxies, and only the electronic ballots submitted today at the meeting will be counted.

At the end of the formal part of the meeting, we will have a Q&A session. Questions can be submitted using Lumi's instant messaging service. Questions regarding procedural matters or directly related to the motions before the meeting may be addressed during the meeting.

During the Q&A period, we will answer questions that are relevant to the meeting matters. Questions should be succinct and cover a single topic. We will do our best to answer all relevant questions. If we encounter any technical difficulties, please remain logged on, and we will resume as soon as possible.

Finally, I would like to remind everyone that today's meeting may include forward-looking statements. These statements are given as of today's date and involve certain risks and uncertainties discussed in our public filings that are available on SEDAR+ and EDGAR. A number of factors and assumptions were applied in the formulation of these statements and actual results could differ materially.

For additional information with respect to forward-looking statements, factors and assumptions, we direct you to our public filings, including our most recently filed annual report on Form 40-F. I will now turn it over to Patrick to proceed with the formal portion of today's meeting.

Thank you, Mindy. With the consent of the meeting, I appoint Computershare Investor Services through its representative to act as scrutineer. The scrutineer report on the number of shares represented at this meeting and tabulate the votes and report the results at the end of the meeting.

The purpose of today's meeting is set out in the proxy dated March 31, 2026. The meeting materials were mailed to shareholders and have been filed on SEDAR+ and EDGAR and posted on our website. Unless there is any objection, I will dispense with the reading of the notice of the meeting.

I ask that copies of the media materials be kept by the secretary with the records of the meeting. The scrutineers' report indicates that the quorum required by our bylaws has been met and we can proceed with the meeting. A copy of the final report on the attendance will be filed with the records of the meeting.

If you are a registered shareholder or duly appointed proxy holder, the online ballot will now be available on your screen. To expedite the meeting, I will propose and second all motions, but this is not meant to limit any questions with respect to the motions.

The first item of business is the presentation of our audited financial statements for the fiscal year ended December 31, 2025, as well as the auditor's report. These remain available on February 18, 2026 and on SEDAR+ and on EDGAR as well as on our website. On last there is an objection, I will dispense with the reading of the auditor's report.

We will now move to the next item on today's agenda, which is the election of directors. As I led in the circular, the following directors have been nominated to hold office until the close of the next Annual Meeting of Shareholders until his or her successor is duly elected or appointed. All of the nominees are currently serving as directors of GFL. They are myself, Dino Chiesa, Vi Konkle, Sandra Levy, Jessica McDonald, Arun Nayar, Paolo Notarnicola and Ven Poole. The circular contains information on each of the eight nominees, all of whom other than myself are considered independent under Canadian and U.S. securities laws and the rules of lead New York Stock Exchange. I declare the nomination for directors to be closed. I move and second the motion to nominate the directors as set forth in the circular.

The next item of business is the appointment of our auditor. I move and second that KPMG LLP be reappointed as auditor of GFL for the ensuing year or until a successor is appointed and that the Board is authorized to fix KPMG's remuneration for the ensuing year.

The next item of business are the approval of our resolutions to renew GFL's omnibus long-term incentive plan and nonexecutive director deferred share unit plan. I move and second a motion to renew the LTIP and the DSU plan as set out in the resolutions in the circular.

We will now move on to the final item of business, which is the consideration of the advisory nonbinding resolution on the company's approach to executive compensation. I move and second that the say-on-pay advisory resolution as set out in the circular be approved.

I will now respond to any procedural questions raised by any shareholder about the motions we have just presented. Please type into the instant messaging window any procedural questions you may have.

There are no procedural questions that have been raised by any shareholder. For those of you who have not voted on the resolutions, please do so now. We will start the timer now, and the ballots will close on all resolutions in 1 minute.

[Voting]

Voting is now closed. I have received the scrutineers' report and can confirm the following: Each of the eight nominees named in the management information circular have been elected as directors of the company to serve until the next Annual Meeting of Shareholders or until his or her successor is elected or appointed.

KPMG LLP has been appointed as auditor of the company to serve until the next Annual Meeting of Shareholders or until a successor auditor is appointed and the Board of Directors is authorized to fix their remuneration.

The resolution to renew the omnibus long-term incentive plan as set out in the circular has been approved.

The resolution to renew the director deferred share unit plan as set in the circular has been approved.

The say-on-pay advisory resolution has been approved.

As there is no further formal business to be brought before the meeting, I move and second that the formal portion of today's meeting be concluded.

We will now begin the Q&A session of the meeting. All meeting participants can submit questions using the messaging platform on your screen. Please type in your questions now. Mindy will read any questions to be addressed.

Mr. Chairman, there are no questions to be addressed. That concludes our meeting today. Thank you all for joining the webcast will now end.

Hello, everyone, and thank you for joining the GFL First Quarter 2026 Earnings Call. My name is Lucy, and I'll be coordinating your call today. [Operator Instructions]

It is now my pleasure to hand over to Patrick Dovigi, Founder and CEO of GFL to begin. Please go ahead.

Thank you, and good morning. I would like to welcome everyone to today's call, and thank you for joining us. This morning, we will be reviewing our results for the 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.

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, 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.

Thank you, Luke. Our financial results for the first quarter exceeded our expectations from top to bottom. Adjusted EBITDA margin 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 onetime transportation volumes realized in the prior year, volumes were up 80 basis points. Our special waste and EPR volumes more than offset the impact of lower C&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 our returns-focused capital deployment strategy. The impact of broader economic uncertainty continues to be a drag on C&D volumes compared to prior period, 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&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 in 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 exceeding of our already industry-leading margin expansion guidance demonstrates that we are on path to realizing 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 8 acquisitions year-to-date, including Frontier Waste Solutions, which closed at the beginning of this month. Frontier is a leading vertically integrated solid lease business with operations across the Texas Triangle, one of the fastest-growing regions in the United States. Frontier's assets are highly complementary to GFL's existing assets in the region and will identify 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 are expected to drive outsized growth for the coming years.

The contribution from these 8 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 $300 million to $500 million before year-end. The contribution from any additional M&A 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 and densify GFL's existing geographic footprint in Western Canada, a market that has had 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 in the quarter in more detail, and then I'll share some closing comments before we open it up for Q&A.

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 is 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 expectations even in the face of the impact of outsized winter storms experienced in several of our markets. lapping hurricane and onetime transfer station volume in the prior year period were the primary drivers of the anticipated negative volume trend 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 to $6 million change to annual revenue and adjusted EBITDA.

Looking at operating costs. Cost of sales before depreciation, amortization and integration costs as a percentage of revenue decreased 90 basis points to 60.7%. Ongoing efficiency in 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 built 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. SG&A 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 have 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 EBITDA margins were 29.1%, representing a 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 an 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 $1 billion of new bonds to provide flexibility to execute our growth strategy. The bond issuance was significantly oversubscribed and the interest rate offered represents 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 3.6x, 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 3.5x, 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 the [ 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 4 months of the year, we are updating our full year guidance to reflect the expected in-year contribution from the 8 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 billion 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 billion to $1.9 billion and 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&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&A.

Thanks, Luke. I wanted to finish by talking a bit more about our proposed SECURE acquisition. This acquisition represents an opportunity to acquire a 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 publication dial related to the [ Sevita ] merger. While we saw a lot of opportunity in this asset package, we have limited balance sheet capacity at that time of the sale process and we are 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 '21 and 2022, the inflationary environment in 2022 and 2023 and then the tariff related to 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 wave assets.

SECURE's business is unlike other E&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 the 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&P disposal assets in other regions across North America. And thirdly, the ownership of the disposal capacity in the region yield 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 multibillion-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 million to $50 million of opportunity above the $25 million of largely SG&A cost savings already identified. SECURE's revenue in 2026 is expected to be $1.5 billion 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 revenue is expected to represent less than 8% of our pro forma 2027 revenues and will decrease further in prime 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&A of our M&A pipeline suggests 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&A.

[Operator Instructions] The first question today comes from Sabahat Khan of RBC Capital Markets.

Great. Maybe just a question first to start off on the pending transaction. I think it's about coming up later in May and one investor came out somewhat opposed to the transaction in some form. Maybe from your vantage point, can you just maybe share your thoughts on sort of getting the transaction completion and your confidence in getting the vote.

Thanks, [ Toby ]. Yes. As you said, there was -- there has been one investor that has publicly expressed their desire to not vote for the transaction. I think I don't personally know Abrams, but for everything we've learned and know they're highly respected, great performing sort of money manager. But I think the one thing we agree with Abrams on 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 1 versus 2. But 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 we'll see where that goes. That being said, that's one investor out of a multitude of many. When you look at the transaction, you have a very experienced management team that has been on both of these assets being secured GFL over 20 years. And you have a Board here that, again, highly sophisticated, have been alongside both of us building the business for a long period of time. And most importantly, put their money where their mouth is, around the board table, there's about $6 billion of invested capital in the combined entities, right?

So they all believe in the strategy, they believe in the combination of these 2 businesses. And 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 it's been very positive. So from our perspective, we believe this transaction is going to go over the line. Obviously, shareholders can vote however they want. But I think once particularly GFL investors got comfortable with the strategy and 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 of this asset was where it was, what the opportunities were coming in Western Canada on the backdrop of a lot of the Canadian infrastructure and government investment. So I think we're very well positioned to sort of move this across the line.

Again, we're going to continue to speak to both investors over the course of the next few weeks. But I keep reiterating the fact when you look at these businesses on a combined basis, when you look at next year, yes, you're approximately going to have $9.5 billion of combined revenue, call it, $3.2-ish billion of EBITDA, $1.3 billion to $1.4 billion of free cash flow next year. I mean if you look for the business is trading today on a combined basis, we're probably trading at 17 to 18x 2027 free cash flow probably 10 to 10.5x EBITDA when historically, we've traded at 25 to 30x free cash flow and multiple it then somewhere between 13 and 16x, right? So from our perspective, this will catch up. Yes, a little bump in the road, but there's significant upside to the combined business. So for all those reasons, we believe that this is the right thing to do.

Great. And then just on my follow-up, maybe on the guidance outlook and maybe more for Luke. And I appreciate the color that you shared on the guidance. I guess when 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&A that you've baked in, RINs and commodity prices, at least directionally are stabilizing. Maybe just talk us through the opportunity in the back half? Is there a potential for upside to the numbers you've shared for '26 in the pipeline?

Yes. Thanks, Sabahat. 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-5% or 5.5% price, I think you'd see it at or 25 bps better than that, right? And that should yield if you're looking at dollars, that's $15 million to $30 million incremental dollars coming out of that.

Now the offset is volume, and this is really why we need to wait for 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 have 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 if you think about from an interest rate perspective, from an oil price perspective, the expectations for incremental C&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 50 bps, right? That's representing $15 million to $30 million of incremental revenue I think that's the part we want to wait and see.

Now obviously, some of the exogenous factors in 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 million to $75 million of incremental revenue that would come online to offset that incremental diesel cost. And then FX. Recall, 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 result 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.

The next question comes from Patrick T. brown of Raymond James.

It's Tyler. Luke, I appreciate all the color a little bit on the guidance. But I just want to make sure I 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 the 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's street, better retention, a little bit of both? Just a little bit of color there would be helpful.

Yes. 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 recover the incremental dollars. So net-net, no impact to EBITDA and just really that's what the 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 that. I think what we've also seen is just a very high level of retention, right? 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 I do think, if you recall the original guide, we started at mid-6s 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 5s 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 improved 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 do 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 $1 billion 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 investment-grade opportunity to cash flow.

Yes, it's a great question, Tyler. It's 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 actual rating represents.

So pro forma for SECURE, you're absolutely right, a bigger business, better free cash flow generation, larger scale is all highly sort of credit positive. 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 of the balance sheet, as we have alluded to, our borrowing rate today on an after-tax basis, is this 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 of the cost of equity capital that one can achieve by having the perception of higher quality virtue of the investment-grade rating. So if you look at our spread I mean we are borrowing at 140 basis points over the underlying treasury and an investment-grade peer. We'll be doing it at 70 to 80 basis points, so the 60 to 70 basis point spread on a pretax 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.

The next question comes from Kevin Chiang of CIBC Wood Gundy.

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 that you saw internalization benefit? Or was that something I might have missed in the prepared remarks?

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 full disposal assets.

Okay. Okay. Cool. Yes, I thought that would be the case. Maybe just a more conceptual question. And Luke, you alluded to this in the prior -- 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 kind of look back the last 18 months, you saw your cost of equity improve as you went through this deleveraging process and clearly, the market is penalizing 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 be afraid how you think about the pace of future M&A, just given how this one specific is you can kind of swing your cost of equity 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 truthfully is 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.

So obviously, coming out of '23 and '24, we reevaluated our capital allocation strategy and came to the view that operating in a sort of 3 to 3.5 leverage level is ultimately what's going to yield the best way or 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 when 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.

And I think -- I mean the industry for whatever reason, I think, sold off was out of favor for, let's say, Q4 of last year and definitely into Q1 of this year. And stock has sold off before we announced any sort of M&A and then actually recovered a bit with some of the actual M&A.

I mean, listen, we don't know when interest stock go up or down. I think over time, the capital allocation decisions we've made have made investors a significant amount of money over a long period of time. compound 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 of equity, and you have a SECURE Board that owns between DPG and Solis another $1 billion of equity, it's over $6 billion of equity. So I think we are making prudent financial decisions, and we have our money where our mouths are. And we're going to keep doing the things that we think will yield the best results for us as shareholders. I might not be -- so we knew that the share price could maybe suffer 4% or 5% at the time of when we did the SECURE deal, but it will recover.

And we keep printing quarters like we printed key printing quarters like SECURE print this quarter, as you saw this morning, I think each and every one of our investors are going to be very thankful that of what we're doing and what we continue to do to drive exceptional results and exceptional performance. So I just think you doing the things that we know what to do, albeit with what we've heard over and over and time and time again, maintain leverage between 3 and 3.5 because that is going to yield the best results for the equity account. And we're going to keep doing that. We're going to live with them that. So you'll continue to see that from us.

I appreciate the response there. Congrats on a solid start to the year here.

The next question comes from Stephanie Moore of Jefferies.

Great. Good morning. Thanks, everybody. I wanted to touch on SECURE again. Maybe just talk a little bit about, I think a lot of the questions that we get and may be helpful to get a little bit of color would just be about the commodity exposure under the under the assets? How do you think about how the exposure has changed over time and at the same time, to position that GFL can make us the new owner here and really kind of addressing the quality of the assets and really looking at GFL's legacy services and how they can enhance the business under GFL umbrella?

Yes. Stephanie, it's Luke. Great question. On the commodity price exposure, we've highlighted in the call and certainly, I believe in 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. And in the short term, that's what gives rise to the commodity price exposure.

So if you think about SECURE's guidance for the year of $525 million to $550 million of EBITDA 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 that an elevated level of WTI over the longer term, does that drive multiyear 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 WTI 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 characteristics, very much alike to what GFL has today.

In terms of the overlap in that region, like, I mean, 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 bring 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 collectors that bring the waste to their facilities that are not GFL and that can 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 stand-alone.

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 permitted. You just -- you can't do it. They're metal recycling facility permits for rail that goes into those facilities. And again, the network of storage and pipeline facilities that they own, you just -- these are impossible to replicate assets, which yields the margin profile that these assets come with and the returns on invested capital that come with them. So I think the transaction worked perfectly because it's highly complementary to both businesses.

I think from an M&A perspective, there's limited opportunities on the SECURE side, and they would have to diversify outside of their core today into more sort of lines of business like 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. So again, strategically, it makes total sense financially makes total sense, in -- as I always say, market where we want to be and market selection we want to be in a market that we're going to be sort of sharing a big part of [indiscernible] Waste Connections. And those -- that's a market profile that we like. So we'll continue sort of driving through. And again, like I said, I think we, as a shareholders will all be rewarded handsomely on both sides of the transaction, both SECURE shareholders and GFL shareholders over time.

I appreciate the color. Just one quick follow-up on M&A in general. And I think you touched on this, but I think it's worth emphasizing. So maybe just talk a little bit about let's just say this deal does close, what is the enhanced flexibility for doing additional M&A on a -- based on a combined basis? I think that's an important aspect that's not being said.

Yes. I mean great question. I mean if you look at it today, we said we could effectively deploy somewhere between $800 million and $1 billion on incremental M&A while still deleveraging sort of 10 to 20 basis points, right? And so that's sort of the sweet spot in which we have been sort of modeling where we're sort of moving.

Now when you put the 2 businesses together, you're basically going to be able to deploy somewhere between $1.8 billion 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 to 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 under organic high returns on invested capital projects that you've seen in the spend on the year, which has been a $50 million to $100 million a year spend.

So you put those together, that will then keep the solid waste business growing, continue identifying the markets where we're operating in the U.S. And we have an incremental, call it, $800 million 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 log, 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 is trading at these kind of levels is highly compelling. So we have also a flexibility with the capital structure to basically do whatever we want. And I think, again, that is a tangential benefit of the transaction.

The next question comes from Jim Schumm of TD Securities.

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 U.S. So just curious how you see things playing out? And how is GFL positioned for any shifts in the landscape?

Yes. I mean I think that's more of a geographic discussion than anything else. I think if you're thinking about the Northeast, particularly, that's where a lot of waste by rail volumes are happening. I think from our perspective in the regions that we're operating, keep in mind, we're 75% secondary, 25% primary. The big primary markets where we're operating in, again, sort of if you think about Houston, Atlanta, Detroit, those are big primary markets in the U.S. 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, our landfills have significant capacity for the next number of years. 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 operations in those geographic regions.

Right. Okay. And then could you just give us an update 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?

Yes. So on EPR, with the exception of some of the stuff in Western Canada, the lion's share of EPR continues to come online throughout 2026. Obviously, the growth CapEx spend associated with those has come down significantly. Yes, to the tune of $100 million to $125 million as we sort of go into next year. There will be some modest CapEx spend around Alberta as those collection contracts and processing contracts continue to come online throughout now and the end of 2027. But that program is materially winding down now and those contracts are live. And the largest collection contracts came on -- are coming on to 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. And then forgive me, but was there -- were there still some opportunities in the Maritimes or that already come fast?

There's still some collection opportunities in the Maritimes, but the processing ones have been let.

The next question is from Bryan Burgmeier of Citi.

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%. I think we've talked about kind of the timing of EPR from last year and then maybe some fuel headwinds then you've got the M&A integration now. So just if you can provide color on some of the big items, that would be helpful.

Yes, Bryan, great question. If you look at sequential going from Q1 to Q2, contemplating at that 30.4% level, an 80 basis point increase. Now I think in order to frame the year-over-year, you got have to look at last year. Last year, Q1 to Q2 increased sequentially 280 basis points, which was sort of outsized and atypical. When you go back to '24, the sequential increase from Q1 to Q2 was 170 bps. And I think that's more sort of a normal course cadence.

So really, as we go into this Q2, you have fuel, commodity and M&A. I mean fuel of today's pricing is going to be a sort of 40, 45 bps headwind and you're going to have commodities if it stays where it is today, it's both sort of 20, 25 bps, and then you got M&A with what we've done so far is 40, 45 bps. And so when you add that all together, you got the 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 also had a benefit of 40, 50 bps as it is related to certain accruals and WSI rebates that we generated in Canada. And so again, it was about a 45 bp 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.

The next question comes from Trevor Romeo of William Blair.

I wanted to follow up a little bit on Frontier and then the Texas market. Maybe I 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 from -- or potential for 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?

Yes. 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 double the revenue of the Texas market sort of over the next 5 years. So we feel pretty comfortable in that operating model. That's a model shared by ourselves in the Frontier team that has come along with the business. But the plan is, is to double the size of the revenue in Texas over the next 5 years.

And I'd say on that, just to add, I mean, while M&A is obviously part of our playbook. The nice things about entrepreneurial and growing business like Frontier is there's meaningful opportunities for organic M&A deployment as well. One of the opportunities that was in flight when we closed the transaction and is adding a new sort of C&D recycling facility at the front end of their C&D landfill and there'll be a benefit to sort of the whole region. So that's in flight have some incremental growth spend, it doesn't manifest as purchase price because the payment for that is happening under our watch.

But 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 the results. So that goes to the point of this sort of outsized growth expectations. So not only just M&A, but some high-return organic growth opportunities are available to us in that market as well.

That's great. And then a 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 to comp, what was underlying volume activity kind of across your regional areas if there were any differences?

Yes. Look, whether we operate in Canada, we operate in Northern climates. We try not to call out weather on it, but I think this first quarter was exceptional and certainly 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 no.

So if you look at actual dollars, I mean, volume was negative $18.5 million. So prior year, we had this onetime transfer station volume of $10 million that benefited Q1, and we also had hurricane-related volumes of $21 million last year. So if you just normalize for those 2 things, you actually had positive $12.5 million of underlying volume. Now as I said, weather was about $11 million headwind, 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 $125 million on a sort of net-net underlying volume, that's roughly sort of 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 4 quarters, C&D volumes have been negative for those past 3 or 4 quarters. C&D was at the landfill was negative 7.5% in Q1. Now typically, the special waste is a precursor to subsequent C&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 pulls 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.

The next question comes from Jerry Revich of Wells Fargo.

This is [ Jake Coman ] on for Jerry. So on the SECURE synergy build, you've laid out roughly $25 million of low-hanging operational cost synergies and a pass to $50 million 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.

Yes. Great question. So as you said, the $25 million really SG&A-related costs, 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. And we alluded to this in the prior comments, you started thinking about internalization opportunities whereby today, SECURE is subcontracting a collection activity to a third party. They 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 would sort of be the next bucket. And then the third bucket being sort of what we 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 maybe 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 million that we underwrote is really that sort of SG&A that other incremental $25 million to $50 million is really equally across those 2 operational costs 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.

And then my second question would be on the Q4 call, you sized RNG in the roughly $125 million 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?

Yes. So that's right. I mean the original plan for RNG was $175 million. We talked that down, say, to about $125 million 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 million is the expected target. You're doing roughly $50 million today out of the 5 facilities that you're generating benefit from. That's roughly flat with last year, to your call 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, today's 240 versus the higher level that you realize on a blended average in 2025.

Going forward, 2027 is supposed to see an incremental 4 facilities come online, which takes you sort of upwards to that sort of close to $85 million to $100 million mark. And then in '28, you have the other remaining sort of 4 facilities that come online and take you the balance of the way there. So meaningful minimal incremental contribution in '26 to the guide, but we remain clearly focused on that path of sort of getting to that $125 million target as a whole.

The next question comes from Adam Bubes of Goldman Sachs.

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?

No, nothing material. I mean, I think, yes, this year, sort of exiting the year run rate of probably $600 million to $625 million. There's been some incremental M&A, no change in sort of net leverage sort of 5.5 to 6. On the GIP business, today, recently just signed another transaction, pro forma EBITDA, probably exiting the year in the neighborhood of 3.50 to 3.75 and net leverage in that business con sitting around 4.5 to 5.

So again, going back to the point of -- 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 1/4 of GIP and our equity value creation initiatives in those businesses continue to sort of continue to prove out. So they're going well, are doing exactly what they were supposed to do and what earth they set out to do. And at some point over the next few years, we'll definitely monetize our stakes in those 2 businesses.

And Adam, just as a follow-up in terms of disclosure on that, 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 billion, $1.8 billion value on the ES investment and then the $1 billion 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 a sight of which is lost.

Got it. Super helpful. And then can you just talk about how you're thinking about magnitude of transaction and integration costs over the next 12 months as you just a higher level of M&A. Just trying to think through what that bridge between adjusted and free cash flow -- actual free cash flow might look like to consider how much capital in hand you might end the year with?

Yes. And what I'd say is that will 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 while we're feeling good, we'll have that in hand before we sort of update that for the year.

So if you think ex SECURE normal course, you'll have the same level of acquisition integration costs that you've had the last couple of 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 then there's a bunch of sort of small ones. I mean the team in SECURE is fantastic. And when you think about their capabilities and skill sets across IT, HR, legal and areas where we need integration, being able to leverage the existing folks is really going to minimize the need for incremental sort of third-party costs. However, we'll wait until Q2. And by then, we'll have more visibility and provide you a sort of number. But for the guidance that was provided today on the $7.3 million to $7.34 billion of revenue, I'd assume a commensurate level of integration costs as you've seen in the past couple of years.

The next question comes from Chris Murray of ATB Capital Markets.

Maybe coming 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 had been involved in some of the transactions even back on the [indiscernible]. But any other thoughts you have on kind of the mix of business that you see kind of evolving over time would be great.

Yes, not a material impact on the ES business, although there should be some disposal synergies from the U.S. business that would benefit the SECURE CFO combination, right? So I think there's some incremental waste streams that we could probably internalize into those landfills over time and into the depot. So no material changes to sort of either business that sort of come with that.

Okay. And then last word, just to follow up. Just the pricing comment. You had mentioned that part of the reason for the stronger pricing was our lower churn as well as EPR. So just a question very quickly. Is there something different you're doing on your approach to turn that's actually driving that? Or is it just kind of a factor of kind of the mix of business or how it's coming in? And how is EPR playing into that? Any additional color would be helpful.

I mean, 2 distinct questions in there. EPR is just a function that we have deployed this growth capital, and we're strategically 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 said, if it was a contract that we were doing before or volume that we are 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, like return in retention really comes down to customer service, right, 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 our price initiatives. I mean, I'm sure this is a theme throughout the industry as a whole, but I do have better tools, whether that's AI-enabled or not, is better data analytics allows for more appropriate or targeted or rather than sort of pricing. And when it's more appropriate in targeted pricing, you tend to get sort of a better stick rate than not. So I think it's just the continuous improvement. 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 million to $80 million benefit at our Investor Day and 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 the discipline around ensuring the sort of price above our costs to generate sufficient return is very healthy and remains disciplined, and we see that not changing for our long-term outlook.

The next question comes from Tobey Sommer of Truist Securities.

It's Henry on for Tobey here. Just to start on your expectations for inflation for the rest of the year and some of the potential upside to the guidance with the global situation. And just kind of the mix of contracts that you have the [indiscernible] linked and the lag we could expect the adjustments flow through.

Yes, 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 the contract price rule. So if you think about Jan 1 price increases that you received, those are probably based on inflation read somewhere 3, 6 or 9 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 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 cost, and we're able to recover that separately. But I think if you look back at '22 through '24 and have the industry responded to cost inflation, it'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 is what CPI printing at a higher level, though, would really be a benefit for '27 and beyond. Understood.

And then just quick on the kind of potential time line for secured deals from the regulatory side. Are there any major milestones that you would call it that we should be looking for as that process moves along?

No. I mean, I think, again, we've put in a significant amount of work, obviously, pre-announcement and post signing. From our perspective, there are no real material issues. And hopefully, the bureau -- again, just because they've gone through this process in depth a couple of years ago, they understand the market really well, and our expectation is that our hope is that we'll get through relatively quickly. But I think you can expect somewhere between 3 and 5 months is probably a reasonable time frame to get through that, which would have us hopefully closing the transaction on going into sort of Q4 so down somewhere in September, October, closing the transaction. So we'd have that tuck-in for a quarter of ownership with that asset for this year.

The final question today comes from Shlomo Rosenbaum of Stifel.

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%, U.S. 3.4% you're getting more margin expansion in Canada, even you look at the underlying in the U.S.? And I'm just trying to understand, is there operational something that's very different going on? Is 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.

Sure. I mean 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. They were priced between 2009 and 2013, at just continue to get extended and we're getting CPI on those. And then as we took over the recycling as part of EPR, we reset them to the current market rate, right? So that led to some of the margin expansion or the big difference in the margin expansion between Canada and the U.S. over that period.

So nothing -- there's no anomalies that have come out of Canada or the U.S. over that period, just -- it's largely just again, the repricing of a bunch of those recycling collection contracts that represented a significant amount of revenue.

And Shlomo, I would just add, when you think about that margin that you described on the face of it, underlying the U.S. was significantly more impacted by what I call, exogenous factors in Canada was. So if you think about the U.S. quarter year-over-year margin, commodities was a 40 basis point headwind. Fuel was 40 basis points. The hurricane from last year that you're lapping and the winter impact was 40 basis points, and you had sort of 75, 80 basis points from M&A that was in the U.S. And so if you factor that in, 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 have alluded to.

So 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 U.S. business has very squarely been sort of low- to mid-30s, some of the pricing opportunities that we've talked about, we're also disproportionately available in Canada in the U.S. So I think it's all of those things that need to be taken into account that 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 look, maybe you could just provide color, what exactly is this is, the housekeeping and what is the change in value add call option? What does that do to?

So as you know, we have a call option to buy back the ES business in 4 years' time. As with any option, a significant component of the value is the time. And naturally, all other things being equal, that time 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 the 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 auction.

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.

We have no further questions at this time. So I'd like to hand back to Patrick for closing remarks.

Thank you, everyone, and we look forward to speaking to you about our Q2 results. Thank you. Have a good day.

This concludes today's call. Thank you all for joining. You may now disconnect your lines.

Hello, everyone, and thank you for joining us today for the GFL Investor Update Call. My name is Sami, and I'll be the coordinator for today's call. [Operator Instructions].

I'll now hand over to your host, Patrick Dovigi, CEO and Founder of GFL to begin. Please go ahead, Patrick.

Thank you, and good morning. I would like to welcome everyone to today's call, and thank you for joining us. Earlier today, GFL and SECURE Waste Infrastructure Corp. jointly announced that we have entered into a definitive agreement for GFL to acquire 100% of SECURE's common shares for an enterprise value of approximately $6.4 billion. We believe this is a highly compelling transaction for both GFL and SECURE shareholders.

I am joined this morning by Luke Pelosi, our CFO; and Allen Gransch, President and CEO of SECURE. Luke will take us through our forward-looking disclaimer before we get into the details.

Thank you, Patrick. Good morning, everyone, and thank you for joining. We have filed a press release and investor deck, which include additional and important information on this transaction. These materials are available on our website.

During this call, we'll be making some forward-looking statements within the meaning of applicable Canadian and U.S. securities laws, including statements regarding events or developments that we believe or anticipate may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set out in our filings with the Canadian and U.S. securities regulators.

Any forward-looking statement is not a guarantee of future performance, and actual results may differ materially from those expressed or implied in the forward-looking statements. These forward-looking statements speak only as of today's date, and we do not assume any obligation to update these statements, whether as a result of new information, future events and developments or otherwise.

This call will include a discussion of certain non-IFRS measures. A reconciliation of these non-IFRS measures can be found in our filings with the Canadian and U.S. securities regulators.

I will now turn the call back over to Patrick.

The acquisition of SECURE provides a unique opportunity to acquire a leading waste management provider in Western Canada. SECURE's highly complementary footprint of difficult to replicate post-collection assets significantly densifies our footprint, enhances our scale and expands our ability to offer a full suite of services to our customers in Western Canada, a market in which we have long operating history in and favorable long-term outlooks.

Over the past decade, we have observed the maturation of SECURE into a high-quality waste asset with predictable cash flows tied to durable waste production with 80% of volumes tied to recurring waste streams. In 2023, we bid to acquire a package of SECURE's assets that were forced to divest as part of an acquisition, but were unsuccessful.

Since that time, we have continued to observe the improving quality of SECURE' business and the markets in which it operates in. SECURE's portfolio of landfills, transfer stations, recycling facilities and critical waste infrastructure are best-in-class and position the business for continued success.

Structural tailwinds provide ongoing support for SECURE Services, and we expect the evolving macro environment to drive incremental demand over the coming years and decades. Allen and the entire SECURE management team are extremely impressive operators with a track record of equity value creation, and we look forward to utilizing our new combined footprint to further enhance shareholder value. Luke will walk through the financial impacts in detail, but at a high level, the acquisition is highly accretive across nearly every financial metric.

SECURE's mid-30s adjusted EBITDA margins, combined with relatively lower maintenance capital requirement yields a 50-plus percent free cash flow conversion. The pro forma impact of this acquisition significantly accelerates the achievement of the multiyear financial targets we shared at our 2025 Investor Day, including low to mid-30s adjusted EBITDA margins and mid-40% free cash flow conversion exiting 2028.

Additionally, being able to do this transaction on a leverage-neutral basis is a unique opportunity and one that we think is going to create meaningful value for both GFL and SECURE shareholders.

On this point, I will hand the call over to Allen, who will provide additional context from SECURE's perspective.

Thank you, Patrick. Good morning, everyone. I'm very pleased to be here today and excited to announce this transaction with GFL, which represents an important milestone for SECURE and our shareholders. SECURE today is a large-scale waste infrastructure platform with the largest processing capacity in Western Canada, supported by a network of more than 80 facilities.

SECURE's network of critical waste infrastructure across Western Canada and North Dakota spans waste processing, recovery, recycling and disposal and integrates naturally with GFL's broad North American platform. The combination expands GFL's footprint in key industrial markets and strengthens the ability to capture more waste streams and vertically integrate across the value chain.

Over the past several years, SECURE has executed a clear strategic repositioning within the waste sector, building a high-quality infrastructure-backed business characterized by stable cash flows, durable growth and industry-leading financial metrics. This transaction accelerates that recognition by capturing the intrinsic value of the business today with a share price premium of approximately 23% to the 60-day VWAP while also providing our shareholders with meaningful participation in the upside of the combined company through a significant equity component.

We also believe the continued ownership is important. SECURE brings a high-margin free cash flow generated business that enhances GFL's financial profile, supporting improved margins, double-digit adjusted free cash flow per share accretion and incremental capital deployment opportunity. Overall, we believe this is great value for SECURE shareholders and the result is a stronger pro forma company with a clear path to long-term value creation, positioning our shareholders to benefit from the growth of a larger, more scaled platform.

For our customers, this combination is also compelling. It enhances our ability to deliver reliable, integrated environmental solutions across a broader footprint with greater scale and the capabilities to meet increasingly complex waste handling needs. Now none of this happens without our people. Our team has built this company with a focus on safety, operational excellence and doing the right thing. These values are deeply embedded in how we operate, and we are strongly aligned with GFL.

With GFL's scale and platform, we see a clear opportunity to accelerate growth, expand our capabilities and capture opportunities that would take longer to realize on a stand-alone basis. This transaction brings a leading strategically positioned waste infrastructure platform into GFL, unlocking the next phase of growth from that foundation. We're proud of what we built, and we're very excited to be part of the GFL and continue the growth of the combined company.

I'll now pass the call over to Luke.

Thank you, Allen. Page 4 of the investor deck highlights the significant accretion to our financial metrics expected from this transaction. Note, the first column on Page 4 is the original 2026 guidance we provided and has not been updated to reflect the impact of the M&A that has been completed year-to-date.

As we previously announced, we expect to significantly update our 2026 guidance when we report our first quarter results at the end of this month and the actual 2026 adjusted EBITDA pro forma for SECURE's would therefore be something greater than the $2.715 billion shown on Page 4.

With that, assuming our original 2026 guidance on a pro forma basis, the SECURE acquisition would increase adjusted EBITDA 27% and adjusted EBITDA margin by 100 basis points to 31.6%. Furthermore, assuming the midpoint of outcomes, adjusted free cash flow would increase approximately $300 million to over $1.135 billion, representing adjusted free cash flow conversion of nearly 42% and adjusted free cash flow per share would increase approximately 15%.

As Patrick stated, this significant growth is being achieved on a leverage-neutral basis, once again demonstrating our commitment to keeping net leverage within our stated range of low to mid-3s. The transaction is being contemplated at an enterprise value of approximately 11x, 2026 adjusted EBITDA or at a share price of approximately 18x free cash flow, an acquisition price that is expected to generate a compelling return on a stand-alone basis.

The ROIC opportunity is significantly more compelling when considering the opportunity for incremental capital deployment resulting from the transaction. Our financial algorithm is that adjusted EBITDA growth and free cash flow generation reduce leverage and provide balance sheet capacity for returns-focused capital deployment.

When you model out the go-forward balance sheet, adjusted EBITDA growth and free cash flow generation pro forma for SECURE, using conservative assumptions, you have nearly $1 billion of incremental capital deployed over the next 2 years or nearly $2.5 billion of incremental capital over the next 4 years that could be used for M&A, organic growth projects, share buybacks and dividends and should be an opportunity for significant incremental value creation.

Additionally, the pro forma enhanced scale and free cash flow generation are expected to be positive updates for our credit profile. We continue to see opportunities for credit rating upgrades in our future, which should be incrementally positive to our financial profile and increase our appeal to a broader base of equity investors.

Similarly, the pro forma enhanced scale will improve index inclusion opportunities. The significant increase to our float weighted market cap likely to result from this transaction will further bolster the relative sizing of GFL that is considered when evaluating inclusion in indices like the TSX 60.

I will now turn the call back over to Patrick.

Thank you, Luke. I would just summarize by framing the acquisition as the following: A highly complementary business that significantly densifies our existing footprint in an attractive market in Western Canada, immediately accretive across all key financial metrics, provides enhanced scale and free cash flow that improves opportunities for returns-focused capital deployment, credit rating upgrades and index inclusion.

I will now turn the call over to the operator to open up the line for Q&A.

[Operator Instructions]. Our first question comes from Sabahat Khan from RBC.

So maybe just starting at a higher level, if you can maybe just share some thoughts around kind of the -- you talked a little bit about the assets, but maybe the strategic rationale, why now is the right time?

And then with the increased exposure into Western Canada, maybe if you can just share some thoughts on what the E&P exposure looks like or where you want it to be longer term pro forma.

Sounds good. Thanks. Yes, I mean I think from our perspective, this is an asset that we've been looking at since the original divestiture packages of 2023. And when we think about the strategic rationale, a multitude of fronts. We've been operating in Western Canada since our first acquisition in Western Canada in 2010.

We're in a lot of the markets where SECURE is operating at today, albeit maybe not doing exactly the same services that they're doing today. But I think when we look at it and how Allen and the team have transformed the business really over the last 5 years to now be in a market with its largest competitor sort of being Waste Connections, which is obviously a large competitor of ours on the solid waste side, we think the setup for that is very well.

I think to Luke's point, in terms of where we're looking at in terms of sort of overall revenue. I mean, if you take a look at it in the sort of most punitive way, you could say you basically have, call it, $1 billion of revenue that is tied directly to those markets where you would see would be more sort of E&P focused. And if you take the bread crumbs for '27 and sort of how we're thinking about the business sort of longer term, I think on a pro forma basis, pretty hard to see how the business on an overall basis would be less than sort of $9.5 billion of revenue going into '27. So that represents sort of like an E&P exposure of, call it, 10% to 12% on the overall business.

Our intention is not to expand our E&P business and buy other industrial business across the portfolio. This is literally just to expose -- to increase our exposure to Western Canada around a very unique opportunity in a high-margin, high free cash flow business that highly complements our existing portfolio in Western Canada. And you sort of put all those break comes together, I think it's going to be highly compelling as we roll into '27.

We're using '26 numbers here. But ultimately, when you use '27 numbers and where the business is going, EBITDA is definitely going to start with a 3. Revenue is certainly going to be $9.5 plus or minus a couple of hundred million, and you're going to be converting to free cash flow at sort of low 40s as we discussed. So free [ cash flow exceeding ] is sort of $1.3 billion plus next year. And I think that to us is sort of highly compelling as well as getting a business from our perspective at a very reasonable purchase price multiple with very low integration risk, right? This is an experienced management team.

And again, markets where we already operate with management teams that already exist in those markets that can work in a complementary fashion with the existing management team. So we think integration risk, obviously very low. So that's what excites us about the opportunity.

I think one point to raise as well. We debated a lot about where this fit within the portfolio. Did it fit more with ES? Did it fit more with solid waste? And I think when you actually look at the assets, again, having 12 major landfills with a permanent landfill in BC, again, significant opportunities to retool some of those sites to be able to receive some of our incremental waste streams within the book. I think 12 recycling facilities, 5 transfer stations and the injection wells are all things that we do on the solid waste side, and we do them very well.

I think the treatment facilities and the storage terminals are something that we would more do on the liquid waste side, but that only represents 25% of the business today. So from our perspective, this was a better fit for solid waste than it was for Environmental Services. And again, for all those reasons, we think it's very compelling. This is not a change in strategy or direction.

The lion's share of our capital is going to continue to get spent on solid waste tuck-in M&A within the existing geographies where we're operating. This just happens to be a larger opportunity. But ultimately, it's the exact same thing we do in all the markets with a very highly compelling sort of financial profile.

Okay. Great. And then I've got a couple of more questions. I'll just roll into one. The first part, maybe a bit more color on, call it, $25 million of synergies. What specifically is in there? And any thoughts on ability to use landfill, maybe go to collection?

And then second part, if you can just comment on some of the additional businesses that SECURE has, such as midstream, the metal, the specialty chemicals. Just is that something you expect to keep as part of the business? Just thoughts on those 2, and then I'll pass the line.

Yes. Thanks. Great question, Luke speaking. Look, on the synergy part, $25 million, we characterize this as a highly conservative estimate, really focusing on low-hanging fruit duplicative G&A type costs.

As Patrick said, we're very excited that the entirety of the SECURE management team wants to stay and sort of keep running and growing this business. But 2 public companies coming together, you start thinking about public company costs, audit fees and the other sort of low-hanging fruit.

I think that's the majority of what's been identified. I think the opportunity could be upwards of sort of 2 to 3x that when all said and done, if you start to think about commercial overlap opportunities and revenue generation. But today, that $25 million is really just focused on what I characterize as SG&A type cost savings, really more on sort of professional services, insurance and other public company-related type costs.

In terms of the business mix, look, as you said, Patrick alluded to, I mean, Allen and the team have done a phenomenal job of sort of maturing or transforming this business into a waste infrastructure asset with the recurring cash flows that are durable across various cycles. And that's the type of asset we sort of like, whether it's in the metals recycling, specialty chemicals, those segments all sort of form part of the whole.

And we're very happy with the mix that they have today. Will that augment around the edges as Allen and the team continue to sort of mold and craft the portfolio as it goes forward? I'm sure it will. But there's no sort of one distinct subsegment in there today that we think doesn't fit into the portfolio, and we'll continue to evaluate as we do with all of our business offerings as and when opportunities arise.

Our next question comes from Stephanie Moore from Jefferies.

Great. I wanted to -- I guess just one question, but maybe kind of 2 parts to the same topic. So first, maybe talk a little bit about how the M&A pipeline looks for the remainder of this year.

And then Patrick, you alluded to this a little bit. But as you think about pro forma this year, how would you characterize the M&A strategy going forward?

Yes. So for the balance of the year, we expect that we'll deploy an incremental $400 million to $500 million into tuck-in M&A across the portfolio. 100% of those dollars will be spent on solid waste M&A that tucks into existing geographies really on the back of underutilized post-collection assets. So no change from that perspective.

I think when you roll into '27 and you're going to have $3-plus billion EBITDA business. I mean you can do the math and put the organic on after our updates. But you're going to be in the low 3s next year of sort of EBITDA, converting free cash flow at somewhere between 41% and 42%. That's going to yield $1.3 billion plus of free cash flow.

As Luke said in his remarks, that affords us a lot of flexibility in what we do with that capital. The lion's share of that capital is going to continue to get deployed in those same solid waste tuck-in M&A transactions across the solid waste footprint in both Canada and the U.S. Obviously, we'll have incremental dollars to use for share buybacks as well as delevering. But I think when you run that with this pro forma -- with this transaction on a pro forma basis, I think you can easily spend the $1.5 billion to $2 billion a year on M&A, and you're still going to delever sort of 15 to 20 basis points a year if you wanted to.

Obviously, if you do less, you're going to just delever faster and have incremental dollars for share buybacks and/or dividend. So we're going to have ultimate flexibility. We'll assess as a company and as a Board about what the right capital deployment strategy will be. But know that we have ultimate flexibility, which is a very good place to be.

Our next question comes from Patrick T. Brown from Raymond James.

Congrats on the transaction, but I got a question for Allen. So we've been watching SECURE from afar for some time. But can you kind of give us a little bit of color on the visibility to organic growth in SECURE over the next few years? I think you guys have a pretty robust organic growth pipeline kind of building there.

And then real quick, Luke, would you expect this to be separately reported segment once it's closed?

Good morning, Tyler. Yes, I think when you look at our organic spend over the past few years, we've been averaging $100 million in new projects. A lot of those projects have been funded with long-term contracts with very large customers. And as we think about 2026, we've already announced $75 million of growth capital, and it's a little bit unique in terms of growth capital.

We do have price and volume growth, but we also have these new facilities that we bolt on or expand our existing locations. And so this year, we're spending $75 million. I expect that number is going to be higher as we get through the year. But I've explained this before, our hopper is anywhere from $300 million to $400 million. We're going to continue to execute $100 million of opportunities per year. And obviously, that will be in conjunction with having discussions with Patrick and Luke on what's our best IRRs and where do we think our capital is best place.

But that's not going to slow down. Our hopper is going to continue to grow. I think the backdrop here in Western Canada is very, very strong. And I think we're going to have lots of opportunities and new opportunities to keep expanding there. So no, it's quite strong.

Yes. In terms of your segment question, look, I mean, we're constantly evaluating our financial reporting, making sure we have sort of sufficient disclosure there. As we get into 2027, which is when this is going to be sort of most relevant, we'll sort of revisit.

Certainly, I don't think there's a scenario in which the SECURE business as it exists today would report it stand-alone just because of the sort of overlap that it would have with our Western Canada business. So may do some resegmentation versus our current segment reporting. But it will be more 2027, as Patrick said, we'll look at the M&A that's happened, the relative size of the pieces at that time, and we'll look at that. But even if it's not a stand-alone segment, Tyler, will make sure to provide you some nice quarterly bridges so you can understand all the moving pieces.

Okay. Luke, I appreciate that. All right. Patrick, so you kind of touched on it a little bit, and we can talk a little bit about SECURE and call it GFL proper and the overlap that you have. But how much does SECURE compete with GFL Environmental Services? And does this transaction change the calculus longer term on both your willingness and your ability to exercise that ES option in, call it, '29 or '30?

Yes. There's very little competitive dynamic between SECURE and the GFL ES business, which was, again, one of the reasons why we looked at, where we were going to put it as a Board. And well aware that on the face of it that maybe someone could poke a hole and obviously, on every financial metric, there's nothing anybody can argue with that this transaction makes sense, right?

And I think when you look -- when you actually dig deep into what it is, the lion's share of what SECURE does is what GFL does across the country in -- both in Canada and the U.S. and the lion's share of those assets fit directly in, again, long-term contract against what we would view as post-collection assets that yield sort of great financial results. Does it change anything in how I think about -- again, it complements the ES, but it doesn't compete with it.

So again, I think from our perspective, it doesn't really change anything on what we would do with the asset. But again, you look at what the multiples of those are trading at in the private sector, I mean, we sold our ES business for almost 15.5 to 16x, right? You look at what Veolia paid for the Clean Earth business, I think that thing traded for closer to 18 to 19x. We think buying this sort of around 11x pre-synergies on '26 versus rolling that out to '27, which is probably closer to 10 and still meaningful opportunity for increased synergies with some of our -- with conversion of some of these landfills to receive some other incremental waste streams, as Allen said, to internalize more volumes into those landfills is very compelling for us.

And I think this acquisition is going to provide exceptional results, both financially and operationally with an exceptional management team that they have and with very low integration risk. And most importantly, their shareholders, their Board, their largest shareholder believe in the combined entity and are taking 80% stock to keep this leverage neutral to be able to give us the firepower to go and continue growing the business and the combined entity and believe that there's material upside in the combination. And so do we. And that's what makes it compelling for us.

And I think when you look at that, this is a very unique opportunity with an extremely great margin profile, free cash flow profile, and these opportunities don't come along every day. Sure. Would I have liked to have done it when GFL was trading at $5 or $6 higher? Sure. But at the end of the day, it doesn't materially change any of the economics as you move forward. And I think it just puts us uniquely square in the position of where we want to be.

And I think for all the reasons Luke and Allen have mentioned, we're just in a great spot, and it's going to be a great deal. And the best dealer when both sides win and both shareholders of GFL are going to win and SECURE shareholders are going to win over time as well. So I think it's great.

Okay. And one really quick last one, Luke, on the U.S. GAAP transition, does this change or slow that potential?

Yes. Thanks, Tyler. No, we continue to evaluate and look at sort of options or the broader sort of financial reporting. We are going to continue to prepare to be a U.S. GAAP filer, and there likely will come a time when that is the right decision for the sort of company. When that exactly is, is still sort of TBD, but we'll be sort of prepared to sort of do so.

And the index inclusion opportunity that was really a driving force as to why maybe you'd want to accelerate that, it is quite possible that the pro forma impact of SECURE together with GFL materially advances our index inclusion opportunity here in Canada, right? And that could be a very nice sort of stepping stone along the way for broader index inclusion, perhaps reducing the sort of near-term impetus or need or desire to accelerate the...

Yes. And I think first step is the Russell, (sic) [ Tyler ] obviously, which we should get some more clarity on certainly by April 30, which could be very favorable and positive outcome is sort of our expectation. Obviously, no promises, no guarantees, but April 30 is when we should get some pretty good color in terms of what that looks like.

Our next question comes from Kevin Chiang from CIBC Wood Gundy.

Maybe you've noted a few times, these are complementary services with SECURE. But I guess we've seen the Competition Bureau step in when you look to acquire when you acquired Terrapure. And clearly, they stepped in when SECURE acquired the Tervita assets. They seem to be, I guess, reticent around some of the consolidation more broadly in the Western Canadian waste industry. I guess given your previous experience with them, just why you think maybe the Competition Bureau approves this deal in a short time with the second half close or maybe your experience with them gives you a little bit more color on the things that might be pain points that you would have addressed already in this transaction?

Yes. I think at the end of the day, we're realist. A big part of the assessment we did was obviously doing just that. We are very well prepared and have spent a significant amount of time doing the work that we needed to do to ensure that we didn't believe that there was any material regulatory issues. And we'll make our submission over the course of the next sort of 7 to 15 days, and we'll start the process. But we feel very confident both on the SECURE side and on the GFL side that this should be approved.

For all the reasons that sort of we've articulated on the call, highly complementary sort of less competitive. And given the work that the bureau previously did with the recent SECURE, Tervita divestitures to WCN is a good framework because I think a lot of that work has been done already, which gives us a lot of confidence in terms of what the bureau's expectations are going to be around certain markets, et cetera, given the work that was done as recently in the last sort of 1.5 years to 2 years.

That's helpful. And maybe just in terms of -- Luke, you provided good color on the kind of the cost synergy opportunities. But in terms of cross-selling, maybe you can speak to where you see some of the opportunities, if any? And then maybe your experience with your legacy ES business and the cross-selling strategy there. Are you -- does this accelerate that? Or have you seen good success there? And clearly, you think you can lever that into the secure assets?

Yes, Kevin, it's a great question. One of the things that gets us excited as you look at the SECURE facility network, it's mostly post-collection facilities, right? Collection isn't a meaningful part of the sort of SECURE service offering today. And it's obviously an area in Western Canada where we are very large and sort of well entrenched, right? So all those customers have collection needs as well. And so that seems like some low-hanging fruit opportunity on the commercial sort of synergy side.

And then additionally, you've heard us say something, but like most customers have regular waste solid waste needs, right? And so there's an opportunity to look at the sort of customer book and ensure that if there's customers there that SECURE servicing in some capacity, if they have regular waste commercial or normal course waste, that represents another sort of opportunity for -- to expand the GFL service offering in that. So we're excited about the commercial synergy opportunity.

We think that could take the cost synergy of $25 million opportunity up to something, as I said, 2 to 3x higher than that in the over the course of this sort of coming together. But that's something that we will update and articulate as we get closer to integration and have that sort of more well laid out.

Our next question comes from Konark Gupta from Scotia Capital.

Allen, great to hear your voice on GFL calls. Congrats on the deal guys. Maybe first one for me, Patrick, Luke, do you know the 80 assets you're acquiring here or 80 sites from SECURE, how do they compare to the 29 sites SECURE, Tervita had to divest in 2024 to Waste Connections?

Probably a better question for Allen. But I think for all, it's very similar, but I'll turn it over to Allen.

Yes, you're exactly right. I always characterize it as they were a representative sample of our overall network of 80 facilities. And so we would be directly in line with these locations where they're spread across Western Canada. In some markets, we do compete with WCN. But for the most part, yes, they're a representative sample of the assets.

And if we look at the commodity exposure, and I think we have chatted about it in the past. I mean you guys are 80% production tied, so probably not a lot, but maybe more a question of strategic rationale here, Patrick, for you. Are you taking a lot more commodity risk at this point? Do you think with the 10% plus E&P exposure you will have and where the commodity prices are today, I mean, they may not be sustainable long term. Like any thoughts there?

Yes. Well, again, I think that was the beauty of the business is the way that Allen and his management team have retooled the business over the last 5 years, there's very low commodity risk. I think we took a lot of comfort in sort of $55 to $60 WTI last year and sort of how the business performed. And I think that's the beauty of the business having built it now. But digging highs and terrifying lows, the business generally performs very similar. Yes, there might be some modest upside from the numbers we looked at with the increased sort of WTI. But all of our work, we actually entered into the transaction and our work was done pre the war in Iran.

So I think when you look at -- from that perspective, again, we took a lot of comfort in that there wasn't a lot of commodity risk. And from our perspective, there's not. And a lot of this is sort of on the maintenance side and sort of not dependent on incremental waste streams that come from new drilling, et cetera. So I think we feel very comfortable about it. Again, it's immaterial in the overall book of business, like we said last year.

Like I said in my previous comments of sort of $9.5-plus billion of revenue for '27. There's modest commodity risk. And I think from our perspective, that is a very good place to be with just given how Allen and the management team have retooled the business.

And Konark, just to add that very modest commodity risk that Patrick said, the fact that it's countercyclical like to our existing GFL business. What I mean by that, our diesel price, we buy 50 million gallons of diesel, that going up and down. I mean the commodity risk and secure is sort of the inverse of that.

We used to have a little bit of that, and we have the ES business that serves as a sort of natural economic hedge against sort of diesel price volatility that, as you know, solid waste business can have on a short-term basis. So notwithstanding Patrick's emphasis that we think the commodity risk is de minimis, the fact that it goes the opposite direction of the risk that I have in the GFL's diesel consumption is a nice natural hedge.

Makes sense.

Our next question comes from Trevor Romeo from William Blair.

Patrick, I think you talked about very low integration risk here. I was wondering maybe if you could talk a little bit more specifically about the integration plans that you have. I guess, are there any sort of bigger migration efforts required in terms of the brand? Do you [ integrate ] SECURE brand in market? Do you integrate under GFL? Just any more details you can provide on kind of the integration plan, how much, how fast, anything like that would be helpful.

Yes. So I'll break it out, again, client-facing and then sort of back office. The way we sort of think about M&A the SECURE brand will move to the GFL brand over time, not going to sort of happen overnight, but will definitely happen over time. And then I think, obviously, on the HR front, the accounting front, sort of on pricing and procurement, again, those are -- from an integration perspective, that's sort of rinse and repeat, done that multiple times with over 300-plus acquisitions. So we have a very well-defined playbook on that front.

I think operating systems, again, where we are today with sort of AI, the integration of those into sort of our back-office systems is going to be very quick. Obviously, the moving to our accounting system is going to be very quick. The moving to our HR platform is going to be very quick with sort of very low risk. And the beauty is that the assets that are sort of highly complementary, there is not -- we haven't modeled significant sort of synergies coming from facility consolidations, et cetera, and headcount reductions. So that's not what this is about. So I think from where we sit, going to be very modest integration risk, if any, at all. So it should be very smooth, should be very quick and shouldn't really have any issues.

And Trevor, one of the things you've heard us say before, people often think larger deals pose a sort of greater integration risk. Our experience has been the quality and capabilities of the team that come along with a larger deal actually materially sort of aids in sort of integration sort of planning.

So when you think about, as Patrick was saying, whether it's sort of Chad who runs the sort of -- the CFO running the finance function, Michael and HR, these are very organized, well-qualified professionals with processes, et cetera. And we've historically found that to really sort of ease the integration process versus what you might see at some of the smaller, what we call mom-and-pops that are less accustomed to the processes, systems, et cetera, associated with being part of a public company like GFL.

Great. And then maybe for my follow-up, I guess you've kind of announced 2 larger deals recently with Frontier and now SECURE. You talked about, I think, $400 million to $500 million of core tuck-ins the rest of the year. I guess as you think about the next few years and kind of the pipeline for deals that are maybe larger than your typical $30 million and under EV mom-and-pop type tuck-ins, what else is out there? What are you kind of interested in doing? How do you think about that opportunity, I guess, over the next few years?

Nothing sort of any size or scale anywhere near sort of the frontier size. I mean, again, like we've said historically, those sort of come up every sort of couple of years. That was one, obviously, we've been working on for a while. But I think as we sort of look into '27, where we sit today, obviously, things can change, but where we sort of sit today, there's a couple of opportunities that I would say are north of $50 million of EBITDA that, again, always on our radar, always in discussions with.

But again, the lion's share of what we see today is, again, $1 million to $10 million of EBITDA across a broad book, both in Canada and the U.S. No plans to go outside the geographies that we're operating in today, and we're just going to keep doing exactly what we've done sort of rinse and repeat for sort of a long period of time. But I think as we move into '27, from an integration perspective, obviously, the team is set up to do it, but Frontier was well underway going into the end of last year and through the beginning of this year. So integration there is well in hand and expectations that will be done in the next sort of 45 to 60 days.

And then now as we turn our sights to the larger one and SECURE, again, very good team there that will make that process seamless. So again, we're not expecting anything there. And as we said, we'll close -- we'll spend another sort of $400 million to $500 million on traditional tuck-in M&A this year.

Our next question comes from Shlomo Rosenbaum from Stifel.

I have kind of a strategic question, looking at it from Allen's side and Patrick's side. Allen, maybe you can comment a little bit more on strategically why getting together with GFL should accelerate the growth for your core business. You made a comment that you think you could grow faster afterwards.

And then strategically, Patrick, do you think about the business being more economically sensitive post this kind of acquisition? Or maybe you could just give us a thought on that.

And then I have one follow-up for Luke.

Sure. I'll start. Thanks for the question. Yes. When we look at the businesses, and Luke has mentioned it, we want to look across our infrastructure platform that we've said multiple times is very complementary. But when we look at our service offerings to our customers and they see a broader suite of offerings, specifically on the waste collection and on the infra side, we're going to be able to expand what we do together for that customer and offer that better service offering.

And when we think about the access to capital, I mean, when you put a larger company together, we're going to be $37 billion together here and you look at the cost of capital, and we have access to more capital that we could deploy to some of these organic opportunities, which they're fantastic. I mean we're building these things at a 4 to 5x build multiples we look at opportunities that target after-tax IRR of greater than 20%. And so we're going to look at the network together. We're going to look at the hopper of opportunities.

As I said, the backdrop here in Western Canada continues to get better as we think about the longer term and the setup of some of the areas we're located that continue to grow each year. We see production in Canada growing at 2% to 3%, which just means more waste volumes. And when you see more waste volumes, we see more opportunities to deploy capital. And so I think with the team and the total infrastructure, I think that's going to be very advantageous to work together on what our platform can do and how quickly it can grow.

Even on -- when I think about LNG and the coast, we've got a waste plant in Kitimat. There's more we can do there. We've got our new Redwater facility, which is a Class 1 facility. We've got one of the -- there's only 2 Class 1 hazardous landfills in Alberta. We own one of them. And so there's obviously going to be material there that we could bring in, which we alluded to earlier. So yes, there's lots of opportunities here to accelerate.

Yes. And your point on sort of the economic sensitivity to the business, where we sort of sit today, again, if you look at SECURE, the economic -- I mean, all of our businesses are economically sensitive to the macro. That being said, if you want to just look at the perspective of the SECURE business and sort of what is tied to more sort of commodity-based streams, you take that and that's, call it, 20% of the revenue today, 20% of the revenue on $1.5 billion to $1.6 billion is sort of $300 million.

If you think about $300 million of economically sensitive revenue tied to a business that's going to generate somewhere north of $9.5 billion, I mean it's miniscule in the grand scheme of things, right? So again, that's not something that worries us. And going back to Luke's point, it's sort of a natural hedge against the other parts of our portfolio. So we feel sort of very comfortable with that.

Okay. And then Luke, is it fair to assume that the way that you looked at this was just a matter of that $25 million of synergies based on what SECURE was talking about kind of coming out in the fourth quarter of the year because with some of the changes in crude prices, it looks like the EBITDA target looks a little bit low.

Yes, Shlomo, I mean, one thing we've realized in these public equity markets, and Allen knows as well is that you guys like underpromising and overdelivering. So we've just taken SECURE's base guidance that they gave at the beginning of the year. I'm sure when Allen and his team sort of speak on their quarterly update, they'll provide their outlook. But we're certainly feeling like there could be upside to SECURE's numbers.

Similarly, you'll note that all the financial metrics on -- in this deck are based on GFL's original guidance, which, as we've very clearly said, is going to get raised significantly as well. So we think there's upside to these numbers. The synergy concept of $25 million, I spoke about earlier on the call, I think there's upside to that. And the fact that the financials are so compelling even with this conservative view as part of that, I think gets us excited when we think about what we ultimately might be able to deliver above and beyond this baseline.

Yes. Shlomo, just again, I want to reiterate the point. We're big believers in Western Canada. We think Western Canada is going to be the growth engine for Canada for the next number of years. And we want to have exposure to that market, more exposure than we currently have, which has been an amazing market for us over the last 16 years.

We're not changing the strategy where we're going to go into Texas and other places and buy some business that has more exposure to sort of E&P. The strategy is the same. We just have more capital deployed on the existing strategy that we had over the next number of years in a market where we already operate that's sort of highly complementary. So again, great assets, great margin profile, great free cash flow profile. Very low volatility in a market we love is the sort of rationale for the transaction.

Our next question comes from James Schumm from TD Cowen.

So yes, I just wanted to -- not knowing SECURE's business as well, I just wanted to drill down on the commercial overlap opportunities again. It's like what are the commercial overlap opportunities? I mean you're not using the same bespoke collection assets, right? So when you -- like Luke, you mentioned the synergies, it's more on the revenue synergy side, right? Like -- or maybe you could talk about are there opportunities with the landfills and you could talk about that internalizing some waste there?

Yes. Of course, that is one of the obvious synergies, internalizing incremental waste into the secure portfolio of landfills. That's one.

Two, it's moving some of the services that GFL does today onto the back of some of those services that SECURE does today, which we think is a meaningful opportunity as well. So again, if you look at a map, if you look at the sort of the map on Page 6 of the deck, you'll see the green dots sort of around SECURE, which, again, those are largely sort of hauling facilities, right? So if we can penetrate the existing customer base to augment some of those services and then internalize those volumes into our -- into the secure facilities, we're going to have a very sort of good recipe for success. And we have the confidence and belief that we can do that. We've had that success when we previously had the ES business, and there's no reason to believe that we won't have the success doing that today.

Okay. And then just what's your long-term view of the SECURE business given that it's heavily levered to oil and gas? Do you have any terminal value concerns there? I mean 3 or 4 years ago, everybody was concerned that for energy investors that we weren't going to use -- we're not going to be using oil and gas in 10 or 15 years. That narrative has shifted dramatically. But just any concerns there on the long-term strategy?

Listen, I think the lion's share of is tied to that. I think it's been clearly demonstrated over the last number of years that sort of oil production is here to stay. And I think anything, if you look at the amount of investment to have Canada become a global leader in sort of supplying oil to various parts of the world and the government that's in place now, the liberals today, again, pushing for sort of incremental pipelines, becoming a leader in LNG. I mean, all of those things are going to be incremental tailwinds to the existing book of business, not only for SECURE, but for any operator in Western Canada because as we've seen the macro environment when there's incremental spending in Western Canada just provides sort of incremental tailwinds.

So our perspective is we're pretty bullish on it. We don't believe oil is going away anytime soon. If anything, we think government is going to set up to be able to further sort of bolster production and become a global leader in the supply sort of LNG and oil over the next number of years and we echo that sentiment.

So we think this is a very unique opportunity, and we're just in the early innings of a long baseball game in terms of becoming an energy giant in Canada to supply sort of various parts of the world. And I would say the conflict in Iran has only sort of further bolstered our view. Not that, that formed any part of the view before we actually entered into this transaction, but our perspective was that only further bolsters our conviction around that.

Our next question comes Tobey Sommer from Truist.

What specifically about the transaction would help Canadian index inclusion? And what could timing and net buying impact look like?

Yes, Tobey, great question. Luke speaking. So Canadian index inclusion, the next entrant, a key consideration is what's your float weighted market cap. So not just your market cap, but based on your free float. Arguably, the expectation is the combination of these 2 businesses together is going to meaningfully increase our float cap. And therefore, when the committee of the TSX 60 is evaluating next index inclusion entrants, we are that much larger of an industrial company based on their preferred sort of metric and industrials are an underweight component of the TSX 60.

Now -- the unfortunate part is you don't actually know when those rebalances will happen like they do every quarter, but whether or not they're going to remove a smaller weighted company to add a larger weighted company is at the discretion of the committee. So you don't have exact certainty on that. But it does materially improve GFL's weighting for purposes of the committee consideration.

Makes sense. And within Western Canada, how does this transaction change internalization for that like kind of GO and portion of the company? And do you think that has opportunity to change significantly in coming years, not just post transaction?

Yes. So, Tobey, I mean, as we've been alluding to, we think there's sort of opportunities for us to bring more waste into the SECURE landfills as they sort of currently exist. And then as you look at the sort of trend across Canada, you have small regional landfills that continue to close and the preference is to concentrate waste volumes into more sophisticated, well-capitalized landfills from majors, does that represent future opportunities.

So we are going to keep evaluating where we can internalize more. We think right out of the gate, we have incremental waste that can go to SECURE landfills and augmentation of sort of landfill permits allowing for more would just represent upside above and beyond those sort of near-term opportunities.

Our next question comes from Adam Bubes from Goldman Sachs.

As you outlined, the deal consists of 80% of GFL shares and allowing it to be leverage neutral. Do you see continued opportunities to use equity issuance for M&A? Or is this a one-off?

Mostly a one-off. I mean there'll be a larger transaction where certain shareholders management teams have an interest in taking GFL equity. But by and large, we generally prefer to use cash versus equity. Obviously, in this situation, it's unique. But if you look at Frontier, there's basically $100 million of sort of rollover equity. But the norm is mostly just sort of using cash, and I don't expect that to change much in the future.

Got it. And then maybe one for Allen. Maybe can you just talk about the pricing algorithm for SECURE and at a high level, the structure and flexibility of contracts?

Sure. No problem. Yes. I think if we look at our business over the past few years, we've been raising prices on average of 5% per year. We did that in '23 and '24 and here again in 2025. And so alongside price, and some of our price is predicated on long-term contracts. We have about 20% of our business that's contracted specifically with these 10-year plus agreements. There's a CPI indicator in there. So we do every year get price on those CPI indicators as part of the contract.

And then on top of that, we would have volume growth. And as I talked about production growth being 2% to 3%, our volumes grow, call it, 2% to 3% that we see every year. And so it's a combination of both. And then as we think about these longer projects and investing capital, some of those are tied to long-term contracts, which we would have some similar terms associated with them.

Our next question comes from Abraham Landa from Bank of America.

Just on the financing for this transaction. Maybe I know SECURE has some existing debt outstanding. I guess, what is potentially going to happen with those?

And then on the bridge financing, I'm wondering if you can maybe provide some details on that bridge and maybe how much permanent debt you kind of expect to raise if that's on an unsecured or secured basis?

Yes, thanks for the question. SECURE has $600 million outstanding across 2 notes. The likely outcome is those are sort of exchanged for GFL paper or just sort of called and sort of taken out. We'll evaluate as we get sort of closer to -- I mean there's a committed bridge in place from our financing sort of partners, but I think the more likely outcome is that we access the markets, high yield being the likely place in advance of closing and use available capacity under our revolver, cash on hand and incremental sort of high-yield borrowing in order to affect the price.

The math suggests you need depending on when you close, but somewhere between sort of $1.5 billion and $2 billion incremental, that's including dollars to take out the secured debt. So pro forma company would be an incremental $1.5 billion to $2 billion, depending on when you close. would likely be unsecured paper as part of our transition of a cap structure that will more easily migrate to an IG cap structure. But as always, we'll be opportunistic and evaluate market windows and try and be as efficient as possible as we can with that cost of debt capital.

That's helpful. My follow-up is just -- I mean I understand that this is not on your control, but you did mention that you do foresee future credit upgrades. I guess what have been the reaction from the credit rating agencies, just given the specialty kind of and I guess anything on the timing of as you rate [ involving ] in the future.

Well, the timing, I'll leave that to the black box of those fine institutions. As you know, they tend to be a little bit sort of backwards looking in their outlook. But look, I mean, I don't think there's any debate that the enhanced financial profile of this business, both from sort of margin and most importantly, free cash flow conversion and enhanced scale is highly credit positive, right? And so the agencies will continue to sort of do their monitoring.

Obviously, levels of M&A, they naturally associate with a level of integration risk that they then want to see it play out. for all the reasons Patrick articulated, we feel very, very comfortable with the level of integration risk here and do not foresee anything meaningful, but they do want to sort of see that out.

So we're going to continue to build the business, generating cash, investing and building durable underlying cash flows. And I think it's inevitable that the credit rating upgrades will come and eventually IG will be obtained. As we've said, we're not sort of going to pause growth investments in order to accelerate the achievement of that sort of credit rating, but we do feel over the near to medium term, the likely outcome is credit rating upgrades and eventual IG classification.

Congratulations on transaction.

We currently have no further questions. And with that, this concludes today's call. We thank everyone for joining, and you may now disconnect your lines.

Thank you, everyone.

Good evening, everyone, and thank you for attending today's GFL Fourth Quarter 2025 Earnings Call. My name is Jasmine, and I will be your moderator today. [Operator Instructions]

At this time, I would now like to turn the call over to Patrick Dovigi, Founder and CEO of GFL. You may now proceed.

Thank you, and good afternoon. I would like to welcome everyone to today's call, and thank you for joining us. This afternoon, we will be reviewing our results for the fourth quarter and providing our guidance for 2026. I am joined this afternoon by Luke Pelosi, our CFO, who will take us through our forward-looking disclaimer before we get into the details.

Thank you, Patrick. Good afternoon, everyone. 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'll be making some forward-looking statements within the meaning of applicable Canadian and U.S. securities laws, including statements regarding events or developments that we believe or anticipate may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set out in our filings with the Canadian and U.S. securities regulators.

Any forward-looking statement is not a guarantee of future performance, and actual results may differ materially from those expressed or implied in the forward-looking statements. These forward-looking statements speak only as of today's date, and we do not assume any obligation to update these statements, whether as a result of new information, future events and developments or otherwise. This call will include a discussion of certain non-IFRS measures. A reconciliation of these non-IFRS measures can be found in our filings with the Canadian and U.S. securities regulators.

I'll now turn the call back over to Patrick.

Thank you, Luke. We started 2025 by presenting our strategy to drive best-in-class financial results and this year's results demonstrate we are doing exactly what we said we would. Our relentless focus on value creation through the optimization of our existing platform is yielding results that are consistently ahead of expectations, and our future has never been brighter.

In 2025, we reached a historical milestone of 30% adjusted EBITDA margin for the first time in our company's history. This result is attributable to the tireless efforts of our 15,000 employees and ongoing contributions from implementing the operational priorities we highlighted at last year's Investor Day. Ongoing price discovery, along with the operational efficiencies within our portfolio remain a core focus to drive appropriate returns for the high-quality services we provide. In 2025, we meaningfully outperformed our initial price expectations, furthered our realization of the incremental pricing opportunities we identified at Investor Day. The pricing environment remains constructive, and we are confident in our ability to continue to price at an appropriate spread above our internal cost of inflation.

Q4 volumes were ahead of plan, and we ended the year with 50 basis points of positive volume, a remarkable achievement considering the macro environment we're in. We see this differentiated outcome as yet another testament to the quality of our portfolio, underpinned by our overall market selection and the execution of our returns-focused capital deployment strategy.

Consistent with the third quarter, both operational and SG&A cost intensity continued to trend lower in the quarter and for the full year. The levers we outlined at Investor Day continue to contribute to this performance including enhanced operational efficiency, improving labor turnover, fleet optimization and procurement benefits as a result of our greater scale.

The combined impact of these initiatives are apparent in the 30% adjusted EBITDA margin we achieved for the year, an industry-leading 130 basis point increase over 2024. To achieve such results in the face of an ongoing macro headwind, reinforces our conviction in our stated goal of achieving low to mid-30s margins by 2028.

2025 was also a transformative year in terms of our capital allocation strategy; the benefits, which include the sale of our ES segment, simplified our business into a pure-play solid waste leader. The evaluations achieved in both the ES transaction and recapitalization of GIP demonstrated the immense equity value we have created in both of these assets. Our retained investment in these businesses allows GFL to continue to participate in meaningful value creation. The proceeds received from the divestitures recapitalization allowed us to materially delever our balance sheet and buy back over 10% of our own stock.

We deployed nearly $1 billion to accretive M&A, largely in the back half of the year, providing an incremental tailwind as we head into 2026.

Regarding the share buybacks, recall that we originally intended to deploy $2.25 billion of the ES proceeds into share repurchases, a level of investment that we completed early in the first half of the year. Due to the share price dislocation in the second half of the year, we saw additional share repurchases as a highly prudent use of capital to create shareholder value over the long term. As a result, we deployed an additional $750 million into incremental buybacks, inclusive of both the $1 billion of M&A spend and the incremental share repurchases, we exited 2025 with the lowest year-end net leverage in our history.

With the benefits of the implementation of the capital allocation strategy in place, we entered 2026 with ultimate balance sheet flexibility. This set up, together with natural deleveraging from organic growth will allow us to execute on a robust M&A pipeline while maintaining leverage in the low to mid-3s as a range to which we remain highly committed.

As for the base business guidance, Luke will walk us through the details, but as exactly as we previously indicated. Recall that in 2024 and in 2025, we laid out an extremely detailed plan, raised the guide multiple times throughout the year and beat our expectations on all financial metrics. We see multiple avenues of upside to our current 2026 guide, and that gives us confidence in our ability to meet and potentially exceed the expectations for the year.

Lastly, in 2025, we also progressed on our previously stated intention to maximize index inclusion opportunities. Last month, we announced the relocation of our executive headquarters to the U.S. The relocation broadens our eligibility for participation in U.S. equity indices while preserving our eligibility for inclusion in Canadian indices. We expect this strategy will help increase GFL's visibility with investors and ultimately drive a wider shareholder base.

I'll now pass the call over to Luke to walk through the quarter and guidance in more depth and then share some closing comments before we open it up for Q&A.

Thanks, Patrick. Q4 revenues grew 7.3% on account of better-than-expected contributions from pricing, volume and M&A, which more than offset the greater-than-anticipated headwinds from FX, pricing was 6.4% for the quarter and 6.1% for the year, 70 bps better than our original plan, largely on account of EPR transitional benefits and realization of the incremental pricing opportunities we articulated at Investor Day. The sequential quarterly acceleration of price throughout 2025 sets us up with a very high visibility into 2026 pricing.

Q4 volumes were 70 basis points ahead of plan largely on account of unanticipated special waste activity in several of our markets. Lapping hurricane volume, the initial ramp of EPR and the commencement of a larger municipal contract in the prior year were the primary drivers of the negative volume print for the quarter. C&D related volume continued to be soft, but we remain well positioned for a broader economic recovery in this end of our business when it happens.

Adjusted EBITDA margin continues to expand, with Q4 margins reaching 30.2%, the highest Q4 margin in our history. Adjusted EBITDA margins were up 175 basis points in our Canadian segment and behind 10 basis points in the U.S. although U.S. margins were materially up when excluding the impact of prior year hurricane volumes and acquisitions and commodity prices. Commodities continued to be a drag on margins with market pricing decelerating another 10% from Q3. Excluding the impact of commodities and these other nonreflective items, Q4 underlying consolidated margins were up over 150 basis points from the prior year.

The outperformance in Q4 resulted in full year adjusted EBITDA of $1.985 billion, Note that using the same FX rate on which our original guidance was given, the full year amount would have been approximately $2 billion, over $50 million better than the high end of our original guide despite the commodity and C&D volume headwinds.

Adjusted free cash flow was $425 million for Q4 and $756 million for 2025, ahead of plan on account of the EBITDA outperformance as the other inputs are largely in line with expectations. Adjusted free cash flow conversion improved to 38%, inclusive of the impacts of headwinds from M&A and FX.

During the fourth quarter, we completed the incremental M&A that we had previewed in setting us up for meaningful revenue rollover into 2026, consistent with the initial framework we provided. We also bought back over $200 million of our own shares during the quarter, bringing annual share repurchases total to $3 billion, inclusive of the approximately $4 billion we deployed into M&A and share repurchases, we ended the year with net leverage of 3.4x. As Patrick said, the lowest year-end net leverage in our history. Excluding the $750 million of incremental share buybacks, year-end net leverage would have been 3.1x.

The strong finish to 2025, combined with our positive forward outlook, allows for 2026 guidance better than the initial framework we provided in Q3. To level set on the guide, when we previously provided our 2026 framework, we did so assuming an FX rate of 1.40, which was the FX rate at the time and coincidentally, the average rate for all of 2025. Consistent with our past practice, we are providing our actual 2026 guidance using the current FX rate of 1.36. Any changes to the FX rate will cause translational impacts to our reported results. Recall that every 1 point change in FX impacts revenue by approximately $35 million and adjusted EBITDA by approximately $11 million.

2026 revenue is expected to be approximately $7 billion or $7.14 billion on a constant currency basis, an 8% increase over 2025. Pricing is expected to be in the mid 5s, driven by our base pricing programs and incremental contributions from EPR. The pricing plan includes modest progression in our ancillary surcharge programs and implementation acceleration in this area will be a source of upside. Q4 commodity prices were down 33% year-over-year and today's prices are approximately 20% less than the average price in 2025. Based on these current price levels, commodity and fuel prices are expected to create a 50 basis point headwind to revenue growth in 2026. Any improvement to commodity prices throughout the year will be additive to our results.

Volumes are expected to be positive 25 to 50 basis points. There are a couple of more sizable impacts included in this number, namely around hurricane volumes in Q1, EPR transition and tangential residential contracts. Excluding these headwinds, underlying volumes are expected to grow closer to 100 basis points.

M&A is expected to add 250 basis points of revenue growth and using an FX rate of 1.36 creates a 210 basis point headwind.

Adjusted EBITDA in 2026 is expected to be $2.14 billion or $2.185 billion on a constant currency basis, an increase of 10%. Adjusted EBITDA margins are expected to expand by an industry-leading 60 basis points, overcoming the headwinds from lower commodity prices and FX rates. The implied 30.6% margin for 2026 reflects an over 500 basis point expansion of margins over the 4-year period since 2022.

Adjusted free cash flow increases to $835 million or $860 million on a constant currency basis, an increase of 14%. The 2026 guide includes cash taxes more than what was previously expected as the benefit of ITCs associated with RNG projects have shifted into 2027. If not for this change, adjusted free cash flow growth would have been closer to 20% on a constant currency basis.

Included in the adjusted free cash flow guide is net CapEx of approximately $800 million, cash interest of $395 million and other items of $110 million. Excluded from adjusted free cash flow is approximately $175 million of incremental growth of CapEx, approximately 50% of the amount deployed in 2025, consistent with previous expectations.

Adjusted free cash flow conversion as a percentage of adjusted EBITDA increased...

One moment, ladies and gentlemen. One moment, ladies and gentlemen. I'll try to get our speakers reconnected.

[Technical Difficulty]

Pardon the interruption. We now have our speakers back on, and we will now begin the Q&A session. [Operator Instructions] Our first question comes from Patrick Brown with Raymond James.

Can you all hear me?

Yes. Can you hear us better?

Yes, you're there. Okay. Good deal. Patrick, I appreciate the guidance -- I appreciate the guidance of low 3s on the leverage. But one, does that assume -- does that assume no incremental M&A and buyback? Is that right? And then I think you mentioned last quarter that '26 could be an outsized M&A year. And I get that you're very active in the back half of '25, but is that still your base case as we sit here today?

Yes. I think to be crystal clear on the leverage point, we are committed to leverage, as we said, in the low to mid-3s. I think Luke made the point that absent any M&A, you end the year close to 3 turns, obviously, doing incremental M&A and buybacks would increase that number. But we are definitely committed to exiting 2026 at sort of low to mid-3s. Could there be a quarter where there's 25 to 40 basis points of leverage move around in a quarter? Sure. But we end the year exiting low 3s to mid-3s.

Okay. Perfect. Exactly what I was looking for. Okay. And then, Luke, if I just try to do the EBITDA bridge, I feel like there are a few kind of key things to think about. So one, it seems like you have something like $30 million of M&A rollover benefit. Again, this is on EBITDA. Two, on my math, at least, you maybe have $40 million of EPR in RNG. Three, you have about a $45 million drag from FX. But if I took all of those, it feels like organic EBITDA is up maybe low to mid-single digits. And I realize that commodities and a few things are in there. But is that conceptually close because it feels doable.

Yes, Tyler, it's a great way of breaking it down, and thank you for doing my role for me. I think you're directionally right, but you seem to be taking just the good guys and not factoring in the bad guys, right? So a couple of things. Commodities going against you, right? And so that is a pure sort of EBITDA hit that you will sort of have. In that margin bridge we have, recall, Q1 '25, we enjoyed storm volumes in the Southeast associated with the hurricane, very high margin contribution that you're not getting the benefit of that.

So that's sort of distorting that bridge a little bit. And then on the EPR, while $40 million, I think, was the right way of thinking about it at the beginning of '25 with the outperformance that '25 had, I think that number comes in a little inside on the '26 year-over-year comp. So if you normalize those, then I think you should get to a base business underlying organic EBITDA at the sort of mid- to high single digits. And as you said, we're feeling confident that, that's something that can be achieved.

Our next question comes from Sabahat Khan with RBC.

Just, I guess, just following up on the commentary around EPR. Can you just maybe give us a little bit more color on the incremental growth CapEx investments that you're sort of calling out here? How does that sort of flow in through the course of the year? And just, I guess, in terms of the RNG side and the EPR side, it sounds like the contribution is still there. But just maybe how does that ramp for '26 and maybe into '27?

Yes. Saba, great question. Luke speaking here. The $175 million is very front-end loaded. The expectation -- just so you know what's really coming on EPR this year is the collection side of the contracts and the majority of that is actually for the payment of said trucks. So I think we're expecting sort of about $100 million to $120 million of that in Q1 and then sort of trickles in through the balance of the year.

As we had alluded, RNG incremental contribution this year is more muted as projects have shifted to '27. So the RNG contribution in the current plan is pretty flat in terms of dollars for '25. You have slightly higher levels of production at a slightly lower RIN price. And then the expectation is it's sort of into '27 and '28 when you get the ramp of the -- tail of the RNG projects coming online. Growth spend in '27, the equivalent of that number, I think, steps down significantly again from where we are today as EPR will largely be completed and the RNG tail is relatively small. So we'll advise on '27 as we get closer to it, but the expectation today is it's again, a meaningful step down from this year.

Okay. Great. And then just on the volume portion, it looks like you're guiding to modestly positive volumes. Can you maybe just break that out a little bit across some of the puts and takes? Any shedding left in that? And in addition, sort of what are you seeing across some of the more cyclical end markets? Is the situation may be somewhat better than '25? If you can just kind of break out the volume piece a little bit.

Yes. I think we're giving the guide, Saba, based on today's macro conditions, which continues to be soft on the sort of C&D or industrial end. Now I think there are some green shoots out there that may suggest there's opportunity above that. And certainly, the benefit of that opportunity would be additive to the guide. If you think about the year for '25, Q1 started a little bit sort of stronger before some of the uncertainty was -- entered the macro environment. And therefore, I think, Q1 is a tougher comp. So we're expecting a negative volume number in Q1, and then that moderates as you start lapping the sort of tougher quarters that were sort of experienced in the back half of this year.

We do have the benefit of EPR coming in and contributing, and that is part of it. And then also, as Patrick alluded to, we still take a lot of pride in our market selection. And what I mean by that is a concentration of our revenues in the faster-growing South and Southeast markets where notwithstanding a perhaps more uncertain macro, you still do have volumetric growth by virtue of people moving and new business formation. So we're feeling good with the setup. I think there's multiple avenues of upside above what we have in here, but we're very pleased to be able to sort of report a year of positive volume. I think the industry as a whole is probably slightly negative and to be able to reiterate that sort of positive outlook going into '26 as well.

And just maybe just a quick one, if I can sneak it in there. Just on the capital allocation side, obviously, a very big year on buybacks in '25. It sounds like the M&A pipeline is reasonably good. How do you guys sort of balance the 2 in terms of what seems more attractive for your analysis or just how you view it?

Yes. I mean, obviously, with the sell-off in the sector and sort of where we are. We continue to believe the stock is materially undervalued. That being said, we need to balance that. That could correct itself very quickly and our expectation is that it will in time. So we also have to plan for the future in some of these opportunities that are in front of us. And as we continue to work through the opportunities, we'll sort of outweigh and weigh against one another, but what we think the right thing to do is. But just know that my 30 million shares are working beside every one of yours.

So I'm going to do what's right for what I believe sort of the long-term value creation for the business will be. But last year, it was clearly obvious in the back half of the year that it was prudent to spend that incremental $750 million on share buybacks just given where the stock was trading. But that being said, we have a great pipeline as well with good opportunities in markets where we're already operating, and we'll continue looking at both and weighing them as the opportunities continue to present themselves.

Our next question comes from Kevin Chiang with CIBC.

I apologize if I missed this. Luke, you mentioned you kind of saw a sequential improvement in pricing as you kind of got through 2025 here. Just wondering how we should think about the cadence of pricing in '26 as you kind of average out to the mid-5s that's in your guidance there?

Yes. Kevin, great question. With the sequential increase that you had coming to the back half of '25, you end up with a stronger start in absolute numbers in Q1 that then sort of tapers down. So where we're sitting is that Q1 is a sort of mid-6 or better number. And then that ratably kind of steps down to a kind of 5 type number by the end of the year.

So one of the benefits that we have in a year of accelerated pricing realized the year before is the degree of visibility you have into that pricing cadence. I mean, where we sit today, we probably already have 80% of 2026's pricing effectively already in hand just by virtue of how the sort of math plays out. So feeling really good on the price number, could be a source of upside as we go, but it really will be starting high in Q1 and then tapering down by Q4.

That's helpful. Maybe just turning to some of your, I guess, minority investments, GIP and Environmental Services. Just wondering how those performed in '25? And what was still kind of a soft, I'll call it, industrial economy, just -- did those businesses exhibit the type of resiliency you saw within your Solid Waste business? Did you kind of end out the year the way you anticipated 12 months ago? Just any color you can provide there would be helpful.

Yes. I think if you look at the ES business, I mean, you're forecasting sort of $525 million of EBITDA for '25 going into the year when there was a lot of optimism around a new President, et cetera. I think with the softness in the industrial economy, et cetera, that business largely just finished just north of $500-ish million. So I mean, it was modestly off from our plan, but not materially off from the plan. And we had pretty robust plans for that business from a sort of a growth perspective.

And on the GIP side, again, it's an industrial business, yes, but by and large, 75% to 80% of that work is government contracts and largely based around transportation sector. So that hasn't gone away. So that business basically performed to plan. So exiting -- coming into this year, somewhere in the $300-ish million range of EBITDA like we had discussed, and that's sort of still well in hand.

If you factor that in, even those 2 businesses at cost, right, there's -- from our perspective, at cost, there's $5 to $6 a share of value there. Why we think about opportunistic share buybacks because our numbers on 2026 puts GFL trading at sort of like in the 12.5x range on 2026 numbers when you factor in the equity value that sits in those 2 businesses that aren't included in our numbers. And I think that's why we continue to think share buybacks are very attractive at these levels.

Our next question comes from Bryan Burgmeier with Citi.

Sorry if I missed this in the prepared remarks. Did GFL provide 1Q guidance, like I think you did on the 4Q call last year? Maybe I missed it or maybe we blame the cooperator or maybe you're shifting strategy a tiny bit.

Yes. Bryan, it's Luke. Thanks for the question. I think we had some technical difficulties when we were giving the very end of the call and maybe that sort of cut out. But either way, I'll just reiterate what the prepared remarks was. And what I said was that looking specifically at Q1, we expect revenue of $1.6 billion to $1.625 billion at approximately 28.8% margin, which implies 150 basis points expansion over the prior year. Q1 adjusted free cash flow is expected to be negative $45 million, which is less than the prior year, but solely on account of the timing of working capital and CapEx payments.

Okay. Okay. And then just one more question for me. Just maybe as RNG production, I know these projects have been pushed out, but just as we are gradually kind of ramping up production, are you finding that your costs are sort of roughly in line with what your initial expectations were from the Investor Day last year for ongoing production costs, start-up costs? Just any kind of broader comments there.

Yes. No material change in the actual costs. I think, obviously, we're taking a very careful look at building out the larger sites before we're building out some of the smaller ones. So I think what we've articulated in the Investor Day presentation, we said about $175 million of RNG coming on. Our perspective is just depending on where some of these regulations and volume requirements come in that we're going to sort of think about that number sort of being potentially sort of in the $125 million to $150 million range. That being said, EPR is outperforming. So those 2 numbers as a whole are going to be on plan to our Investor Day presentation.

And Bryan, just to add to what Patrick said, I think the operating costs once the plants are up and running are proving to be very much in line with the pro formas, which included an appropriate degree of conservatism to account for that. What we have noticed though is some of the start-up has slipped a little bit to the right. So your ramp to achieve that sort of full run rate profitability has arguably been a quarter or so longer than anticipated. But all the projects that we have up and running are performing, in fact, at or above what those sort of underwritten sort of cost profiles were.

So I think it's more of the sort of timing issue of shifting to the right. And then Patrick said, just ensuring that the overall envelope that we originally identified remains the appropriate level. But net-net, we had presented EPR and RNG as a combined step in that bridge, and we think that combined step remains intact, just may be a reallocation between the 2 components therein.

Our next question comes from Trevor Romeo with William Blair.

First one I had was kind of a follow-up on EPR. I guess in terms of some of the provinces that maybe aren't as far along on EPR, how much at this point is still in that kind of future opportunity bucket? I guess, are you still seeing incremental contract awards as a potential upside driver for this year and beyond? And maybe you could talk about competition for any new contracts that are still out there if it's gotten tougher to win any of those deals?

Yes. I would say we're largely through. I think there are some collection contracts still to be let over the next couple of years, but that's -- we would put that in the normal course bucket with normal resi wins. But anything material is we are largely through that now. Alberta was the last province to basically get finalized, and we ended up splitting the processing for the province of Alberta with Waste Management. So Waste Management ourselves have sort of half of the province each. And that was the large -- that was really the last one that will be let in Canada. So from an opportunity perspective, I think by the end of 2027, you'll have all EPR dollars flowing through the P&L.

Okay. Thanks, Patrick. That's helpful. And then maybe just on your M&A pipeline and kind of, I guess, the pipeline plus what you bought maybe within the last quarter or so, if you could just provide maybe some color on regional or asset perspective, kind of where you saw attractive opportunities, what do you see in the near term in terms of your pipeline there?

Yes. I mean I think we said at the end of Q4, people were questioning whether or not we would actually deploy -- if we'd actually deploy the amount of capital that we had in our sort of initial guidance that we'd have been articulating through the year, just given the slow start to the year and the fact that we are focused on the divestiture and recapitalization of ES and GIP.

We basically deployed close to $1 billion that we said we would. I think when you look at 2026, as we said on Q4, pipeline is very healthy, a lot of good opportunities, obviously, still in diligence on a bunch. But again, focused on businesses in markets where we already have existing infrastructure, creating very good synergy opportunities, which will sort of yield higher returns on invested capital versus moving outside and acquiring businesses outside of the existing platform.

We're obviously extremely happy with the post-collection network we have throughout the 10 provinces in Canada and 25 states in the U.S. So we're going to continue just driving incremental opportunities on the backs of those facilities. And that's what we're going to be focused on for '26. But again, it's going to be -- as we communicated in the $750 million to $1 billion. As we said in Q4, we think this year could be even higher than that. And assuming we continue to make our progress through diligence on some of these assets, I think we'll have a pretty good update for everybody when we report Q1.

Our next question comes from Konark Gupta with Scotiabank.

Just on the M&A follow-up. In terms of the asset quality that you're finding these days in the marketplace, I mean, a big chunk of the market has already been consolidated, right? And I mean, obviously, there's still a ton of opportunities for you guys, especially given you're smaller than the rest of the 3. But any noticeable differences you're seeing in terms of quality of assets that are coming open to you?

No. I mean I think it's obviously year-by-year, you can never predict when a specific asset is going to come to market. But what we know for certain is that the sellers of these businesses aren't getting any younger. And as people start thinking about succession and liquidity, that's creating opportunity. And I mean, if you think about the Canadian market, again, basically Waste Management, Waste Connections and ourselves represent, call it, 40-ish percent of the market. So 60% of the market continues to be white space and not consolidated. And you think about the U.S., about 50% of the market is consolidated by the majors, and that still creates a very good opportunity for all of us to continue acquiring businesses in the markets where we see opportunities for each of our respective businesses. But the quality of the assets continues to be very high.

The quality of the assets that we're looking at within the existing pipeline are very good. And again, we think there'll be great contributors to sort of overall book and will yield very good return on invested capital on the backs of our existing infrastructure. So we're feeling very good about where we sit today, and we're feeling very good about 2026 and beyond in that respect.

And Konark, just to add to Patrick's commentary, you have to remember, I mean, the focus of us on tuck-in acquisitions into our existing platform, we can have a scenario whereby we have a great market and a great asset base. And there's a competitor that doesn't necessarily have a gold star asset. But in our hands, with cost takeout opportunities and other synergy, you can turn that into a very high-quality asset.

So what's nice about where we're at in our journey is the ability to densify and tuck in some of our best-in-class markets and thereby take what is perhaps a suboptimal little sort of tuck-in on its own, but turn that into something accretive in our hands. And that's really what we're focusing on what can this business or asset contribute in our hands.

And if I can follow up, I think there's some news around the Toronto recycling contract changes that have happened. I think there's a change of supplier or your third-party partner there. Any sense in terms of what potential changes might be required on your side to deliver on the contract into...

Sorry, in terms of -- yes, in terms of EPR, I mean we obviously are doing the exact same work we did before, albeit with different service providers, meaning our customer used to be the city of Toronto and now our customer is circular materials. That being said, there's been no real change. Yes, there's a little bit of political fallout in the city of Toronto. The fact that we ended up doing -- taking on 2 more districts than we had before, and there was a loss of some union jobs, I think that led to some media attention by a couple of, I would say, the more left leaning papers.

That being said, we started collection in Ontario for over 1 million homes and collection success was better than 99.3% in the first month of a very large startup. So overall, very successful. Province continues to be very happy. Ultimately, there was a change in collection days in some of the city of Toronto, which certain residents didn't like or enjoy, but I think we're largely through that and now into our second month, and I think the noise is largely subsided.

Our next question comes from William Grippin with Barclays.

Great. Most of my questions have already been answered, but just wanted to come back to the update you gave around the GIP and ES. I appreciate the color there on the performance. I guess just do you have any updated thoughts on maybe providing some incremental disclosure around those businesses going forward in the quarterly releases just to kind of help investors and analysts kind of track the performance of those businesses.

Yes, Will, it's Luke. It's a great question and something I know we've talked about in person. In light of the fact that both of those recapitalization or carve-out just happened, we all have this very fresh mark. So the cost basis, as Patrick referenced, roughly close to $3 billion across the 2 assets today is pretty sort of fresh. So we didn't include something at this. But absolutely, as we go forward, we're going to come up with an appropriate level of disclosure such that you guys can have a handle on how those businesses are doing, what the sort of debt level of them are and what our sort of equity interest is.

So you'll have an ability to calculate that $6 per share math that Patrick was doing. So we will do that. But as of today, we're just thinking, hey, you had $1.7 billion cost base in ES, roughly $1 billion in the GIP asset. And then I think we valued the option on ES at a couple of hundred million bucks. So just under $3 billion of value at cost across those 2 businesses today.

Our next question comes from Jerry Revich with Wells Fargo.

I wanted to -- as we think about the -- Patrick, I wanted to ask, as we think about the free call profile of the business. So now that you've got a cleaner portfolio. How should we be thinking about CapEx to sales beyond '26. So the core business looks like it's about 11.5% CapEx to sales you have the high returns. Growth CapEx on top of it as a starting point for '27 and beyond, how would you counsel us to think about both growth CapEx opportunities as well as just normalized CapEx to sales versus [ local ] guide for '27?

Yes. Thanks, Jerry. It's a great question, and I know one that the industry is a wide way of focuses on. I think today, normal course CapEx, if I was underwriting a model, it's an 11% to 11.5% number. I think probably 11.5% today as we sort of just get through some tariffs, et cetera, and maybe that gravitates back down to that normal sort of 11% spend. I would characterize that as the normal course, which is inclusive of maintenance and normal course growth. Obviously, in years where we're going to be delivering outsized growth, whether it's EPR or similar type of investments, there could be opportunity for spend above and beyond that, and we'll call that out as we have.

Where we sit today, as I articulated to the other question, I think next year's growth spend is currently contemplated to step meaningfully down from this year's as really EPR is behind us and you just have the sort of tail end of building out the sort of RNG facilities. So the truth is, as we've said since our 2023 capital allocation framework, we've looked at the growth CapEx similar to M&A. And if we could find more opportunities like RNG and EPR, we would be very inclined to invest in based on the sort of returns profile. Where we sit today, we don't see anything else on block that is going to warrant that same carve-out as we've done for EPR and RNG.

So we expect these to play off and then roll off, and we'll just be back to a singular CapEx number. But certainly should, by regulation or otherwise, we see opportunities as attractive as these we're going to go after those and we'll talk about the appropriate stratification or bifurcation of our CapEx at that time.

Super. And separately, Patrick, can I ask you, given the strong M&A activity over the course of '25? Normally, we see you folks deliver really good synergies in year 2 of integration. Can you just talk about for some of the larger deals and how those assets are performing and whether we could see a notable tailwind '26 versus '25 as you integrate those assets?

Yes. I mean there was nothing overly large that sort of happened in '25. That being said, when we look -- when we embarked on the M&A pipeline for '25 we did, just given that we were taking a year and shoving it into basically 6 months, we really focused on the ones that were most accretive that were going to give us the biggest bang for our buck quickest. And I think that's what gives us a lot of conviction around some of the comments we made in our prepared remarks around. I think if you look at the previous 20 quarters of the business, I think the previous 20 quarters, we really sort of met or exceeded expectations. And I think there's multiple levers and multiple avenues for us to continue to exceed expectations in 2026. And a big part of that is realizing synergies on some of these opportunities that we closed in late Q3 and early Q4.

So you're right. We will continue to deliver on those. And I think those will contribute to exceeding the expectation for 2026, coupled together with what we think is a very compelling pipeline for '26. And we looked at some great updates for you as we report Q1 and give some good updates for the balance of the year as we get through the beginning of the year.

And, Patrick, if I may, just to put a finer point on that. So typically, in year 1 you worked down by about a turn in terms of synergy relative to the acquisition multiples, what we typically see. So just applying that given the outsized M&A in '25, it does feel like that's a big chunk of the core EBITDA growth that you have baked into the numbers unless I'm missing something about the nature of the deals, which is normal?

Jerry, it's Luke speaking. I think you're absolutely right. We've demonstrated the outsized margin expansion that we've delivered and enjoyed over the past 3 or 4 years, a large part of that is being driven by that synergy capture as you've articulated. So if you think about the 2026 guide, Tyler on the first question was trying to parse it out. But even when you peel it all back you're seeing margin expansion above and beyond what normal course price/cost spread should provide. And the component of that is exactly, as you said, that you're realizing the synergy benefit of all that M&A we did in '25 and also still the tail end of what you did in 2024.

So you're absolutely right. Typically, if you're going to pay, I think, Investor Day, we said we pay sort of 8x on the face of it and then over time, can take that cost of ownership multiple down through synergy capture. That is happening. You saw that in '25. You saw that in '24. And certainly, for us to be able to have a 26% guide that shows 60 basis points of margin expansion, including, don't forget, like a 25 basis point plus headwind from commodities a few other puts and takes. You're actually at an underlying of closer to 100 basis points of margin expansion in '26, certainly contributing in there is the synergy capture from the acquisitions that you completed in '25 and previously.

Our next question comes from Tobey Sommer with Truist.

I was hoping you could elaborate a little bit more on some of the green shoots that you said you might be seeing with respect to volume in '26 in both the core and perhaps even ES?

Yes. So Tobey, it's Luke speaking. I was speaking in relation to GFL, I want to -- sort of spoke to that. I think on the macro side, so might be even the indices, whether it's PMI or PPI are actually sort of starting to turn if it's positive or showing some sort of green shoots coming out of that. But it's also just in the sentiment in talking to some of our larger customers as to what their capital plans are for 2026.

Very clearly in '25 people shelved a lot of capital plans, whether it was expansionary or the like as they were waiting out to see how the world was going to unfold. I think just having conversations with some of our large customers today, it seems clear that people are figuring out a way to navigate in this period of uncertainty and are going to invest in some of that sort of capital spend that can end up being volume on our side. We also saw on the special waste side, we alluded in the prepared remarks, Q4 some surprise special waste coming out of activity in some of our markets that wasn't otherwise contemplated.

As you know, that's obviously a leading indicator for activity that then follows on the back of that. So while we would certainly like to see more green shoots before we get sort of too ahead of our skis, it's certainly positive to just see those indicative indicators suggesting that maybe there's some opportunity on the horizon.

That's helpful. With respect to the -- moving the headquarters to the U.S. and inclusion in various indexes, could you maybe give us a little bit of color on time line? Any hurdles or decisions that you have to weigh in order to pursue various inclusions?

Yes. So right out of the gate, by virtue of the changes that have already occurred, we become eligible for the Russell set of sort of indices. And the time line is to that how that typically works is mid-spring, I think, in April, they'll make an evaluation, and we believe that we'll check the boxes to be eligible for inclusion. And the actual inclusionary date would happen middle of the year. I think it's in June.

And if you look just on the face of it, I mean, the Russell Index inclusion alone could yield somewhere in the mid-single digits of our float, right? So an incremental permanent demand that could come on. By virtue of the step that we've taken, the next step would become the eligibility for other U.S.-based indices, the [ CRSP ] being one that is available to us, and we think we're eligible. And then obviously, the S&P sort of 400/500. Further steps would be required, most notably U.S. GAAP and no longer being a foreign private issuer.

Steps are underway for us to be eligible, both from a U.S. GAAP conversion as well as to the filing on the domestic forms. And in doing so, you could then open up that incremental index demand. And if you look at what the index specialists say, there's upwards of another sort of 10% to 15% of volume of our sort of float that could be in demand from that. If you just look overall as to how much passive demand is in the GFL stock versus our peers, there's a meaningful gap. And I think this headquarters announcement is a first step in starting to close this. So there's a significant degree of incremental demand that we think over the short and medium term should come into the name, and we're going to continue to actively pursue that.

As Patrick alluded to in his opening remarks, one of the benefits of the current strategy, thanks to some of the sort of recent changes to the S&P definitions, is none of these changes preclude our eventual inclusion or eligibility therefore into the TSX 60, which, as many know, would drive even more incremental asset demand. So we think we have a very nice near and medium and longer-term tailwind that should drive a significant incremental permanent demand for a large component of our float.

Our next question comes from James Schumm with TD Cowen.

So Luke, just a clarification on the pricing. I think -- so pricing was 6.4% in the fourth quarter. I think you said Q1, your mid-4s or 6s. And I think you said you're largely 80% contracted through the year as of Q1 or something like that. So help me understand, I mean I know that pricing will bleed lower, just the math of it. throughout the year. But like how do you get to mid-5s from 6.4% or solidly in the 6%?

Yes. Jim, thanks for the question. It's a good one. I know sometimes the pricing map can get a little confusing, but it's really a function of the quarter over the prior year quarter. And during a period of ramping pricing during the year, effectively, the pricing actions I did in H2 '25, I now have certainty of those rolling over into H1 of '26. And therefore, just gives me a high degree of certainty of the actual dollars of price that will be realized into these quarters. So if you think about a Q1 number being in the sort of mid-6s and if that then steps down and forgive me, I don't have the rest of the quarter cadence in front of me, but think of that then stepping down to the high 5s that then steps down to the low 5s that then steps down to 5, that's how you're going to blend to a number in the sort of mid-5s.

So that's the sort of rough cadence of it. That is absent any incremental pricing actions. That's what to get taken through the year. And as I said, we think, we hope that we're able to actually do sort of slightly better than right? The pricing you ultimately realize is a function of stick rate, and so you do pricing actions sometimes have roll backs that you need to do to establish the soda firm level pricing. And obviously, the full extent of those aren't known to us today. We're taking estimate based on our past experience. but that is the basis on which the math would yield that sort of mid-5 number.

Okay. Great. And then my last one, you basically just touched on it, but in the prior question. But given that FX is moving your financials and your guidance around quite a bit, like I was going to ask, do you have plans to report in U.S. dollars. It sounds like you said maybe you've got something in the works, but what would be the timing on that?

Yes, it's a great question and something that we think a lot about because today, FX moves against us is a benefit for our peers. So we're sort of moving in opposite directions, and I think it just adds incremental complexity to the comparability. So I think the eventual outcome is that we convert to being a U.S. GAAP reporter again, eliminating diversion and reporting between us and our peers. And you could evaluate being a U.S. dollar-denominated sort of reporter as well. I mean, more and more, our business has grown in the U.S.

However, we still have a very sizable business in Canada and the sort of back-end infrastructure and shared services is all based there. So we'll continue to evaluate I think, though, if you were to make a change to be a U.S. GAAP filer, it may make sense at that time that you also went to a U.S. dollar currency, just to fully align comparability amongst the sort of peer group. The timing for that, Jim, I'd tell you is as of speaking about the Russell, we think there's a path where being a sort of Russell inclusion midway through this year.

The next big inclusions would require a U.S. GAAP conversion. And I think we intend to be ready to do that as early as Jan 1, 2027. Now whether or not we actually sort of go forward at that date or you wait to the end of the year is still sort of TBD, but it's not going to happen in '26, but we're certainly taking the steps in preparation now to be ready to do that sometime in the future. I could see a potential outcome be do it at the end of 2027 in advance of 2028. But certainly, we're exploring all options.

Our next question comes from Stephanie Moore with Jefferies.

Great. Luke, I just wanted to follow up on a question, maybe 2 or 3 questions ago, we were talking about the outsized margin expansion this year outside of price cost spread. I think Luke you did a really good job at the Analyst Day of outlining kind of all the self-help initiatives, ancillary pricing, automation and the like. That you expected over the next couple of years. Can you maybe give us an update on how those are trending? What we should be thinking about in 2026 that's really moving the needle? And I guess as a follow-up to that, if we do expect to see a more outsized M&A even this year or next year, do some of these investments help make those integrations and synergy captures that much more effective?

Yes. Thanks, Stephanie. It's a great question. Something that as we look back on the Investor Day presentation and our outperformance in 2025, gives us even further conviction in our ability to realize those financial benefits from the self-help levers that we had articulated based on how successful we were in '25. Look, if you think about the leverage starting with the pricing, I mean, obviously, we started '25 in an expectation of low to mid-5s pricing, ended the year at 6.1, nearly 70 bps of outperformance. A big part of that was the realization of those sort of ancillary surcharge program as we had sort of anticipated.

I think we articulated a $40 million to $80 million prize there, taking that at this sort of midpoint roughly the $60 million amount that I mean, I think we're set up and on pace to recognize that ratably over the 4-year period, arguably a little front-end loaded as we've demonstrated in '25. As I said in the prepared remarks, pricing for 2026, estimated in the sort of mid-5s range. And any further accelerated implementation of the ancillary search charges could give upside to that number.

So we're feeling really good on that aspect or that's what a self-help lever. When you start getting into the middle and the next one was employee turnover. We said, as we reduce this employee turnover, we're going to realize the benefit of the efficiency, the cost of risk the onboarding and the productivity associated with that. And I think you're seeing that as well. I mean across the cost category lines this year from direct labor costs, R&M expense, to SG&A. You're seeing the operating leverage come and part of that is that improved labor turnover. We got to high teens in '25. We see more room for improvement in '26 and '27. And certainly, those benefits are accruing to the bottom line.

The next -- the fleet conversion and CNG piece, I believe, was the next lever. I mean I think when we started this, we had a sort of mid- to high teens percentage of our fleet being CNG. And we brought that up to mid-20s. And we're now on a path to sort of be close to 30% and certainly seeing the benefits of that coming through in the results as well. So we feel really good with the ratable realization of that benefit or that prize that was articulated on that side.

And the last one was just the sort of general procurement and overall sort of efficiency in the middle. And I think you're seeing that as well. So you peel it all back, what gives us a great sense of optimism is we're not relying on any one of those levers to drive outsized performance. It's, in fact, the combination of each of them in small, little ways, but all adding up to this differentiated margin expansion that you're seeing in our business versus ours. So '26, we're excited to continue to deliver. As we said, we see avenues of upside on the guide and certainly continued outperformance in those levers will be sort of part of that. '25 was a great starting year, and we hope to be able to continue the trend.

Our next question comes from Adam Bubes with Goldman Sachs.

Patrick, you talked about potential for an outsized year of M&A. Just how far above the $1 billion annual target would you be comfortable going? I mean just back of the envelope math, I think, every $500 million of incremental M&A only adds 0.1 or 0.2 to leverage.

Yes. I think -- we think where we sit today, you could even spend $1.5 billion to $2 billion. I think temporarily, leverage might be sort of in the $3.75 billion to $3.8 billion range intra-quarter, but then you still exit the year in the mid-3s. So I think that's where I think you sort of peak out before you would need some form of equity. And I think going back to -- I think we've telegraphed in Q4 and sort of late Q3 was that we think that this year could be. That being said, we're still in diligence on a lot of these opportunities and nothing is for certain.

But yes, your math is right, obviously, depending on what the purchase price is for you're buying that sort of -- but in that range, you're correct. And I think that you would still end up in the low to mid-3s, even deploying that amount of capital.

And then, Luke, I think you said for 2026 margin guidance, there's 100 basis points of underlying margin expansion, 25 basis point headwind for commodities. What are some of the other puts and takes that get you to 60 basis points? And then can you just help us think through the cadence of going from 150 basis points year-over-year and I think, guidance obviously embeds decelerating margin expansion throughout the year?

Yes, Adam, great question. If you think about 60 basis points margin expansion on the headline number included therein, you got a 25 basis point headwind from commodities, a 5 basis point headwind from the Q1 year-over-year comp on that hurricane volume that I alluded to. Again, we always hope there is no natural disasters. But in 2025, we enjoyed excess volume at a high margin. So back in that under bps. I think have a 10 basis point headwind from FX and some of the carbon credits that you realized in '25.

So when you think about the 60 basis point headline number, backing out those amounts, yields about 100 basis points sort of underlying piece overall. When you think about the cadence, Q1, as I said, the 150 basis point beat based on the guide year-over-year. Q2 of last year, you enjoyed an exceptional sort of margin performance. And so actually contemplating, I think, flat to a little backwards in Q2. And then Q3 and Q4, modestly ahead. I think what you're seeing is as the business matures and our geography spans in the South, you're seeing a bit of a flattening of that sort of seasonality, so as opposed to the peaks and valleys from Q1 to Q3 that we historically had.

You're seeing a bit of a sort of flattening of that year-over-year. And we expect sort of more of the same. But that's the basis for the expectation of the cadence throughout the year. You also have Adam recall, the commodity comp will bigger drag in the first half of the year and then that steps down as you go throughout the year. So the underlying will have less adjustments to achieve by the time you get to Q4, if commodity prices stay where they are today.

Our last question comes from Aadit Shrestha with Stifel.

Just a quick one. In terms of the reported volume of 50 bps for 2025, how much of that was from EPR and RNG ramping up?

RNG had a de minimis component to the overall thing because RNG is much less a revenue story for us. There's a little bit in there from R&D ramping up, but that's not a sort of significant component of that. I think when you look at EPR and you look at our Canada-wide sort of volume, I think the numbers we would have reported was EPR was about $10 million in Q1, roughly $20 million of each of Q2 and Q3. And then as you had lapped the Q4, it was de minimis. I think it was like sort of $5 million or $7 million in Q4.

So you certainly got some outsized contribution from that. Where we take comfort is even when you strip that out, when you think about some of that hurricane volume they're comping year-over-year, you're still, I think, at an industry-leading sort of volume print, again, just going back to some of our market selection where we enjoy volumetric growth is based on the macro that's happening in Central Florida, Georgia and some of our Texas markets to help sort of offset some of the C&D related exposure.

And just in terms of your guide for volume for next year, what are you sort of kind of building into your guidance in terms of recovery seen because you mentioned some green shoots that you're seeing. So are you trying to -- are you thinking of building in some since volumes in there or anything like that? Or is it really what you're seeing right now?

No. Our guide is based on the environment that we see today. So we just assume sort of status quo. The green shoot sort of commentary was more, as I was alluding to some of these conversations and touch points we've had with our customers. Look, January is going to be a tough volume month right at the gate just because when you think about the amount of snow that's come and blanketed Wisconsin, Michigan, Toronto, these are markets that are used to snow, but this has been an exceptional level of snow. So I think you've got a pretty tough start to the year in January.

But again, it's just sort of structurally of some of the contracts we've won, EPR coming online and the like that gives us sort of confidence or to print a slightly positive number. Certainly, any recovery as we think about our C&D volumes or just broader macroeconomic activity could provide a tailwind above and beyond, but that would all be additive. We're just assuming status quo with the current sort of macro environment.

At this time, I would now like to pass the conference back over to Patrick Dovigi for any closing remarks.

Thank you, everyone, for joining. Much appreciated. We look forward to catching up when we report Q1. Thank you.

That concludes today's conference call. Thank you for your participation. You may now disconnect your lines.

Hello, everyone. Thank you for attending today's GFL Third Quarter 2025 Earnings Call. My name is Ken, and I will be your moderator today. [Operator Instructions] I would now like to pass the conference over to our host, Patrick Dovigi, the CEO and Founder of GFL. Please go ahead.

Thank you, and good morning. I would like to welcome everyone to today's call, and thank you for joining us. This morning, we will be reviewing our results for the third quarter and updating our guidance for the full year 2025. I'm joined this morning by Luke Pelosi, our CFO, who will take us through our forward-looking disclaimer before we get into the details.

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, including statements regarding events or developments that we believe or anticipate may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set out in our filings with the Canadian and U.S. securities regulators.

Any forward-looking statement is not a guarantee of future performance, and actual results may differ materially from those expressed or implied in the forward-looking statements. These forward-looking statements speak only as of today's date, and we do not assume any obligation to update these statements, whether as a result of new information, future events and developments or otherwise. This call will include a discussion of certain non-IFRS measures. A reconciliation of these non-IFRS measures can be found in our filings with the Canadian and U.S. securities regulators. I will now turn the call back over to Patrick.

Thank you, Luke. Once again, I want to start by thanking our incredible employees whose commitment drove another quarter of exceptional performance. Our results exceeded expectations from top to bottom. For the quarter, we achieved the highest adjusted EBITDA margin in our company's history at 31.6%. All of this was accomplished despite the challenging macro backdrop and an incremental commodity-related headwind.

As I said last quarter, we view the consistent delivery of record-setting results even in the face of challenges as a continued demonstration of the quality of our asset base, the effectiveness of our value creation strategies and the resilience of our business model. Near double-digit top line growth is driven by the continued success of our pricing strategies, the impact from our disciplined rigor on price/cost spread, harvesting pricing opportunities related to ancillary surcharges and incremental price discovery opportunities as well as the EPR ramping and other contract renewals were apparent in the quarter and position us now to expect pricing for the full year of 6%.

Industry-leading volume performance also contributed to the top line growth. MSW volumes and the ongoing tailwinds from our recent EPR investments more than offset the impact of softer construction-orientated activity, lower manufacturing and industrial collection, C&D landfill and special waste volumes. We continue to see broader economic uncertainty impacting the level of activity in these areas of our market, but remain well positioned to participate in upside when these volumes inevitably return.

Operational costs as a percentage of revenue trended lower in the quarter in response to our continued improvements in labor turnover and our ongoing focus on cost discipline, process optimization and the realization of self-help opportunities across our portfolio. The effectiveness of these cost efficiencies is seen in the margin line, where we once again delivered an industry-leading 90 basis points of adjusted EBITDA margin expansion. Luke will take you through the detailed bridge, but when you factor in the impact of commodity prices and credits realized in the year, we realized over 250 basis points of underlying margin expansion.

With each passing quarter, we are proving out the business' ability to meet and exceed the industry-leading margin expansion targets we laid out in our Investor Day presentation. We also remain highly confident in the targets we set out at Investor Day for M&A. Year-to-date, we have deployed nearly $650 million into acquisitions, including approximately $50 million deployed subsequent to quarter end. We have several incremental deals in process and we will deploy incremental capital into M&A before year-end. Our M&A pipeline remains very active and anticipate transactions will close in the first half of next year as well.

The rollover impact of these transactions provides us with significant growth tailwinds as we head into 2026. The strength of the base business performance and the anticipated contribution from recent M&A allow us to raise full year guidance for the second time this year. Luke will provide you with those details.

In the quarter, we also completed the previously discussed recapitalization of GIP by partnering with ECP, a leading investor in critical infrastructure. The transaction valued GIP at $4.25 billion, returned approximately $585 million to GIP shareholders and added $175 million to the balance sheet to fund future growth.

Since our original investment in GIP in 2022, I have consistently expressed my belief that GIP would be a vehicle for significant value creation for GFL shareholders. The recapitalization back in 2022 valued our original investment at $250 million and at over $1.1 billion, returning nearly 4.5x just over in 3 years. I believe this is yet another reflection of GFL's strength of the management team and the effectiveness of our strategy to create longer shareholder value. GFL received $200 million of the shareholder distribution and continues to own 30% of the equity of GIP that will allow us to participate in what we expect to be continued value creation from the GIP business.

We are pleased with the valuation we realized on GIP and Environmental Services transaction earlier this year, but currently see a significant dislocation in the value of GFL share price and therefore, see share repurchases as an attractive opportunity to deploy capital. We repurchased $350 million of shares in the third quarter and nearly $2.8 billion of shares year-to-date. Going forward, we will continue to be opportunistic on executing share buybacks. I will now pass the call over to Luke, who will walk you through the quarter in more detail, and then I'll share some closing comments before we open it up for Q&A.

Thanks, Patrick. Consolidated revenue for the quarter grew 9% over the prior year, driven by a 50 basis point sequential acceleration in pricing to 6.3% and 100 basis points in positive volume, which more than overcame the headwinds from commodity prices and fuel surcharges that were even greater than anticipated. The accelerated realization of incremental price discovery opportunities that we outlined at Investor Day is increasing our full year price growth expectations another 25 basis points to around 6%.

Even when excluding the pricing impacts from large-scale contract renewals, both in collection and recycling processing, we continue to see pricing in excess of our internal cost of inflation, driving appropriate returns on our invested capital. Volumes grew 100 basis points as the benefits of recent growth investments and improved MSW volumes offset the ongoing softness seen in the broader macro environment. Volumes were up 5% in Canada and 0.9% behind the prior year in the U.S., inclusive of 3% lower C&D and 9% lower special waste volumes.

While Q4 is expected to see negative volumes on a tough hurricane cleanup comp, we remain well positioned to benefit from a broader economic recovery. Adjusted EBITDA margin for the quarter was 31.6%, the highest in our company's history and ahead of our internal expectations. Commodity prices, which slid over 20% sequentially from Q2 and were down over 30% year-over-year, continue to be a drag on margins. M&A and the nonrecurrence of ITCs recognized in the prior year comparative quarter were also headwinds, whereas RNG and fuel prices were tailwinds.

Excluding these items, underlying solid waste margins expanded 250 basis points. Adjusted free cash flow was $181 million, better than planned on account of the outperformance of adjusted EBITDA and the timing of CapEx, partially offset by changes in working capital items. With the continued strength of our operational performance, we are able to raise our guidance for the year yet again and now expect to be at or above the high end of the previously reported ranges.

Specifically, we now expect full year revenue to be between $6.575 billion and $6.6 billion and adjusted EBITDA to be about $1.975 billion, over $50 million more and nearly 3% higher than our original guidance for the year on a constant currency basis. Adjusted free cash flow remains at $750 million as the incremental adjusted EBITDA is offset by incremental working capital and cash interest. While the incremental M&A expected to be completed before the end of the year will have minimal contribution to the 2025 results, it will add to the nearly 150 basis points of acquisition revenue rollover already in hand. Additionally, the continued ramp of EPR in '26 should add another 75 basis points of incremental revenue growth in next year. And while we will wait until February to provide our detailed guidance for '26, we remain confident in our ability to deliver on GFL's multiyear growth trajectory that we laid out at our Investor Day. I will now pass the call back to Patrick, who will provide some closing comments before Q&A.

Today, we're keeping it short and sweet as we think the results speak for themselves. Our focus is singular and our path forward is clear. Even in the face of uncertain economic environment, the setup for 2026 is simple and clear. We are very confident in our operating plan as you have witnessed quarter after quarter. Our M&A pipeline has never been stronger, and we now have the balance sheet that allows us to keep repurchasing our own shares at what we believe to be dislodged prices. I will now turn the call over to the operator to open the line for Q&A.

[Operator Instructions] We have our first question from Sabahat Khan from RBC.

So just on the guidance update, can you maybe just walk us through some of the puts and takes reflected in the guidance uptake? I think there's some upside in the Q3 results, but just wondering how you took into account M&A, FX and some of the moving pieces and sort of how comfortable you are with the guidance uptick.

Sabahat, it's Luke. Great question. Obviously, something that in this environment, we're very pleased to be able to come for the second time this year and push the numbers even sort of further up. Now if you think about the year as a whole, right, initially at the top line, we had guided at the midpoint about $6.525 billion of revenue, and if you use the constant currency FX, that would have equated to about $6.625 billion for the year as a whole where we're at today, but roughly $100 million incremental. So I'll just take the translational impact of FX out of the equation for a second.

And if you think about that $100 million, really, what we have happening at the pricing line, we've now taken pricing up to close to 6%, nearly 75 bps higher than where we started. So you have sort of $40 million to $50 million of incremental pricing action is a good guide. That's largely offset by the fuel surcharge and commodity-related headwinds that you've seen through the industry for the year, pretty equally offset. So you have about $40 million to $50 million negative coming from that.

Then you have the volume story. Now volume for the year is going to be plus or minus 25 bps. We're pleased to be able to report that we're going to be slightly positive on volume. But really within that number, again, you have puts and takes. Our EPR ramping has outperformed, and we're enjoying excess benefit from some transitional contracts that have come on faster than anticipated. And obviously, offsetting that is some of the C&D and construction-oriented materials that Patrick alluded to in his opening remarks and consistent with the industry as a whole.

And then you have the M&A, right? So very pleased that we've been able to acquire about $200 million of annualized revenue for the year. And roughly, you're going to recognize half of that in year and half is going to sort of roll over. So that's really driving the majority of that raise, but very interesting and happy to see the benefits of our strategies being able to overcome the real industry-wide headwinds that have been present throughout 2025.

Great. And then just for my follow-up, I guess, maybe just recap where we are on the EPR runway and it looks like it's starting to contribute. But maybe if you can just walk us through kind of the wins you have, how much of that is starting to roll in and how much more is likely to come through 2026 and beyond?

Yes. So Saba, just continuing with what I just said, I mean, this year, we've had sort of great outperformance coming from EPR. And what we have spoken about for each quarter is how the Canadian, both price and volume has been enjoying uplifts as all these EPR contracts are coming online. And as I alluded to, we're seeing transitional arrangements whereby our customer base is asking us to do larger quantities of volume or start doing work earlier than initially anticipated. And we're, therefore, enjoying an acceleration of the realization of those EPR benefits in '25 on amounts that were otherwise going to be coming in '26.

Now where we sit and what I said, it's looking like '26, we're going to have an incremental roughly 100 basis points of top line rollover from incremental EPR revenues coming online, offset by the reduction of some of these transitional contracts that I spoke to. And so you're going to get this net 75 basis point impact rolling into '26. As we've kept alluding to, there's still smaller opportunities that we continue to pursue, which could be additive to those numbers. But feeling really good to be entering '26 in addition to our normal course organic growth, normal course M&A to have this incremental tailwind of roughly 75 bps at the revenue line, which, as we said before, will be margin accretive to the business as a whole and certainly to our Canadian segment, which is very quickly closing the gap on that blended margin, and you're seeing it consistently trend at north of 30% margins.

We have our next question from Kevin Chiang from CIBC.

Congrats on a good Q3 there. I know we'll wait until, I guess, February when you provide 2026 guidance. But maybe if I just look at some of the moving parts, and I appreciate some of the top line comments you provided, Luke. But if I look at your run rate EBITDA at the end of Q3, and I know there's a bunch of moving parts in there. But I take that and look back to your Investor Day in terms of the growth you expect organically and what you can get from an M&A perspective. It seems like a run rate EBITDA of just over $2.1 billion could be close to $2.3 billion next year. Maybe some incremental M&A needs to be completed to get there. But just, I guess, how do you think about that directionally, just given the strength you're exiting Q3 and 2025.

Yes. Great question, Kevin. Thank you for the comments on the quarter. Look, the run rate number being reported right now is a little bit skewed by virtue of the inclusion of some of these large EPR collection contracts as you're actually getting that number included in your run rate metric this year, even though the sort of performance will come throughout 2026. So I think to grow organically off that number, you're effectively double counting a little bit. But the way I would think about next year and without forcing us to give you our guidance, what we've said is we're going to enjoy periods of outsized margin expansion over the near term as we execute on our strategies and realize the benefits of the self-help levers.

So the guidance we've just given for this year, you're ending at 30% margin, right? I think the revenue building blocks we just gave, you get to a revenue number that's north of 7% -- starts with the 7% and our margin expansion on that outside, I think you should be banking on something north of 50 basis points. So when you put that all together, I think on the 1975 of EBITDA that we are guiding for the current year, there should be a double-digit growth number coming on that, consistent with what we said at Investor Day.

Now as Patrick said, there's a very healthy pipeline and stuff that we're actively working on and any incremental acquisition activity would be additive to that. So I think if you take the building blocks, you can -- where you sit today, see a 10% EBITDA growth before considering the impact of any incremental M&A or the recovery of some of the industry-wide headwinds, namely commodities and volumes as all of that will be upside to where we sit today.

That's extremely helpful. And maybe just a follow-up here. I noticed your SG&A intensity as a percentage of revenue, it was if my math is correct, down about 80 basis points quarter-over-quarter. And I think that's the best we've seen since you've gone public. I know you've been shifting the portfolio a bit here. But just maybe thoughts on SG&A trends over the medium term here. It does feel like you're starting to get some of that cost absorption benefit you talked about at your Investor Day.

Yes. Thanks for noticing, Kevin. But I mean what we're excited about is not just on the SG&A line. You're right, you have that 70, 80 basis point improvement in SG&A. But if you look at labor and benefits, our main cost category, you had 40 basis point improvement there. The R&M cost, you had about a 50 basis point improvement. So it's really across all the cost categories.

And you're seeing that coming through, and it's a function of obviously improving labor turnover, which is the narrative you heard throughout the industry, and we're certainly realizing that as well, which is certainly coming through in the cost. But it's also just leveraging the infrastructure and cost base that we put in place. I mean, as we spoke about before, effectively, our corporate cost segment, which was trending down towards 3% with the divestiture of ES jumped back up north of 4%. And now you're getting the operating leverage, both organically as you execute on our price-driven growth strategy, but also inorganically, right, because we don't really need to add to that supportive shared services and broader executive infrastructure to accommodate the incremental M&A contribution that's coming online.

And so you're going to see the operating leverage. I think we're set up to print the corporate segment at a sort of 4% of total revenue this year, and that's going to continue to trend down. And I think that's part of our excitement as we go forward over the near to medium term is that we have the cost in place and the scalability, and we can now execute on both our organic and inorganic growth initiatives and be able to leverage these relatively fixed cost basis. So thanks for the question, Kevin.

We have our next question from Stephanie Moore from Jefferies.

Now Patrick, I think you've been pretty open about your view on just the underlying value of shares. And I think you've taken pretty decisive actions to unlock value, whether it's selling ES or GIP and anything else here. So as we think about where the business stands today, are there any other actions that you would consider that you believe would further unlock value for shareholders?

Yes. I mean I think when you sort of sit and look at it, everyone said what's the relative value of the business. And I think we clearly demonstrated that the multiples that these businesses are trading at today, when you look at the crown jewels of all of our asset bases, I'm not just talking about GFL specifically, but just the industry in general and where valuations have trended, I think we've been handed -- the industry has been handed a bit of a bad deck of cards today.

I mean if you look at the results of all the companies across the sector, even in the face of this economic environment, it's certainly overdone in my view. And if you look at the valuations in the private market and private capital and the returns that can be generated in the private markets, I mean, that's what should drive what the multiples of these businesses trade for. And I think today, it's clearly not right. And I think that's why even -- we execute on these transactions, exited those 2 businesses and kept meaningful equity stakes, but 15x to 16x for 2 businesses that I would say are slightly inferior to the solid waste business of RemainCo.

That being said, it provides a great opportunity. And as you've seen, we bought back -- we anticipate that we buy back sort of between $2 billion and $2.3 billion of stock at the beginning of the year, and we've acquired -- we bought back $2.8 billion to $2.9 billion. And me as the largest individual shareholder, I think that's the best use of our capital today, and that's why we did that.

That being said, we're obviously executing on continued the M&A pipeline. And I think in my closing remarks, I basically said what I said, which is very straightforward plan moving forward. We're very confident in our operating plan. We have a balance sheet now that we can execute on share buybacks with what we believe to be dislocated share prices. And our M&A pipeline since going public has never been better.

So I think in the Investor Day presentation, we had a base number of sort of spending $750 million to $1 billion. I think next year will be an outsized year again. I think well in excess of $1 billion. So we've teed that up, coupled together with the rollover. I think at the end of the day, the stock will move at the appropriate time. Obviously, we don't control the share price. But when we see opportunities like this, we're going to lean in pretty heavily to own more of the company, and I want to own more of the company at these prices.

We have our next question from Trevor Romeo from William Blair.

I wanted to maybe dig in a little bit more on your price metric for this quarter because it did seem a little different than the typical seasonal cadence throughout the year going up 50 basis points relative to last quarter. So maybe I missed it in the prepared remarks, but was there like a specific portion of your book that had really good results this quarter or any mix impacts? Or maybe you could just dive into the price a little bit more and what drove the improvement?

Yes. Great question, Trevor. You're absolutely right. It does sort of defy the typical seasonal cadence, and that's really driven by sort of 2 pieces. So one is EPR. And as we're going through this transitional period, we are starting to have new contracts come on and recognizing price on that on a sort of off typical calendar perspective. And so you're seeing the pricing of that come through. And the Canadian pricing was a sort of high 6s number for the period and really getting benefit from EPR coming through, defying the normal course seasonal cadence.

The other piece is -- you know, another part that we're really excited about is just the execution of the strategies that we sort of spoke so much at our Investor Day. And this is really realizing the latent benefit within our existing book, primarily related to ancillary surcharges, right? And we've sort of talked about that we are actively going to be ensuring that we are sort of paid the appropriate rates on the services we provide, and we are out there executing on that strategy. And so you're seeing that start to sort of ramp, which is providing incremental sort of support to our blended pricing line and something that is setting us up with a high degree of conviction for visibility of pricing as we go into '26. So I'd say it's both of those things together, Trevor, that underlying is normal course seasonality and then you have these bolstering in the second half of the year.

Okay. That is helpful. And then for my follow-up, maybe just ask for an update on labor turnover. I think you touched on costs a little bit earlier, but maybe labor turnover specifically has been a good story across the industry. What kind of improvement have you seen so far this year? What do you think is possible next year? And how does that translate into the kind of wage inflation that you're seeing now and maybe heading into next year?

Yes. I think -- it's Patrick speaking. I think, obviously, it's trended in the direction that is very favorable. And with the unquantifiable costs with the lower turnover numbers that are relevant to the overall P&L, i.e., productivity, overall sort of performance, et cetera. But today, we're sitting at high teens today in the voluntary turnover line, which, again, as you know, in COVID, that sort of ramped up to north of 30%. If you look at historical averages pre-COVID, we were always around sort of 17%, 18%, 19%, and that's basically where we're sort of sitting today.

We think, obviously, in this macro environment, that probably has the ability to continue to trend lower as labor pools have broadened in a lot of the markets. Not every one market is the same. But we saw markets where our best drivers are expecting above average increases and the driver pools are shrinking for high-quality drivers. But that being said, we feel very comfortable. The voluntary turnover line of sort of high teens is very comfortable. If we can trend towards mid-teens, obviously, there's going to be further improvement on the sort of margin line for us.

We have our next question from Shlomo Rosenbaum from Stifel.

It's a really good quarter. And I'm trying to just get underneath the numbers a little bit more just to understand kind of the organic growth trends in Canada versus the U.S. I don't know if you could parse a little bit more about what's going on. You saw the organic growth in the U.S. trended down a little bit. I'm not sure how much of that was commodities prices coming down. But I was wondering if you can just kind of unpack some of the trends there and how that translated to the organic growth rates of the 2 different regions.

Yes. Thanks, Shlomo. It's Luke speaking. Great question. As you see in the headline reported numbers across the segments, Canada did enjoy a higher overall organic growth number than the U.S. If you break the pieces apart, look at the pricing, both markets continue to sort of price at the levels we need to be. And I think both pricing in Canada and the U.S. was sort of north of 6%. I think low 6s in the U.S. and high 6s in Canada. And that's always blending to the general 6.3%. I'd say the uplift in Canada was really driven by the EPR contribution.

And ex that, Canada would have actually been slightly lower than the U.S. as some of the sort of ancillary surcharge recognition we were saying is actually being realized in the U.S. at a faster rate than sort of Canada. Volume is really the differentiator between the 2. Again, Canada, positive volume once again and is really being supported by EPR, not entirely because even ex EPR, Canada still enjoyed positive volume, but I think EPR contributed about an incremental $15 million in Canada for the quarter, which certainly was a great support to an otherwise sort of sluggish macro.

I'd say U.S., U.S. had negative volume for the quarter. It's really a function of the, I'd say, landfill C&D and special waste volumes and a little bit on the collection side. The special waste and C&D, while soft, I'd say, on a macro basis, you can still enjoy volumes geographically if you happen to be in an area where there is activity going on. There still is some activity, just muted. And I highlight that because, for instance, our Canadian business actually had positive special waste volumes in the quarter, whereas our U.S. business was negative, by negative 3% C&D and negative 8% special waste in the U.S.

I'd say just sometimes luck of where your site is sort of located. But take away those things around the edges. I think underlying, we continue to see similar sort of organic trends in each of our markets, and it is that there is a softness in the broader sort of manufacturing-related industrial expansionary sort of CapEx spend and you're seeing that in your volumes. But underlying, our market selection continues to sort of bolster our volumes by being in the demographic regions where people are moving to. Our strategic investments in items of EPR and other are providing volumetric tailwinds and our pricing strategies continue to remain strong regardless of the broader macro environment.

Okay. Great. And then I'm just trying to map the 4Q EBITDA guidance and implied going to the top end of the range. I guess from the midpoint would be $12.5 million. You've already exceeded expectations in the third quarter by $10 million and leaves you like kind of $2.5 million. You've done an incremental $25 million in M&A. It looks like pricing is better, incremental FX tailwinds. Can you just give me the puts and takes? It just seems to me that you're -- there's certain conservatism that might be in there and maybe that's it or maybe there's other headwinds on the commodities or things that I'm not fully able to calculate.

Yes. So Shlomo, I think the issue is in the seasonal climates like Canada and other, it's difficult to just say whatever your H2 guidance was if you have outperformance in Q3, it therefore, all carries forward. Just going back to my comment I made on Canadian special waste volumes, we enjoyed a very strong quarter in Q3, and that may now actually result in some sort of softness in Q4. So I don't think it's appropriate to roll forward that 10%. Obviously, we have some sort of conservatism as we want to make sure that we can sort of deliver. But commodities is an incremental headwind coming against you.

The broader sort of volumetric story doesn't seem to be improving anytime soon. And you got a really sort of tough comp that last Q4, you did enjoy a whole bunch of volume related to hurricane and other sort of special waste cleanup that we're not seeing sort of materialize. So I think it's an appropriate degree of guidance. Is there a little bit of conservatism in there? Sure. We hope to be able to do better versus doing worse. But I would factor in the commodity and just that timing cadence before just extrapolating the Q3 results to an expected outcome for the year as a whole.

We have our next question comes from Konark Gupta from Scotiabank.

I wanted to touch on the sustainability targets you guys set out at the Investor Day, specifically as it pertains to RNG, I guess. I mean the commodity prices, right, like they have been volatile this year so far and what you expect for next year. But I mean, it doesn't seem like the RINs are trending at the range that you guys were assuming back then, maybe they rebound next year. But do you need to reevaluate any of these RNG projects or investments as you consider the current commodity prices?

Yes. I think, again, everyone got a little bit -- and everyone seems to tend to forget where the RIN prices were when we actually embarked on these projects. We underwrote these projects had a $2.25 RIN. Yes, over the last couple of years, RINs under the last administration ran to $3 to $3.25, and that just made the profitability of those and paybacks of those RNG build-outs look that much better. But that being said, we always underwrote at $2.25. So we still feel very confident about where we are in terms of returns on invested capital, coupled together with obviously, bonus depreciation and other things that we were able to use on some of the build-outs just make the returns look that much better.

As we articulated last quarter, we did slow things down a little bit, just ensuring that the administration wasn't going to make drastic changes to the program, which they didn't. So yes, we moved some of our RNG project build out 6 to 12 months sort of to the right. But from our perspective, we are -- we do have plans now to sort of ramp that back up, back half of this year as we started and now into next year.

So we will restart that program. But from our perspective, at a $2.25 RIN, returns on invested capital are very good. Paybacks are still sort of 3 to 3.5 years versus the 1.5 to 2 years we were getting when RINs ran to $3 to $3.25. But if you look at the forecast of what a lot smarter people than me are forecasting in terms of the RIN program, people are forecasting back to high $2s, low $3s over the next couple of years. But that being said, our investment case is based on a $2.25 RIN. And even at a $2.25 RIN, we feel very comfortable about where the returns are at that.

Okay. That's great color. And Luke for you, I think on the leverage side of things, I mean, it creeped up, obviously, in Q3. And I think you're expecting to now finish the year around those levels, roughly speaking. But in terms of philosophy for leverage ratio, I mean, I think you guys have like the buyback opportunity has increased now given the stock price and the M&A kind of remains pretty high. I mean, would you be comfortable kind of like remaining in this range, like low to mid-3 or something for the foreseeable future, like as long as you have these opportunities?

Yes. I think as we articulated at Investor Day, as we continue to articulate, we'll be opportunistic, low to mid-3s is where we want to be, given the free cash flow generation, the free cash flow ramp over the next couple of years, we feel very comfortable operating in that space. And we have ultimate operating flexibility, as we said, one, to buy back shares; and number two, to execute on the M&A pipeline.

We have our next question from Bryan Burgmeier from Citi.

Maybe just following up on RNG. Luke, I heard you call out the benefit for 2026 from the M&A rollover and the EPR. Are we still expecting another kind of incremental step-up from RNG next year? And then I think there's maybe a larger step-up into 2027. Is that still accurate?

Yes, Bryan, thanks for the question. '26 is rather muted in terms of production volume. Now the incremental production volume really as you had facilities come online in '25 and are now fully ramped is probably offset by today's RIN pricing. So modest incremental amount in '26, but it really is '27 and into '28 when you get the sort of next leg up. So we'll put a pin in our guide depending on where RIN prices are at the beginning of the year when we speak in sort of February. But the expectation where I sit today is the modest incremental units of RNG will be offset by the year-over-year price declines. And it's really '27 and '28 where we'll get that next leg up in tailwinds.

Okay. Yes, makes sense. And then just one more question for me. You've spoken a lot about price on the call, but maybe just any details on sort of the restricted price versus the open market price and how that sort of trended in the back half of the year? And if you have any preliminary thoughts on '26, that would be helpful as well.

So look, I'd say our blended kind of pricing is typical cadence, what you're seeing open market commercial industrial is high single-digit numbers. your residential sort of restricted is on the lower end of mid-single digits. And then as you're getting renewals and contracts being reset to appropriate pricing for today's cost environment, you're seeing the higher end of mid-single digit, touching high single-digit price blending to sort of residential collection pricing in the higher end of sort of mid-single digit.

Post collection, you're seeing that sort of healthy mid-single-digit sort of level. So we continue to like the industry, be constructive of the narrative that we need to move our restricted pricing off of CPI-related indices as it doesn't necessarily accurately reflect our underlying cost structure. I'd say we're in the nascent stages of that migration vis-a-vis some of our competitors, but certainly something that we're sort of supportive of, and we'll continue to sort of move forward. But I'd say we view the pricing in our industry continue to remain rational, disciplined and sort of healthy.

And I think all of us are unwilling to give away our valuable services at rates that don't provide appropriate sort of levels of return. So we're going to continue to do that. As we round out the year here, we'll form a view on 2026 expected internal cost inflation, and you're going to see us pricing at a blended level in excess of that in order to generate the return that the shareholder group is looking for.

We have our next question from James Schumm TD Cowen.

Yes, I wanted to see if you could provide a little bit more color on those cost inflation expectations for next year. Should we be thinking about 4%? Or could it be as low as 3.5%?

James, it's Luke speaking. I mean, we're going to wait until '26 before we form a view. I mean, where I sit today, I feel it's very squarely going to start with a 4%. I know sort of CPI may be doing what it's doing. But when you look at labor costs across the industry, notwithstanding the current labor market, those numbers are going to be north of 3% on a blended labor cost number. You start thinking about the potential delayed impact of some of these tariffs or other sort of regulations starting to bleed through into spare parts and other items. I think there's a very viable path where your cost inflation on those amounts is something higher than a mid-single-digit number.

And then again, people focus on sort of labor and labor stand-alone. But when you think about medical costs and other benefit costs in the U.S., those are accreting every year at something well north of sort of 3%. So when you put that all together, I'm expecting a number that starts with a 4%, but we are going to wait until 2026 to put a finer pin in that, James.

Okay. And then just on pricing, are you trying to -- based on your earlier answer there, you're in the early stages of trying to move off CPI. Are you trying to move to CPI water, sewer, trash or is it -- would you want like just a 4% number? Or where are you trying to go with that? And then as we think about pricing next year, you're at roughly 6% this year, and you noted some benefits from EPR this year. Is that -- I mean, I think we're all expecting that number to be lower -- but do those onetime benefits mean that we see like a larger move lower because you won't have as much of those EPR benefits? Or just if you could give any help there, it would be appreciated.

So Jim, I'll take the latter part, and I'll pass it to Patrick how we think strategically and moving...

Canada, I mean, breaking apart Canada and U.S. Canada obviously doesn't have sewer sort of water trash index. That being said, the trend we're seeing in Canada is -- and what we're pushing for is going to Luke's point, headline CPI is not reflective of the true cost of our business to operate our business. So what we're pushing for a lot of the contracts are fixed price increases of high 3s to 4%. If we don't see that, then we're pricing it in day 1.

I think we're articulating the story to our customers that, hey, we need this price in order to continue to be competitive and give you the best service that you've been experiencing to keep the best drivers. And that has been received fairly well. This is more of a phenomenon on the sort of on the municipal collection side as well as sort of the landfill transportation processing facilities because obviously, on the commercial book, we can price where we need to be based on what we believe our CPI is internally at the time.

But yes, and obviously, in the U.S., wherever we can, we obviously want to move to a more favorable index than CPI, which is not reflective of our sort of business cost. But that trend is sort of happening. It's been more of a West Coast phenomenon, truthfully in the U.S. than it has been on the East Coast. But we are looking for the same type of opportunities that we -- that exist in the West Coast move to the East Coast. And whether that's fixed pricing, whether that's moving to another index, or whether it's pricing it in sort of day 1, we are sort of finding that solution.

And then, Jim, on your second part of your question, as you think about next year's pricing, high level, you're absolutely right. This year, you're getting the benefit of the sort of EPR ramp manifesting in the pricing line. The incremental ramp next year will be manifest more in the volume line. So you can think between 75 to 100 basis points of this year's price is by virtue of incremental EPR ramp. So if you were to sort of back that out on the basis, you'd only be getting a portion of that next year. Yes, you would be looking at a pricing level something closer to 5% than the 6% that you're having today just on that math alone. But again, we'll save our detailed pricing guidance until we speak to you again in February.

We have our next question comes from Michael Doumet from National Bank of Canada.

Just going back to pricing, the incremental price recognized in Q3 versus Q1 60 basis points. How much of that was recognized from surcharge implementation? And again, I'm just curious how much more is there to go get? And would that flow through into 2026 incremental to whatever underlying price expectation?

Yes. Michael, it's Luke. Thanks for the question. Look, the surcharge absolute quantity it gets complicated as you think about sort of volumes puts or takes and volumes attracting a different degree of surcharge. But holistically, I think we said in the Investor Day, there was a $50 million to $60 million price. Forgive me, I might be a little off, I'm not trying to recast the guide. whatever the number we had said in the Investor Day, I don't have it right in front of me. I think the idea was we're going to ratably recognize that over the next sort of couple of years. I think we've had great success in 2025 and starting the recognition of that earlier than anticipated.

And so you're seeing that come and sort of support the overall pricing number this year. But we remain well on track to realize that overall price as it relates to ancillary charges that we had articulated over that sort of '25 through '28 period.

And Patrick, you made some remarks on first half '26 M&A. And given the second half '25 looks to be pretty deal heavy, I would have thought maybe that you would be working down your M&A pipeline into the year-end. But from your comments, it sounds like you're actually going the other way and potentially entering '26 with a healthy pipeline. Is there anything specific driving the larger pipeline or more of the activity that maybe larger deals that you can comment on?

Yes. I think we spent the last half -- sorry, the last quarter of '24, really focused on repatriating capital and simplifying the business, which was really coming up with a plan for the EES business and completing that transaction, which was an $8 billion transaction. And then around GIP and which we always said. So we spent the first half of '25 focusing on those divestitures, which got executed. We said the M&A pipeline for GFL would be back half of '25 weighted, which you're seeing.

We had a high level of confidence given the pipeline that we had built the stuff that was going to close in '25 or H2 sort of '25. And then when I look at H1 '26, again, these are all opportunities that we've been working on for a long period of time, relationships we've been fostering for a long period of time, sellers that want to deal with us. These are not bank run processes. These are opportunities that are sourced by ourselves with relationships from either myself or the team sort of in the field. And where I sit today, I think as we said at our Investor Day, $750 million to $1 billion would be the sort of average spend and there would be years where there would be a higher level of M&A.

And I think when I look at what we have teed up for H1 of next year and then opportunities that are in the hopper, I think we're going to have a bigger year on M&A next year than we've had this year. And I think that could be 50-plus percent higher than what we did this year. So we feel very comfortable with that. Again, back half of '25, as you're seeing and what we've articulated has been strong. And first half of next year looks to be very strong as well and a lot of opportunities that will backfill into the second half. So we're feeling very good about the M&A pipeline for next year.

And as I said, it's -- for us, in the markets where we want to be, again, focused on opportunities that are in existing regions where we can leverage existing infrastructure, we believe those are going to get the highest returns on invested capital for us. And that's where we're focused, and that's where we're focused on executing. We're not looking to buy a business in a new geography at the moment. These are all things within the existing footprint that work with our existing footprint that we can leverage those post-collection assets, and that's what we're focused on.

We have our next question comes from Tobey Sommer from Truist.

I want to follow up on that M&A comment for next year. I'll just clear pricing for now. Given the more permissive U.S. antitrust posture, is that a factor that could lead to larger deals for GFL or maybe within the industry over the next 3 years?

If you're thinking about a mega merger, now is probably the time. I don't think, from my perspective, much has changed in terms of the HSR and the regulatory environment under the old administration, the new administration. That being said, 95% to 99% of deals that we do don't even require HSR approval because they're under the threshold. So the lion's share of what we do is falling under HSR. Yes, we might have 1 or 2 that exceed. But from where we sit today, we haven't seen much of a change. But I think if someone was trying -- wanting to do something much larger, this would probably be the administration to do it under.

Appreciate that. And then curious what you think the upper bound as a percent of sales you think the business can have associated with commodity-related areas within the portfolio and still warrant that higher multiple versus the current dislocated price.

Yes. I mean commodities today are sort of a relatively de minimis number. I mean, not only for us, but sort of for the rest of the industry. I mean what do you have going in that bucket? You have RNG today that would have a little bit of volatility and then you have sort of all the recycling volumes. I think today, where we all sit today, I think the entire industry is that sort of sub-10%. These are very good margin accretive assets that we want to own regardless.

And I think most importantly, meets the returns on invested capital thresholds that we all basically run our businesses on. So from my perspective, again, do you want to have that number 20%? Absolutely not, but anywhere sort of in the 10% to 15% range, I think is more than comfortable, particularly with the structures that we all have today.

We have our next question from Chris Murray from ATB Capital Markets.

Turning back to some of the self-help initiatives and thinking about this, you go back to the Investor Day. And at the time, your CEO had been in the chair for about a month. Maybe had a little more time to think about the operation, and look, there was all kinds of levers. There was technology, there was turnover, pricing strategies, things like that. But just thinking about ideas as we go into 2026, where do you feel you are on the self-help levers at this particular point?

And are there any new opportunities you're starting to uncover or think about doing? I guess what I'm trying to figure out is where we are in the margin kind of catch-up or progression against the rest of the industry and anything you think you can do on the MSW business to drive margins over the next couple of years?

Chris, it's Luke. Great question and something that hopefully, we're demonstrating we're sort of delivering on quarter after quarter, continuing to lead the industry with the margin expansion and being able to beat our -- the guide that we lay out that's already inclusive of industry-leading expansion. But you said Billy was in the seat for just a month. I mean, Billy has been here with us for years and has been an active sort of member of the operational and senior executive leadership team all that time.

So it's not as if we put together that sort of plan with imperfect information per se that has been sort of well crafted and Billy was an author of that over the sort of years leading up to that Investor Day presentation. So I'd say our strategies and/or focuses have not changed. In Patrick's remarks, you heard him say that we are clear and our focus is singular, and I would echo that. Those are what we believe to be the highest and best use of our time and efforts in terms of award that's going to come out, so it is the area of focus.

In terms of the cadence by which we are realizing that, look, every quarter with which we exceed our otherwise provided EBITDA guidance, we are doing better than a pro rata ramp, right? So if you say in that presentation, we said we're going to go from X to Y from '25 to '28. Well, this year, we've now just added 20 basis points to our margin expansion that we said at the beginning of the year. Well, that puts us that much further sort of ahead of the curve.

So we're feeling really good. I don't think the levers are going to materially change over this window of the medium term. Those are going to be the things you're going to hear us talking about. It will get boring, but hopefully, the sort of results are anything but that. So I'd say we're feeling very good about our progress towards those goals. And as Patrick alluded to, the setup we have going into '26 makes us feel that we'll get even further ahead of that otherwise pro rata cadence.

We have our next question from Will Grippin from Barclays.

Just one question for me here. I wanted to come back to leverage. Obviously ticked up a little bit quarter-on-quarter on a trailing 12-month EBITDA basis. Just given your comments around possibly ramping share buybacks here and a very strong M&A pipeline and outlook into 2026, how should we think about maybe the trajectory of that leverage ratio over the next several quarters? And I know you kind of reiterated the low to mid-3x target, but should we think about this not being sort of a straight line down? Maybe there's more variability quarter-to-quarter just around actual capital deployment?

Yes. I mean leverage, again, we spent time moving leverage from low 4s to low to mid-3s. And I think we've made a commitment that we will keep leverage that will toggle between low 3s and mid-3s. So you'll see us reinvesting the free cash flow of the business based on those sort of leverage targets. So that's what we're focused on.

Yes. Well, I mean, there is a seasonal cadence, obviously, naturally with the free cash flow. Q4 is a higher free cash quarter. And so you'll see the generation and the reduction in debt coming out of that. But then buybacks and M&A can sort of augment that otherwise organic cadence. But in a given year, it's not going to be perfectly straight line because the pace of M&A and/or buybacks and/or just general underlying free cash flow won't be a perfect straight line. But I think what you hear is the sort of absolute commitment to live in and around these ranges.

And obviously, if there's a higher level of sort of M&A at one point, then you afforded the opportunity to sort of temporarily pause as you then bring leverage back in and so on and so forth. So it's not going to be perfectly straight, but it will be absolutely committed over sort of 4 quarter period to live within the sort of ranges that we're talking about.

Well thank you, everyone, for participating today. And -- sorry, operator, is that the end of the last question?

Yes. Thank you.

Okay. Thank you, everyone, and we look forward to speaking with you in February when we report our full year results and giving our full outlook for 2026.

Thank you very much. This concludes today's call, and thank you for your participation. You may now disconnect your lines.