GFL Environmental Inc. (GFL) Earnings Call Transcript
May 14, 2020
Earnings Call Speaker Segments
Good morning, everybody. Welcome to day 2 of the Goldman Sachs Virtual Industrials and Materials Conference 2020. Thank you, everybody, for making the time to be with us again. Unusual circumstances this year forced us to kind of take this to a virtual format. But we're hoping we can still have an interactive dialogue and get some questions from the audience and make this more of an interactive session. Before I get started, we are required to make certain disclosures and public appearances about Goldman Sachs' relationships with companies that will be discussed. The disclosures relate to investment banking relationships, compensation received or 1% or more ownership. We are prepared to read aloud disclosures for any issuer upon request. However, these disclosures are available in our most recent reports available to you as clients on our firm portals. With that out of the way, I wanted to welcome our first company for day 2 of the conference. It's one that might be a new name to some since they just became a public company about 2 months ago. An interesting time, obviously, to becoming public. Maybe will be one of the last companies becoming public in the industrial materials space for a little while now. But we're very pleased to have with us today from GFL Environmental, Founder and CEO, Patrick Dovigi; and CFO, Luke Pelosi. Guys, thanks so much for joining us today.
Thanks, Brian.
Thanks, Brian.
Before I dive into the questions of my own, [Operator Instructions]. Your questions will be sent to me, and then I'll read them aloud later in the session. [Operator Instructions].
So Patrick, Luke, for most of the companies the conference, we often skip the company overview part and just kind of go right into recent trends. But since you guys are a relatively new issuer in the public equity market, there's probably a lot of investors on the line who might be a little bit new or less familiar with the story. I thought we might just start with that company overview. Maybe you could just kind of give a quick overview of the different business segments with just a particular focus on how you differ from the 3 large publicly traded waste guys that most of the investors on the line would be more familiar with, just some of the things that differentiate you from a business or strategy point of view?
Sure. So thanks, Brian, it's Patrick speaking. The company was founded in 2007 by myself. And the plan back then was to build a small regional business to sort of $10 million or $15 million of EBITDA, largely around the Greater Toronto area in Canada. And sort of rolling forward to where we are today, we've now become the fourth largest environmental services player in North America. About 75% to 77% of our business today is the traditional solid waste business like our public company peers, where we do municipal collection, industrial, commercial collection. We own post-collection operations like recycling facilities, transportations, landfills, et cetera. We can get into a little bit later, but there are a little bit of different nuances between Canada and the U.S. Over half of our business today is in Canada, just under half in the U.S. So we can get into the differences with respect to the different markets. And then we also created businesses that were highly focused on extender producer responsibility and circular economy type businesses. And that's why we're in -- about 15% of our business is our soil remediation business, which every one of our competitor -- our public peers are in. The only difference is that we've come up with a bioremediation technology to actually divert those tons away from landfill. Given some of the legislation that we saw coming in Canada, followed the lines of Europe, we found the ability to create a new line of business, which integrated well with our solid waste business. And then we entered the smallest piece of our business that represents today about 8% to 9% of our overall revenue. It's just liquid waste business. And we got into liquid waste business because we realized really quickly that every liquid waste customer actually had a solid waste need. So there was a significant amount of cross-selling opportunity between those 2 lines of business and really just created a one-stop shop for all of our customers' environmental services needs, which positioned us very well over the years to grow at above-average organic growth rates and has positioned us very well to sort of pounce on opportunities both in Canada, in the U.S. over the years to come.
Great. Thanks for that background. It's hopefully a good foundation for folks to better understand the company. Now I wanted to just jump right into some of the recent trends. The impacts of the coronavirus are really on everyone's minds. You had your first earnings call as a public company earlier in the week. As you said on the call, when you were on the IPO roadshow at the end of February, early March, you can never really imagine what we were on the precipice here. So the virus, it obviously started to impact your numbers, your volumes towards mid-March and has continued to kind of have an impact. I was wondering if you could just, for the benefit of the audience, remind them of kind of what you saw in 1Q up until March. How things are trending versus planned? And then when you did start to see the impact of the virus? Maybe by line of business kind of just talk through what you saw from volume point of view and then bring us up to speed today kind of where we've gone from a bottom to wherever you think we're at today?
Sure. So I'll start with the solid waste business. I break out the solid waste business into 2 separate sort of vehicles. You have the residential curbside collection, again, which is about a 1/4 of the overall business. And then the other, just to say for round numbers, you have industrial commercial, which is 1/4. On the residential line of business, basically, what we saw coming into mid-March, volumes were trending normally, no abnormalities in that LOB. Obviously, the economy is very healthy, but things were as normal as expected as they always were. Obviously, seeing a bit of a shift in waste that's generated in post-collection operations as food waste and recycling and other things come out of the waste stream. But as volumes sort of, as we came into mid-March, and this is very regional specific because everybody -- every region did something differently. But I'll start with Canada first. Canada was very obedient on the lockdowns and literally went into full lockdown sort of -- the big markets in Canada, meaning British Columbia, Ontario and Québec went into full shutdowns very early. And what we saw was a huge spike in residential curbside volumes in Canada to the tune of sort of 10% to 15% for a period of about 2 to 3 weeks. And I think that's just as people really thought that there was going to be a shortage of supplies, et cetera. They ran out, they produced a whole bunch of more waste at home. They started cleaning out their homes because they had nothing to do, so they generated a lot more waste. From mid-April, that has -- every week continued to trend down. It was up 10% to 15%. I would say, volumes today are up probably 5% to 7%, if I look over the last couple of weeks. So trending lower over the last couple of weeks on the residential curbside collection. On the industrial commercial collection, this is where the biggest impact happened. Again, very regional specific, different states in the U.S. did different things; different provinces in Canada did different things. I would say the shutdowns, like I said, in Canada, were far more strict than they were in a lot of the regions where we operated in the U.S. But we saw up until mid-March, again, very healthy volume environment. Volumes were 2-plus percent. Pricing was very strong. That sort of happened -- went until mid-March. Mid-March happened. Basically, we had 3 weeks of temporary suspension on accounts, significant volume declines. In Canada, it was probably to the tune of 20% to 25% on the volume side, not on the price side, obviously. And then you sort of looked in the U.S. and I would say it was probably half of that over those 3 weeks. Over the last 3 weeks, so that brought us to mid-April, over the last 3 weeks, every week, there's been more customers come back online. Volume continues to increase every week. And I say today, just rough numbers, we recovered about 1/4 of what we've lost so far. Next week will be a big week as the Ontario and Québec governments where we are hardest hit have decided to reopen. So as we reopen, those customers will come back online and the volume will come back. It's always a question of how fast it comes back, which I really think everybody is really interested in. But at this point, we don't have the answer to that question.
Yes. No, that's great color and detail. It's -- all that can ask for anybody is just kind of tell us what you're seeing on the ground today because none of us have lived through this, and it's really hard to kind of forecast what this recovery is going to look like. I think on the call you mentioned in the commercial, maybe the small container commercial line, which is more of a service-based model, there was only 6%, 7% of the commercial customers that were impacted, that asked for to put service on hold. That seemed like an awful low number to me. My -- I would have thought it would have been quite a bit higher with all the restaurants and bars and hotels and the schools that are closed out there. Do you think that's just companies that are just kind of taking a wait-and-see approach, and that number could eventually tick up as more people decide to either throw in the towel on staying open or decide that they finally get around to call in the waste guy, and saying, hey, I'm going to put it on hold now. Or do you think that, that is a good representative number, we're not going to see that, it's going to tick up from here?
We haven't seen it pick up. It's actually been coming down over the last, again, like over the last 2 to 3 weeks. And it's hard to know exactly. I think people are -- again, when you look at the average check size of a commercial small container, I mean, we're talking about $500 a month to a customer. So it's not a meaningful number. I mean interestingly enough on the restaurant side, a lot of the restaurants in all the markets we are in, again, very market-specific, they remained open for takeout, right? So they were still producing waste and food waste, and they still wanted their waste picked up, albeit, we are picking up less. But as most of you know, on the small container, we're getting paid -- we're getting paid by volume, not weight. So we get paid to pick up that container, whether it has 1 pound in it or has 200 pounds in it, doesn't really matter. So it's actually in that line of business, if you're picking up the same service frequency and picking up less weight, you're actually making more money. So I think as businesses -- as the economy starts opening up, I think that will become less and less. But where, I guess, the impact could be is if people realize when business reopens, that it doesn't reopen to the same levels that they had before, and they were currently getting serviced 3 times a week, that they call us and say, "Hey, really I only need service 2 times a week." We have a fixed contract with them that requires so many times a week servicing, but that creates an opportunity to change pricing because now you're only going twice a week instead of 3 times a week, and you have that dialogue. Clearly, we want to work with our customers. We want them to be a going concern. So we're not going to take the position that we're not going to be reasonable through these times. But yes, I think we've -- for now, as long as there's not another wave or something else that, I think we've sort of leveled off at that level today.
And some of the others, I think, waste management's probably been the one most vocal about putting some incentives in place for guys to come back and come back with them if there's been any dislocations like a kind of a rent holiday for a month or so. I mean for the companies that have been impacted, are you still able to collect from them? Are they still paying their bills? Or are you guys sort of looking at it as this is a month where maybe we don't get paid and we just kind of get through it until we -- so that we can kind of just retain the customer and have some goodwill there?
So again, on a case-by-case basis, we've looked at the customers that have asked to be temporarily suspended, which we've done and put them on a bin rent of 6 bin rental fee per month, which the customers were gladly taking, the ones that we actually -- that formed part of that 7% number. I think when you look at it today, for April, our cash collections were very strong. I mean it was definitely a worry in March, about -- similar to what you're seeing from some of the REITs and the shopping plazas, they ask who's going to actually pay and who's not going to pay. But I can tell you, April cash collections were better than we had originally anticipated and targeted. So on plan from a cash collection standpoint through the month of April.
That's great. And so I think the solid waste business makes -- I think by now, we've heard from a lot of the companies, we have a good sense of what's -- where the trends are, what's going on. When I look at your other business lines, the soil and the infrastructure business and the liquid business, maybe they're being impacted by different factors though than the solid waste, guys. Can you maybe just talk about the trends that you saw in those businesses in April? And whether the shape and slope of the downturn on the recovery might look a little bit differently? And in infrastructure, you can correct me if I'm wrong, but I think about it as kind of being tied to large government municipal or provincial work, at least they've a long lead time to them. So I wouldn't expect volumes to dry up overnight, unless maybe there's restrictions on actually getting the work done and maybe that can create a little bit of a hiccup here and there. But that project will get completed, and so the -- if there is a volume impact from this, to me, it would be more coming out of this, out of the municipal government, the provincial government strapped for cash, are they going to be able to fund that next wave of infrastructure work. Is that accurate? Or do you think that there may be different factors that impact soil and infrastructure than solid waste?
Yes. I mean the infrastructure business is pretty steady. I mean the lion's share of what we do is on the maintenance side. Yes, there's a new development. But when you think about sewer, and water main breakages, not removing the soil, I mean that happens every day, sidewalk, parking lots, roads, removing all of that excess material and bringing to our facilities. Yes, new developments such as subways and et cetera is part of it. But as what we've seen both in Canada and the U.S., both governments have said, they're going to spend significant amount of dollars on their infrastructure over the next sort of 5 to 7 years. Well, it positions us extremely well. But when you look at the backlog that we have, I mean, we have a significant amount of backlog. We represent a very small share of the overall market share. So we don't -- we're not anticipating any material changes in that line of business, particularly. I think the only thing we could see, I mean, is a lag in the permit issuance of some of these projects because there's been a 6- to 8-week lag, which I think we'll get through. But as municipalities and provincial governments shut down largely in Canada, there's a backlog. They're all coming back on now, but we just hope there's not a backlog in terms of timing. But from our perspective, that business is very similar to the solid waste business. What we saw through again March and April, there was nothing that disappeared. It was just some of the projects we were on were deemed nonessential for that 6- to 7-week period. And that was for mid-March until early May. As of May 5, all of our projects have now come back online. So whatever little bit we lost in April, like we disclosed, will come back in May because we have to complete the work.
Okay. That's great. So I want to talk -- it's still related to the virus, but just switching a little bit to more financial outlook for the year. You talked about a couple of numbers on the roadshow and a free cash flow number. I think you walked through this a little bit on the earnings call as well. But to me, it sounded like if you took the CapEx plan, where you -- I think you said you have up to $100 million of leeway and you netted that against some of the impact to EBITDA you're seeing from coronavirus. You still came out to roughly the same free cash flow number, at least the bridge from EBITDA down. Is that still the right way to think about it? Do you think you can still sort of hit that -- hit a similar free cash flow number as you talked about by deferring or delaying some of the CapEx spending to make up for some of the weaker volume we're seeing?
Yes. So sure -- I mean when you think about our business, we're uniquely positioned because of the Canadian market dynamic. When you think about our Canadian business, outside of the 8 primary markets in Canada, Canada is largely a bunch of disposal-neutral secondary markets. So our landfill revenue as a percentage of overall revenue is significantly less than some of our peers, which some think is an advantage, some think is a disadvantage. Obviously, for us, we think it's neutral. But in terms of significant downturns like we're seeing today, if you think about a normal strategic what they would spend on landfill CapEx, somewhere between 35% and 45% of the overall CapEx budget for the year, ours is, for our landfills, is sitting at somewhere around 15%. So outside of that number, which is very hard to flex, we have significant spend that we were budgeting in terms of growth, some new facilities and some new real estate that we're contemplated as part of our growth plan. We have the ability to flex that really easily without deferring any material CapEx to next year. So we were able -- like we said, we had committed -- in Q1 when we did our update call at the beginning of April, we basically committed to $275 million to $280 million of CapEx for the year. There was a couple of residential contracts that we won that required new fleets that brought us to somewhere between $290 million and $300 million. And then we've left ourselves a buffer of sort of another, call it, $30 million to $40 million, which then flexes our overall CapEx number, about $100 million for the year. Obviously, our philosophy internally is you can't spend EBITDA. I mean you can only spend free cash flow. So from our perspective, given what we're seeing, we think that today, it's very realistic that we maintain virtually the same free cash flow number for the year that we set out to at the beginning of the year.
That's -- you're the rare company that we're hearing from these days is able to do that. So that's impressive for sure. So just to pivot a little bit beyond the virus and just talk about the -- more of the longer-term strategy for the company. Acquisitions have been a big part of the DNA, a big part of the growth algorithm. That was a big part of the conversation during the roadshow and with investors. And as I think about how you fit in the group, obviously, a newer company, a little bit of a smaller footprint, a lot more white space or green space on the maps to kind of go and target. It seems like M&A is going to continue to be a big part of the strategy going forward. Just thinking about the current environment, do you think we'll see a change in buyer and seller behavior out there? It's been a robust environment for M&A across the space for last 2 or 3 years. But do you think the uncertainty from the virus and some of the issues in the credit markets will change behavior a little bit? Do you think some of the small haulers might be even more motivated to sell in this environment? And just in general, do you think multiples will change much or it's going to take a while before reality sets in and multiples come down a little bit if they ever do?
Yes. I mean there's a couple of questions in that. I mean the strategy, the going forward strategy for us, first and foremost, like we did, we paused M&A here for the last sort of 6 to 8 weeks. Really ripping apart every P&L in our business, which truthfully, we never had the chance to do. We've always been sort of focused on grow, grow, grow. And then when the sort of virus hit, it allowed us to pause, really look at every P&L and focus on driving as many costs out of the business as we could to offset any of the potential volume impact that we are seeing as part of corona. Obviously, keeping the employees safe was paramount. And now when you look, I think, the base business is going to come out of is better than before we went into it because of again those actions that we took over the last sort of 6 to 8 weeks. And previous season, as we said on the IPO roadshow, a big focus of ours was really leveraging the platform, the 9 provinces in Canada, the 23 states that we operate out in the U.S. is now leveraging that platform, and leveraging that platform from a pricing perspective and from a procurement perspective to actually drive out incremental margin out of the existing business. So our goal is pre any margin accretion or decrease from M&A or decretion from M&A for us to drive another sort of 150, 200 basis points of margin expansion out of the base business. So that continues to be a huge focus of ours in the work stream of ours, and we continue sort of marching down that path. On the M&A side, like you said, I mean, M&A is something we do well and have done well for the last sort of 13, 14 years. We've done 135-plus acquisitions. Our sweet spot and bread and butter on M&A is companies that are in the $1 million to $10 million of EBITDA range. We have done platform acquisition. We've done 10 platform acquisitions since we've been founded. And when I say a platform, that's a business that's $15-plus million of EBITDA. The bulk of what we do is $1 million to $10 million. We'll continue focusing on the $1 million to $10 million. I mean my philosophy around that is, hey, if I can buy a bunch of businesses that are $1 million to $10 million of EBITDA that tuck into an existing geography, where we've spent some time with GFL size of team in a specific market, that's going to drive comparable free cash flow margins out of those businesses than buying the new regional white space growth investment that we're going to spend the next 2 or 3 years buying down our ownership multiple. Clearly, the multiples on the smaller stuff are less than what the larger stuff is today. But they pose an equal opportunity for us in the future. In terms of what we're seeing today on M&A from the market, I think it is a bit early. I think it's a bit early to know what the actual reaction is. I think from a valuation perspective within a case-by-case and depending on whether smaller regional players got themselves in trouble somehow and is not able to weather the storm to get through this. But I think given where that is, I think the industry will just come through it fine. I mean if you look at what the expectations were in early March from a bunch of the analysts and people not knowing how bad it could get, I don't think the results got anywhere near as bad as what truthfully anyone was thinking. So I think that will translate into some of the smaller guys being able to be successful. But we never know. I think on the larger scale stuff, basically what we saw in 2008 and 2009 and even in 2015 and 2016 in Canada, both the last sort of oil crash, it really just brought guys to the table saying, hey, like guys get comfortable when things are really good. If you're an older type seller and you've been thinking about selling your business, and now you're living through this pandemic or epidemic, you just get to a point where, say, you know what, I just want to sell my business. I don't want to live through another one of these. I don't want to weather this storm. We saw a significant amount of opportunities on the backside of 2009, and we saw a significant amount of opportunities coming out of 2015 and 2016. So I anticipate we will see the same, and that's why we went out and did the bond offering that we did when the market was open. It was the lowest cost bond we've ever done. We've had a great support group of public debt investors since 2013 when I did my first high-yield deal. That core group of investors has stuck with us through thick and thin over the last sort of 7 and 8 years. And again, post IPO, they were extremely supportive. And we launched a $400 million bond in April, and we had over $3 billion of demand for that bond, and we upsized it by the tune of $100 million. But it's just -- it just shows we're very well positioned, and we have the capital support from the right group of both equity and institutional investors on the debt side.
Yes. That's right. I mean you can never have enough cash, especially in an environment like this. So cash seems to be king. That seems like a very well timed, good cost of debt there. The -- just on the M&A to follow up, 1 or 2 follow-ups there. Just thinking about, are there strategic imperatives you have with acquisitions? For example, do you think it's important to increase your landfill ownership? And as you think about geographically, is there more of a preference for the U.S.? U.S., obviously, I think, was just more white space on the map for you. So it seems like just naturally, you'll have more opportunities there. But is it a priority to kind of be more U.S. tilted? And does landfill matter to you? I guess, if you're going to be in the U.S., there's sort of maybe more of an emphasis on owning landfills here because it's not the same disposal-neutral environment as in Canada. But do you see those as kind of strategic imperatives for acquisitions?
So I think it's twofold in the -- I mean, Canada, there's a significant amount of opportunities in Canada. If you think about the Canadian market today, particularly on solid waste, the big 3 represent, call it, 30%, 35% of the market. That's us, waste management, waste connections, representing about 35% of the overall market. 65% are done by mom-and-pops. I will tell you, in Canada, like you said, a lot of them are disposal-neutral markets, which we love in secondary markets, very rural, not a lot of competition, post-collection operations and route density win the day in those markets and highly accretive opportunities for us because we're actually cutting businesses into our existing geographies. So from an SG&A consolidation perspective, from a facility consolidation perspective, from routing efficiencies, to just overall sort of lower cost of operating, those are highly accretive for us, and we'll continue to do them. The bite size of those opportunities in Canada are significantly smaller than the U.S. So I think from a number of acquisitions we do, there'll be -- continue to be a lot in Canada. And I'd say north of what we do will be more than 50% in Canada. But from a revenue weighted dollar basis, the U.S. will continue to be more. The lion's share of what we will acquire will be in the traditional solid waste business. I think if you look at our U.S. solid waste business today, we've been buying smaller collection-only businesses in markets where we already are operating. Again, we're like everybody else in the U.S., huge vertical integration component of our solid waste business. Almost 60% of our volume is internalized to our landfills. So again, buying hauling-only businesses that tuck into those existing businesses that we already own, that then just drive incremental volumes in our landfill are a priority. And obviously, like we said on the road, there's a couple of other opportunities that continue to float out there that we'd be interested in on a larger scale. Again, we'll continue as opportunities come up looking at things, but that's really what we're focused on today.
No, that's great. I'm going to switch over to some of the audience questions that wanted to come in. First one is kind of back to the residential component, where you did talk about the volumes ticking up as a result of the virus here. And they're asking some of the peers in the group suggested that they're going to try and go back to the municipal customers trying to renegotiate the contracts and add a volume component in there. I think you guys in Canada already have some of that business that has a volume component in there. And in the U.S., even some of it's subscription-based. So you might be a little bit ahead of the game already on this front. But for the portion that is more service-based than volume-based there, is there a way -- do you think that there's an opportunity to go and have those conversations to help offset the increased disposal costs that you're experiencing on those increased weights? And what likelihood do you think there is for success across the industry there? And if that's the case, do you think the municipal customers are going to ask for something else in return?
Yes. So like you said, in Canada, it's been not much of an impact for us. Again, we're more, like I said, with the disposal-neutral type markets, our larger contracts are getting paid by the time in Canada already. So again, we're picking up that volume. And in the U.S. -- sorry, in Canada, we're getting, again, paid by the time or at the worst case, we pick up a little bit more weight, but we're not responsible for disposal. So we haven't seen much of an impact on the Canadian residential book of business. The U.S., like you said, 40% of our U.S. residential book is subscription. So again, have the ability to pass those costs on monthly if we see huge spikes in volume. And then on the 60% of the U.S. residential book, like you said, that's where you're getting paid by stop, not by actual weight. So in theory, municipalities should pay, you should be able to be relying on force majeure those contracts. The reality is, we sort of lived through this in 2018 when recycling commodity prices when China shut the door and the industry sort of flipped on its head, a lot of us went back to municipalities trying to get more money. Some were receptive and realized on the long-term goal and the long-term partnership and just being cooperative, realizing that there was a structural change in the recycling market. They agreed to pay us more money and negotiated. But there was a lot of them that just did not fought tooth and nail and didn't won. So it comes to a point where how far do you want to push for those municipalities. I think anything that -- we are personally not forecasting anything specific in terms of getting revenue back from municipalities. If we get it, it will be bonus. But from where we sit today, I think what's more realistic as those contracts come up for renewal, I think what you're going to see is you're going to see added language, and if people don't want to add specific language, what companies are going to do similar to what they did on the recycling side, was make sure that they price them high enough that they could offset another sort of pandemic or epidemic. So you'll see incremental PIs and margin expansion of those contracts because you're going to be pricing in the risk of that happening again.
We have time for just 1 more question. I'm going to make it about the balance sheet, so maybe give Luke a chance to chime in as well. You ended the quarter with the leverage at a little bit higher than we had at 4, 4, but I think some of that was just the currency translation. I think if you adjusted that out, it would have been a little bit lower. Maybe you can just kind of briefly just talk about that for some people who are not familiar with the people reporting in Canadian dollars and how the debt being denominated in U.S. dollars works. And then just when you think about what's the right leverage ratio for the company, I think during the roadshow, you talked about kind of being in the low mid-4s, but would you -- for the right acquisition, how high do you think you could take the leverage? And then just kind of if you compare yourself to the peer group, they're obviously at a little bit of a lower leverage. Do you think that that's -- you'd ever get down to something around 3 turns? Or do you think the natural rate should be really something around 4 really for you?
Thanks, Brian. I thought I was going to get out unscathed.
Making sure you're still awake.
If you look at the quarter end leverage, I think, as you said, Brian, it really is a function of the Canadian and U.S. dollar FX rate. Under IFRS, we take the balance sheet and the whole thing gets revalued at the spot rate at period end, which was 1.42 versus 1.29 at the end of the year-end. So that change in foreign currency and the revaluation of the whole debt stack drives incremental debt on the net leverage calc. In reality, the vast majority of our long-term debt is hedged back to Canadian dollars. And ultimately, settlement rates are different. But on the balance sheet, that's the way it works. So if you look for the quarter, it's about incremental 30 basis points of leverage just being driven by that. So if you look like-for-like and translate into balance sheet, at the year-end rate, as shown in our Q1 presentation, net leverage would have been at that sort of low 4, 4.1 level. Now to your point about where we're going to be and where we're going to live. You're right. On the roadshow, we said it come out in sort of low 4s. In the end, the greenshoe was not executed. And so the equity dollars that came in were slightly less than what was initially anticipated. But the idea is while we are growing in growth mode, I think you'll see the business can naturally delever with our regular way M&A plan, somewhere between 25 to 30 basis points a year and executing on our small tuck-in program. So you'd see natural delevering, bringing us down from where we are today to somewhere in that sort of 3.5% to 4% range, which is where we said we would live while in growth mode. Obviously, if the growth came to an end for whatever reason, COVID or otherwise, you'd see the natural free cash flow of the business drive that leverage down to that 3 level, as you were mentioning, more in line with the peer group. But we think the growth opportunities are there, and we'll continue to deploy the free cash flow towards those opportunities and live with leverage in that sort of 3.5 to 4 range. Now what we have said is for larger opportunities. If those had merit on their own, we'd look at them and potentially take leverage up on a temporary basis in order to execute on those transactions. So gone are the days where we were going to have leverage up above 5x. But as we said on the road, if we had to take it up to sort of mid-4s in order to execute a transaction of scale, we would look at doing that if that deal had merit on its own for the equity account, but only doing so with the clear path to then delevering back down to that 3.5 to 4 level, which is again where we expect to be for the near to midterm.
Right. That's very clear. So we're out of time. I want to thank both you guys for joining us today and [ here with ] us with the virtual format. And hopefully, next year, we'll be able to do it live and in person, and we'll be talking about a great 2020 for you guys. But best of luck and stay safe, guys. Thanks, everyone, for joining us on the call.
Thanks, Brian.
Thanks, Brian.
Read the full transcript via the API
You're viewing the first half of this call. Get the complete GFL Environmental Inc. transcript - plus 251,000+ transcripts from 12,000+ companies, speaker segments and full-text search - through the EarningsAPI REST API or hosted MCP server.
Get an API key View API docs →For developers and AI pipelines
Programmatic access to GFL Environmental Inc. earnings transcripts and 251,000+ others is available through the
EarningsAPI REST API and the hosted MCP server.
Quarterly plans from $105 - full transcripts, speaker segments, full-text search,
and the /api/v1/transcripts/recent polling endpoint for ETL pipelines.