GFL Environmental Inc. (GFL) Q3 2026 Earnings Call Transcript

Hello, everyone. Thank you for joining us, and welcome to the GFL Environmental Incorporated 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. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now turn the call over to Mr. Patrick Dovici, founder and CEO of GFL. Please go ahead, Mr. Dovici.

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 Thank you. Thank you.

Thank you. Thank you.

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. Non-fuel-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 labour 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 in 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 corridor also saw us closing in a 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 multi-year financial targets we laid out in 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 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, Alan Grant was appointed to our COO on September 1st. Alan brings a proven track record of operational excellence that directly complements our long-term growth strategy. Across his nearly 20 years at Secure, Alan was instrumental in establishing and implementing the company's strategic direction, Thank you. We have a great day with you, Luke, and I will talk about how we can and how we can and how we can and how we can and how we can and how we can and how we can. Before I pass the call over to Luke, I will walk through the corridor 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 9th 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 and critical to their 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 advisors, 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 competes 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 brokered transportation services on a pass-through basis. This resulted 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 Outer Landfills. C&D landfill tons were up 4.5%, the first quarter of positive volume since early 2025. This result was helped by the one-time cleanup of a closed transfer station in Western Canada, but even absent that benefit, C&D volume was modestly positive. Roll-off poles 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, 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 DNA and transaction costs. The ongoing realization of efficiency and labor in 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 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 leachate 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 pre-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 one-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 a full year 2026. Thank you. 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 improvements to the macro environment will be incrementally additive. I will now turn the call over to the operator to open the line for a Q&A.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. Thank you again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Sabahat Khan with RBC Capital Markets. Your line is now open. Please go ahead.

Great. Thanks, and good morning, everyone. I guess, thanks for the comments on where the process stands. Maybe for you, Patrick, I guess, ultimately, sort of, you founded the company, you know, have a say in 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? Thanks.

Yeah, I mean, good question. I think ultimately, you know, we want to keep winning and having fun, whether that's sort of publicly or privately. You know, I think when, you know, 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, you know, how the company was founded and, you know, went out to one of the original sites and met with 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. And, you know, you look at what's been built here, it's an exceptional team. And I look at, you know, I've looked at, gone back and sort of, you know, scratched my head and looked at the original, you know, private equity partners and sort of genuity and healthcare of Ontario pension plans. And then, you know, Jeffrey Keenan and Neil Aronson at Rourke backed us. And then Scott French, Mark Rubenstein, Garrett Cochran, you know, backed us with the HBS team, which is now sort of at BlackRock. And then you had Ontario Teachers, GIC, and BC Partners backing us in sort of 2018 as private companies. And, you know, I look at the returns that were generated, you know, for private equity shareholders and us alone. And I think, you know, they believed in this management team and had the philosophy that winners win and winners will continue to win. And, you know, whether that's, whether we do that publicly or privately, you know, I think that ability is there for us to continue winning. And I look at, you know, us going public in sort of March of 2020. I have the tombstone on my desk, you know, first trade was just over $17. And today we're roughly three times higher than we were in 2020. So, you know, 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, you know, 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, you know, 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, you know, selfishly, as a private company, you know, us and the management team would make a lot more money, would probably have to not manage the quarter to quarter, you know, movements, if we had the 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. You know, that makes the business easier to run. The contract to that is, you know, the liquidity opportunities that exist in the public markets. And, you know, 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, you know, they don't get the opportunity to buy those often. And I think, you know, I look at the stock price today. I mean, when we give the sort of breadcrumbs for 2027, like, you know, Luke was sort of mentioning, you're going to get into, I mean, today, the business is trading at, you know, somewhere between 12 and 12 and a half times 2027. And you just can't buy businesses of this size and scale for 12 to 12 and a half times. 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, you know, the public company is about three, you know, for 2027 is going to be about 3.125 to 3.150 in that sort of range. You have our ES business today, which, you know, 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, you know, for 2027 is going to be roughly $350 million of EBITDA. So you put some of those parts together, we took $950 million of EBITDA and grew up to almost $4 billion of EBITDA over the last five and a half to six years, and tripled the stock price along the way. In an environment where we think the stock, from a multiple perspective, is materially undervalued. So, listen, I sit here, I said a lot, you know, again, at the end of the day, this management team is going to continue winning and having fun. You know, 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 five years, there's no path in which I don't think that free cash flow isn't close to a double. So free cash flow doubles over the next five years. What is that going to do to our sort of equity value if we remain a public company? And if we go private, because that's the decision that the special committee makes to bring that to a shareholder vote, then, you know, 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. You know, 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, you know, input that they have, and, you know, you have a very core group of shareholders that obviously, you know, 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, you know, 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, you know, it's been enlightening. And, you know, the best part is everybody's been very supportive. So, you know, 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, you know, 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. Thanks. And then maybe just following on the last comment there, I guess, with the new sort of fresh eyes 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 among your shareholders, is that kind of the bigger buckets? Some are thinking maybe, you know, longer term, the same thing public. Maybe just share some additional color on what sort of the shareholders are coming back to you with as the process has gone on.

Yeah, 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 looked at a couple of tools that were, you know, flagged to us just in terms of that, you know, when they bring in, again, not mentioning names, but they bring in sort of a chief revenue officer of one of another strategics that is now working as a consultant and coming in and 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. Um, implementing tools like Harvey on, you know, contract management and keeping customers accountable to their contracts, etc. 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, you know, which, again, just gives us more confidence in terms of the operating plan sort of moving forward. And, you know, again, going back six months, not to sort of harp on this, but you know, the initial And again, you know, sometimes you need to be in order to be good, you need to be able to We need to be lucky, and we're a little bit lucky, just, you know, given the timing of when we did the secure acquisition, and then what's happened in the macroeconomic backdrop with, you know, the Middle East and Iran, and now with, you know, as everyone's saying with our new prime minister in Canada, Carnies, you know, 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. I think shorter-term thinkers happy to take less money and sort of move on and look for other opportunities versus, you know, some of our page one shareholders that have a perspective that, you know, GFL is worth sort of well into the 60s, and if, you know, you're going to continue executing 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, you know, that's going to yield an exceptional result. And again, free cash flow doubling over the next five years per share, again, you can do the math and what that does to the equity value. And, you know, if we get the multiple expansion that we believe we deserve as we come out of this, you know, potentially this AI trade that has, you know, affected the entire sector over the last sort of 12 months, I mean, I think, you know, you're going to have a winning success of a public company as well. But yeah, 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 Canada, US, 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 GFL on the map with a lot of different investors. And, you know, I think, listen, whichever way it goes, you know, we're fine, and it'll just, it'll just, but we want to bring the process to finality and sort of move on with whatever the decision that the committee and, you know, one of our largest shareholders decides to make, so.

Great. Thanks for your thoughts.

Your next question comes from the line of Tyler Brown with Raymond James. Your line is now open. Please go ahead.

Hey, good morning. Hey, good morning, guys. Hey, Tyler. Hey, just curious on how we should think about pricing into next year. I mean, it sounds like you've 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.

Yeah, 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, we've, you know, when we looked 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, you know, incremental pricing opportunities continue to come on, again, that's just additive in sort of terms of the long-term plan. And, you know, maybe that while it's going to wind down in sort of 27, 28, those initial equity value creation plans, maybe we can now extend them with some of these sort of incremental opportunity and some of these other incremental AI tools that will allow us to, you know, 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 it in a form that allows us to basically betterly manage our business. And, you know, I think this is just relying on, you know, tools that are coming to the market. You know, 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. I mean, think about the upside incremental price we articulated originally. We said it was $40 to $80 million to capture over the next sort of, you know, three or four years. That's what we had said yesterday. I think what Patrick is suggesting and we're feeling highly confident is that prize is something, you know, greater than that. Now, the ultimate magnitude will, you know, sort of remains to be seen. But I think between 25 and 26, you're seeing our outperformance as we are realizing those, you know, 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 six number, if you were to back out the EPR benefits, that'd be more a sort of, you know, low five to mid five 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 of 45, 46, 47 percent, or what is the art of the possible in that number over the next few years? Thanks.

Yeah, it's a great question, Tyler. And, you know, you've always been good at math. And, you know, we think that is the sort of direction of travel. Now, I'll just caveat, this year's number 41, you're getting the last four months contribution of secure, which has like working capital recovery, you know, a little bit of sort of abnormality, because it's not a full year, right? So I think if you're really the pro forma where we're at today, you're probably more at a 39-40% number, you know, 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 I'm becoming a larger cash taxpayer, but I see the path of next year being in that sort of 41 to 42 and a half. I think that's what we had articulated pro forma for secure to be. And, you know, we'll continue to grow from there. I mean, if you think about the whole 2027 framework, you know, this year's growth being 20% revenue, 25% EBITDA, 35% free cash, you know, 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, you know, that's going to be a number greater than five. 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 8055 or 8065, 20% growth on that in the next year, that brings you to a 9.7 to $9.8 billion number. Right now, if you look at the margin line, you know, what we have said and continue to prove is we have, you know, industry leading organic EBITDA margin expansion. So if the industry has been doing 30 to 40 basis points, we sort of do 2x that, you know, 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, you know, already a setup for call it 100 basis points of margin going into next year. That takes this year's 30.9%, you know, closer to 32 for next year. So if you take $9.7 to $9.8 billion of revenue at $32,000, that should be that $3.12 billion of EBITDA that Patrick sort of referenced in his sort of commentary. And then if you apply, you know, that sort of 41 to 42% free cash flow conversion, and that's just assuming, you know, 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 then, you know, 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, you know, 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, you know, I'm not ready to sort of cap, you know, what that ultimate free cash flow conversion number could be, because I think there's a runway to keep going north.

Extraordinarily helpful. Thank you, Luke.

Thanks, Tyler.

Your next question comes from the line of Kevin Chang with CIBC. Your line is now open. Please go ahead.

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

Can you hear me?

Yeah, now we can hear you.

Oh, perfect, perfect. You've alluded to this a few times, just the upside to secure, given some of the opportunities in Western Canada. Just wondering If you're able to frame that as you think of, you know, what that upside could be relative to what you thought at the time of acquisition, you know, if you look at some of the projects being proposed, and if all goes well, let's say, you know, you could have a 50% increase in kind of crude oil egress, you know, one, you know, is there a way to frame that upside? 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 market, which I think was underappreciated by the public market. And one of the things that I've seen in these 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 operation, that affords the ability to deploy incremental capital into incremental opportunities at sort of high returns. And, again, you know, again, east-west pipelines, north-south pipelines, again, that is just going to be, you know, 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, you know, we've seen this movie before, and not only does it only help the secure business, but it'll help all of the industry in Western Canada, because it's just, again, the macro sentiment in Western Canada, when it's positive, you know, the floodgates 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, you know, 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 liked it on its own. But I think, you know, sometimes, like I said, you know, in order to be good, you've 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, you know, focus inward versus outward, that is driving sort of incremental opportunity. And, you know, we're seeing some of these opportunities already. You know, I think, you know, the challenge for us, and 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, you know, we have to look at these opportunities 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 spends 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, you know, 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 a diligence downside cases, right, and see what that could be in a really draconian negative scenario. And for Secure, while we know very clearly articulated and their performance has shown they're 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, you know, degrade earnings. I think where we sit today have the benefit of, you know, 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 in production and therefore opportunity for the sort of secure assets is greater than otherwise. So to Patrick's point, quantifying what that upside looks like today is, you know, 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.

Yeah, and when Rennie and Alan 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, you know, again, you will see over the long run that, you know, this, all of these, you know, if you look at all the regions we're operating in today, you know, the 10 provinces in Canada, 26 states in the U.S., you know, 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. Sure.

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. With the bigger EBITDA footprint, the step-up in free cash flow conversion, you painted, call it a normalized M&A year being roughly a billion dollars of capital deployment. Does that change next year, just given the improved liquidity

Yeah, if we're continuing to be a public company, depending on the stock price, I think, you know, moving into 27, you now have the unique ability to add share buybacks, you know, into a more material way into the sort of capital allocation plan. So, yeah, 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 of 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 uphold, depending on, you know, 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-threes leverage through EBITDA growth and pre-cash flow generation, you would delever sort of 30, 40 basis points going into next year and coming down to sort of a lower threes number. If you deployed a billion dollars into M&A of eight times, just for round numbers, you know, that would impact leverage by 15 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, you know, I think to Patrick's point, just providing us maximum flexibility, being able to execute on our strategies while, you know, very squarely adhering to, you know, the newer leverage philosophy that we adopted a couple of years ago.

That's super helpful. Thank you very much for taking my questions.

Thanks, Kevin. Your next question comes from the line of William Gripen with Barclays. Your line is now open. Please go ahead.

Great. Good morning. Appreciate the opportunity here. My first one, and I get this may be difficult to address, but Patrick, you've 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, everyone, I'm not understanding the question. Monetizing what, sir?

Realizing this incremental equity value creation, right? You had in the past talked about maybe particularly IPOing the business, if it gets, right?

Yeah. Oh, I mean, So I think, I mean, that's the question. I think, you know, some of these, if you're both private, I mean, that's, that's obviously a big question in terms of, you create all this value sort of over the next four to five 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 four to five years, and then get the business back when it's probably 2x the size, right, if that's a path. Or, you know, 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, you know, there's no closed-ended fund nature, maybe the business actually never goes back to the market, right? So and then just given the amount of free cash that the business generates, you could, you know, find ways to continue selling down stakes to incremental LPs as they come in at sort of different times. So, you know, 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. You know, the negative part of the private market 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, you know, how do you monetize your 28-plus million shares over time? I'm not a seller, so I'm not really 47 years old. I'm not looking for Freedom 55 or Freedom 65 yet, but I think over time you need to think about that in the event that I was, but I think there are products available that allows for that under these new constructs.

Appreciate that, Collier. Thank you. 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, you know, to the extent there's any lag, you know, potential margin impact?

Yeah, well, I mean, I think starting point, I mean, a lot of people talk about leachate. It was very wet in many areas, right? And that's just, you know, a quarter over quarter difference that, you know, 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 centers 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 like. So I think this quarter isn't necessarily reflective of a structural, you know, material ongoing headwind. It was about $6 million in this quarter, maybe sort of three quarters of that is, I'd call it more sort of timing one time, and sort of a quarter 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, you know, as incremental regs or other reasons drive operating costs higher, we need to recover those. And you'll see us through our, you know, 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, an incremental sort of cost will just add to the broader base of cost inflation on which we used to set our overall pricing. But, you know, in a given quarter, you can get some, you know, 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. Your line is now open. Please go ahead.

Good morning. Thank you guys for taking the questions. 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 volume price split or just the core disposal business versus maybe some of the other businesses in the quarter?

Yeah, so, I mean, again, we have one month of Secure revenue contribution. There was around $150 million of revenue. You know, it was just over $50 million of EBITDA, so sort of, you know, mid-30s plus EBITDA margins. And you had like $25 to $30 million of the free cash flow performance came from Secure. Now, sort of one month, I don't think is actually reflective, right, from a CapEx timing, working capital timing, et cetera. But I think the contribution, you know, Secure's profile for the year was they're going to do sort of $550 million of EBITDA, you know, $1.5 billion of revenue. And, you know, I think they're very handily positioned to sort of being able to deliver that. You know, the distribution of that revenue across their services is, you know, as we've previously sort of articulated. You know, you have a small sort of percentage of overall profitability coming from the sort of other lines of specialty chemical and energy infrastructure. Sure. But the majority of those revenues is their typical sort of waste and waste processing. And so I'd say sort of right in line with expectations. You know, the team's Q4 outlook is, you know, in line with expectations. And we're finalizing budget since the 2027. But, you know, everything is turning out as anticipated with the opportunity for upside that we were previously speaking about. Okay.

Thank you, Luke, for that. 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, I'm just curious for your thoughts on maybe how that influences, you know, 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?

Yeah, I mean, I don't think it's material enough that it really affects that much. I mean, yes, been moving in interest rates, but, you know, when I look at our borrowing costs, like sort of in a worst case today, you're probably 100 to 125 basis points wider today than you were maybe six to eight months ago. But from our perspective, that's not a forever thing. And we have mechanisms that, you know, they can reduce that with swaps and other things for the longer data as well. So again, it's something to think about. I don't think it's sort of that material. And, you know, I think when I look at some of these, you know, larger recent sort of businesses that have come to markets that have sold on sort of the ES side, I mean, you have ES businesses still continuing to trade at large size and scale, you know, between 13 and sort of 15 times, depending on sort of the market. And so I don't think it's really materially affected values all that much. But yes, something to 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, but we have to take a longer-term view on what we think rates are going to do. But yes, it factors in.

All right. Thank you, guys. Appreciate it.

Your next question comes from the line of Stephanie Moore with Jeffries. Your line is now open. Please go ahead.

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

Yeah, hey, Stephanie. It's a great question. And I think the reality is, whether it's a sort of public vehicle or private vehicle, you know, our path forward is relatively the same under both. And it's really executing on all that we articulated at the investor day and, you know, and more. And I say and more because today we've largely achieved those sort of three-year targets we've put out. So we're just sort of resetting and going into higher levels from there. But, you know, it starts, as I've said, always you think about the algorithm, it starts at the top line. You know, and 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 Western Canada, what should be our passing there over the next sort of near and medium term. And then the U.S. Southeast, we're a preponderance of our businesses. This has the demographic benefit of being a place where people are moving to. So we think top line have a right to win there organically. And I'll speak 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, you know, call it five, six years that we've been public or 10 years we 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, they sort of keep doing that, right? I mean, think about our results today, achieving, you know, I just gave a guy for 27 of these breadcrumbs there too. You know, 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 deleveraging 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. And that is available for GFL and GFL loan. And so you put that all together over the sort of, you know, next three to five years, as Patrick, you know, suggested in the prepared remarks, you don't need to believe a lot to see, you know, close to 2x in a free cash flow per share level over that sort of period of time. And that is really what the next chapter is. You know, we've built the business. Together, Proforma was 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, you know, be tempered by the sort of leverage considerations and just doing more of the same and now doing so, you know, with sort of best-in-class asset base and, you know, a management team that has proven the effectiveness. You know, we welcome Alan to the team that brings incremental horsepower, and we're just, you know, very excited and confident in the sort of go-forward opportunities to just keep doing all of the items that we've articulated.

Thank you. Appreciate the time.

Your next question comes from the line of Brian Bergmeier with Citigroup. Your line is now open. Please go ahead.

Good morning. Thanks for taking the question. During the prepared remarks, you flagged $125 million, I think, in inflation from diesel. I'm 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 2027.

Yeah, Brian, great question. So if you look at it, on direct diesel costs, what we sort of pay for the wind, we have about $105 million incremental costs, and then indirectly we calculate, and this is like third-party transport providers, et cetera, for another $20-25 million. You've got about $125 million of cars. We're going to recover this year about $105, $110 million of that. So you have this sort of $20, $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 $20-25 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, 45 basis point margin. 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, you know, ultimately, diesel rolling over will be a margin tailwind for us.

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

Yeah, I think that's probably, you know, we're still obviously looking through all the opportunities. I think Legacy GFL probably has another $50 to $75 million of, you know, 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. We're going to think about the growth capex spends 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, and we'll bucket those spends together. And when we think about how we allocate capital, we'll allocate that in that capital bucket. So, yeah. So, again, a lot of opportunity, still early days. But obviously, when we come out in February, when we report Q4 and give, you know, 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 Karnark Gupta with Scotia Capital. Your line is now open. Please go ahead.

Thank you. Good morning. I want to go back to the strategic review process. And in fact, I wanted to understand, you know, in a simplified manner, I guess, like, what's the process looking like? You know, I mean, how will it unfold here? You have November 9th as a deadline by a special committee. You know, 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 hoes with respect to bondholders in that process? So any colors will be there.

Yeah, 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, you know, the negotiation of whatever that is. You know, 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 advisor in terms of coming up with what they believe, you know, 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, you know, ultimately that decision will be made. But, you know, 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 look 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, you know, no one in this organization shies away from hard work. And, you know, we're just going to continue doing the right things, and, you know, we'll see how the process unfolds over the next week. But, you know, from my perspective, management's perspective, like, 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, you know, hence the reason why it's sort of a deadline of November 9th. I think, you know, it's not easy to get all these different groups together, and, you know, we've been in Toronto the last couple days where everyone can actually sit down and have, you know, fruitful discussions and real discussions about sort of where things are at and what needs to be done. And, you know, hence, we put a pin in it. We're confident that by November 9th, we can put a pin in this one way or the other.

Again, I appreciate the call there. Thanks. And if I can just follow up, Luke, on the guidance bridge. So you can see, I mean, your guidance has, you know, moved up on the back of recent acquisitions. Obviously, I mean, looking at, you know, 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?

Yeah, Conor, thanks for the question. I mean, obviously, a lot of moving pieces, like, were from the original guidance, you know, with where diesel has gone, FX has been bouncing around, you know, the recovery from commodities. But if you think about, you know, from the beginning of the year, you know, if you think about the top line, originally revenue was supposed to grow, you know, 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. Now, so the 13% of that's coming from M&A, and 7.5%, 8% of that 13% or just under 15% is from Secure. You have 180 basis points from FX, sort of the Canadian dollar weakening, and therefore you're left with like 120 basis points of, you know, what I call organic, right? Now, that's mostly diesel recovery and commodities as price and volume are sort of a wash, right? Price is 40, 50 bps better and volume is sort of 60, 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, the original guidance was just under 8% EBITDA growth, so 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. Now, again, sort of 14 and a half of that is coming from M&A, and that is, you know, a large contribution from Secure. You have 180 basis points, again, about FX, and you have roughly 100 basis point benefit from the commodity price. Now, diesel, as I was saying to Brian, 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, you know, is driving a component of this and taking that margin profile up. But, you know, there's a lot of other sort of pieces, including the underlying just organic margin expansion from a bunch of the, you know, cost levers and other optimization that we've been talking about, you know, on this call and previously.

Yeah, that's great. Appreciate the time. Thank you.

Your next question comes from the line of Jerry Revich with Wells Fargo. Your line is now open. Please go ahead.

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

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

Yeah, I think the in-year, so I mean, what we said this year, $50 million in-year EBITDA this year from R&G, that's roughly right. We're actually a little bit behind, but they're actually there. You know, the next four projects that come on, to Patrick's point, they'll be on at the end of 27, probably no contribution in 27, just contribution in 28. That's another 40 to 50 million of the EBITDA. And then the last four small projects is that remaining sort of 15 to 25 million of EBITDA that comes on, you know, into 2028. As Patrick said, the capex for that has mostly been manifesting through contributions into JVs, but the exact capex spend and the form thereof will be clarified for twice-seven guidance. Great. Thank you. Appreciate the color.

Your next question comes from the line of James Shum with TD Cowan. Your line is now open. Please go ahead.

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

I mean, it's always, I always say it's very simple. It's, again, why 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. You know, at the time, when we went public with a $950 million EBITDA business, when we went public in 2020, we had to do a very large IPO because the business we were operating, the business of six and a half to seven terms 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 six years ago to today, I mean, when you're talking about IPOs of $75 billion to $250 billion, you know, maybe we're in a different market. But from my perspective, listen, if the public markets want to see leverage, you know, somewhere between three and a half and four turns, right, initially out of the gate, you just have to back solve for what that looks like in terms of an IPO. And again, do you want to run the business at six terms of leverage and then have to take out two terms 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 deliver. Or do you want to run the business with four and a half or five terms 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 back solve for that. You can underwrite that in your returns. Do you have to run the business with three and a half turns of leverage? No, but I think as a private company, you wouldn't run the business with five and a half to six turns of leverage. I think you would keep leverage at four and a half-ish to five turns of 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 four or five years. The other thing is, you know, there is material free cash flow that comes off of this business, right? So, you know, you're going to have ultimately, a turn of leverage doesn't do much. Like, if you're thinking about an incremental turn of leverage, which is called $3 billion today, you know, to borrow an extra $3 billion at sort of, you know, 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, you know, hundreds and hundreds of millions of dollars of free cash out that which would afford you the ability to de-lever and grow at the same time as a private company. So, you know, a lot of different paths, but nothing, again, I think that's just the biggest impediment to maintaining that. And obviously, you know, what you don't want is to have a bunch of scorched earth We have public investors today that think they were slighted, 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, you know, 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 one shareholders if you were going to re-identify. So, I think that's an important thing to do, and I'm cognizant of that, if that is the path chosen. So, yeah, 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 year and a half, two years, and sort of clean harbors execution. And the fact that they're 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 may be on the environmental services business. Things are where solid waste was maybe 15 to 20 years ago, so consolidation opportunities, you know, 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 acquire businesses 1 to 10 million of EBITDA. I haven't seen, you know, 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, you know, 75 to 100 million of EBITDA, where you've seen valuation 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. 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.

Got it. Very helpful. Thank you.

Your next question comes from the line of Shlomo Rosenbaum with Stiefel. Your line is now open. Please go ahead.

Hi. Good morning. Thank you for taking my questions. Patrick, I want to ask you a little bit just about the impact of diesel more broadly. You talked about, you know, 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 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?

Yeah, I mean, listen, I think, again, quick movements in fuel, you know, knee jerks. You're going to have to push through price. I mean, I think going to Luke's point, you know, annualized impact, probably $125 million. And we've recovered, well, we will recover 90 to 95 to 100 of that. So, you know, 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. So those indirect costs will have to be recovered. So depending on what happens with fuel, yeah, that could yield to incremental price that we need to put through in 2027, versus what we thought may be 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 of inflation. And you saw that through COVID, as, you know, 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 know, 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. You know, a couple of years ago, it was labor. You know, and now this year, it's fuel. You know, and I think whatever gets thrown at us, we can handle, we can adapt to as an industry. And, you know, that's what we'll do.

Okay, thank you. 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?

Yeah, 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 trends and effectively just passing that through, being a broker on that piece. As part of restructuring the contract, we're no longer doing that component of it. So although, you know, this $30 million of gross revenues 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 it said in Farrant remarks that Q4 volumes will decelerate and it'll be negative. But, you know, 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 just this base underlying volume kind of being sort of flattish.

All right, thank you.

Your next question comes from the line of Chris Murray with ATB Cormac Capital Markets. Your line is now open. Please go ahead.

Yeah, thanks, folks. Good morning. Maybe just turning to some of the subs, especially GIP. You know, 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 since 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 marked the market, the earnings, but just any thoughts around GIP or even the ES business would be helpful.

You know, I think, again, multiples, let's start with ES. You know, I think, again, the operating plan was very straightforward for that business. We had a five-year plan, carved that business out, was doing $475 to $500 million of EBITDA inside the public company. Today, that, over the last year and a half to two years, has grown to $675. Over five years, we had a plan to grow that business to roughly a billion dollars of EBITDA and have roughly five turns of debt on that business. Now, those businesses today are trading between 15 and 16 times. So do I want to do something with that business today? Absolutely not. I think that would be very short-sighted, given the operating plan and the plan we have for that business to continue growing that business over the next, you know, two and a half to three years. But again, you run that math, take a billion of EBITDA, put a 15 to 16 times multiple on that, it'll have roughly five to five and a half turns of debt. There's, you know, call it $10 plus billion of equity value sitting there, of which we own, you know, 40%. If we buy it back out of fixed multiple of 1.8 times, right, that we would owe the existing shareholders in that, roughly you would have, you know, Again, $5 billion in debt. You would owe those other shareholders roughly sort of $5 to $5.5 billion. You'd have $10 billion. You'd have $5 to $6 billion of equity value in that business and call it two and a half years. GIP, you know, again, we carved that business out 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 in, you know, we've won multiple projects, you know, that are coming online. We recently got a quarry permanent in Newfoundland that's going to supply a lot of the northeast into the U.S., all the way down to Florida. You know, a quarry 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, the plan is 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 two to two and a half years away from doing that on both of those businesses. Yes, you can 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 two businesses over the next two and a half years, you probably have in the neighborhood of $6 to $7 billion that'll come back to GFL shareholders of value that will be created in those two businesses alone, on top of the value that we create inside the public company.

Okay, I'll leave it there. Thanks, guys.

Your next question comes from the line of Adam Bubes with Goldman Sachs. Your line is now open. Please go ahead.

Hi, good morning. I'm 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?

Yeah, I think, again, if you're going to stay within the normal algorithm, right, if I roll out the 2027, I think, you know, 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 to sort of 1.4 billion and stay within So I think over the next three or four years, that number will grow somewhere closer to $2 billion that you could deploy. I think as a private company, if you had less of a focus on sort of leverage and maintaining those targets, I think that $1.3 to $1.4, you could actually deploy somewhere between $2 billion. So I think you basically have a $600 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 five-year period, you spent an extra $600 to $700 million, you know, 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 if your share buybacks 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 five 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 There's 150, maybe plus million of CapEx. Any other big moving pieces we should be thinking about on that bridge?

Yeah, and we're going to have to wait until 27, as Patrick said, you know, evaluating growth CapEx. That would obviously be a piece of it within Secure, as you think about that bridge. But otherwise, you know, X 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, you know, I know there's been focus on the delta between unadjusted and adjusted. You know, 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, you know, 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, you know, do not grow at the same rate as the free cash flow base, and you're going to get operating leverage on that. You have to wait until 27 official guidance, where we'll have the specific pieces.

Great. Thanks so much.

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.