Good morning, and welcome to the GFL Environmental Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Patrick Dovigi, Founder and CEO. Please go ahead.

Thank you, and good morning. I would like to welcome everyone to today's call, and thank you for joining us. This morning we will be reviewing our results for the fourth quarter. We will also provide our outlook for 2021 as well as additional considerations through to 2023. I am joined this morning by Luke Pelosi, our CFO, who will take us through our forward-looking disclaimer before we get into the details.

Thank you, Patrick, and good morning everyone. Please note that we have filed our earnings press release, which includes important information. The press release is available on our website. Also we have prepared a presentation to accompany this call that is also available on our website. During this call, we'll be making some forward-looking statements within the meaning of applicable Canadian and U.S. securities laws, including statements regarding events or developments that we believe or anticipate may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set out in our filings with the Canadian and U.S. securities regulators. Any forward-looking statement is not a guarantee of future performance, and actual results may differ materially from those expressed or implied in the forward-looking statements. These forward-looking statements speak only as of today's date, and we do not assume any obligation to update these statements, whether as a result of new information, future events and developments or otherwise. This call will include a discussion of certain non-IFRS measures. A reconciliation of these non-IFRS measures can be found in our filings with the Canadian and U.S. securities regulators. I will now turn the call back over to Patrick, who will start off on Page 3 of the presentation.

Thank you, Luke. I want to start this morning with a recap of 2020 as I believe it has been an extraordinary year on many fronts. On Page 3 of the presentation, we have a summary of the many ways in which we have delivered on the commitments, which we made at the time of our IPO. While the numbers speak for themselves, I want to acknowledge that none of these achievements could have been possible without the dedication, contribution, countless hours and love that each employee has for this company. From our frontline workers to our employees, who support our operations in the field and all of our corporate office employees, GFL is full of heroes. All of our employees did their part to help GFL navigate successfully through 2020, keeping each other safe and ensuring that we continue to meet our commitments to service all of our customers. There is no doubt that the most important part of any business is the people. If you have dedicated, loyal and hardworking employees, you will have a successful business. I have never been more proud of what our employees working together in the face of great uncertainty accomplished in 2020. It is truly inspirational. I have said many times over the years, never let a good crisis go to waste, but as we headed into Q2, we had no idea how much we would all be challenged by the impact of the COVID-19 pandemic, both personally and professionally, or that we would be able to achieve so much in the face of a global crisis. Even as we faced many obstacles, we're able to take advantage of market opportunities and deliver on the commitments we made to our stakeholders at the time of the IPO and more including we expanded…

Thanks, Patrick. I'll walk through the next couple of pages of the deck summarizing the fourth quarter results, and then I will pass it back to Patrick as we get into the outlook section. On Page 4, we have provided our usual summary of revenue growth by operating segment, revenue increased over 37% compared to the prior year period, driven by M&A contribution, strong solid waste pricing and continued sequential volume improvements. Overall organic revenue growth was 320 basis points greater than Q3 and was positive overall for the first time since Q1. For the quarter, we exceeded our expectations and realized 3.6% net price, thanks to pricing activity in late Q3. Again, our overall pricing in the solid waste business in the current year continues to be impacted by suppressed IC&I volumes and by negative CPI adjustments on certain municipal contracts. With Q4 as a result, however, we ended the year with 3.9% net price and outcome we're very happy with the one that emboldens our confidence in being able to continue to deliver on our stated pricing goals as we look forward. Consistent with the third quarter, we also realized an incremental 70 basis points tied to commodity prices, where we realized a blended basket price nearly 40% higher than that of the prior year, and up over 15% from the third quarter. As we continue moving our contracts towards a fixed price processing model, we will see less volatility in our results tied to movements in OCC another commodity. Solid waste collection volumes were down 3%, a 60 basis point improvement over the third quarter, which was driven by a 5% decrease in IC&I, offset by nearly flat volume in residential. IC&I volumes were 250 basis points better than in the third quarter. As we continue to…

Thanks, Luke. Before we get into guidance, I wanted to provide some context as we're going to do things a little bit different than some of our peers. Although we are managers, first and foremost, we are shareholders. And I believe we have some of the best incentive alignment in our industry. I started this company in 2007 with $250,000, which was all the money I had at the time. Since then through a lot of blood, sweat and tears, both mine and our employees, the support of our various partners and a little bit of luck, we have grown the business into the fourth largest environmental services waste management company in North America. I’m personally one of the largest single shareholders and I would argue no one is more incentivized to see GFL continue to succeed over the long-term. And when you look at the broader management team, both the other NEOs and the other field level leaders, you’ll also see best-in-class shareholder alignment. As the broader management team has material amount of equity in this business. As I said before, this is a management team that knows how to create equity value. We’ve done it for over the past 13 years and we see a very clear path to creating material incremental equity value in the near to mid-term. This is why in addition to providing our 2021 guidance; we are also going to provide our outlook through to 2023. We see clear opportunity to significantly grow our free cash flow and we want to make sure everyone has the same building blocks that we’re thinking about. So turning to Page 10, we’ve laid out how we plan to do it. We’ve summarized on this page is the same as the four pillars of our strategy that we’ve…

Okay. So on Page 11, we’ve shown the building blocks of our guide. What I’d say, that outlook is based on the environment and market conditions we see today. We’ve not factored material easing of COVID-related restrictions nor the anticipated volume increases that we expect to see with reopening activities. While we like I’m sure many of you are extremely hopeful that we can get to the other side of this pandemic as soon as possible, we’ve perceived too much uncertainty, particularly in our Canadian markets to make a call as to whether that will be three, six or nine months from now. So we’ve provided the guide and what we see today. Looking at the waterfall, we’re assuming solid waste price in the 3.5% to 4% range consistent with our past messaging. We’ve continued restrictions in many of our Canadian markets and suppressed ICI volumes across the entire platform. We’re now expecting to materially outperform this range in 2021. However, we continue to see outsized pricing opportunities within our portfolio that we intend to go after once normalicy returns. Inflationary expectations should offset some of the negative CPI adjustments we experienced in 2020 and ongoing discipline around ensuring any enterprise residential contracts are renewed at rates that meet our return thresholds should serve to support our pricing goals. On solid waste volumes, we’re seeing approximately 0.5 point to 1 point of growth. Now we know some of the expectations were higher growth numbers here, but I remind everyone of the following two points. One is we had a lower volume declines or near the much of the industry. So we’re coming off of a higher low, if you will. And two, we have a bigger proportion of our revenues coming Canada, much of which is still under some of…

Thanks, Luke. What Luke just walked through is our base guidance. With our current platform, capital structure and macro operating environment we are confident we can deliver on that plan. However, on Pages 12 and 13, we have highlighted opportunities over which we have a degree of conviction, and that would be incremental to our plan. The first opportunity is incremental M&A. The integration of the recent transaction was well on track, and we remain confident in realizing the synergies we have underwritten. The business performed well in Q4 and early indications for 2021 are also looking very positive. Although we are still assessing whatever minor impacts there may be from recent severe weather in the South. I think the success we were able to achieve during 2020 clearly demonstrates our ability to continue to deliver. Even in the most challenging environments, 2021 is shaping up for what could be another active year for M&A. We have a robust pipeline of actual opportunities that fit our model. And we could envision deploying upwards of $500 million of capital across 25 to 30 tuck-in transactions throughout our existing geographies. These smaller tuck-in acquisitions can be entirely self-financed, primarily with our own free cash flow, which will allow for de-leveraging as we grow. We are also evaluating one larger opportunity, a business that we have known for years, but was never actionable. It is entirely within our existing footprint and we believe would be highly complementary. Timing of that acquisition signing could be in the next few weeks with closing potentially in the second half of the year. And we would not need any equity to finance this potential transaction. Any impact from this acquisition would be additive to what I said about the tuck-in acquisitions. In addition to M&A on Page…

[Operator Instructions] The first question comes from Hamzah Mazari from Jefferies. Please go ahead.

Hey, good morning. Thank you for all the details. Just on the free cash flow, the long-term targets that you laid out with M&A refinancing, et cetera. Could you maybe talk about how achievable you think these metrics are? I know investors don't have a lot of public history with you guys. So just talk about, do you view these targets as conservative; maybe just unpack the free cash flow growth a little bit for us?

Yes. Hey, Hamzah, it's Luke. What I would say, I mean, the components are all laid on the page, right? Between you organic, the M&A and refinancing, I mean, you're right, we have short history in the public market window and I think – the one thing we have picked up is the under promise and over-deliver strategy. And so when we've looked about each of those leavers, we think the opportunity to outperform what we've laid on the page is there on all three of the buckets. Now the organic piece obviously is still conditional on the timing of when things reopened, but you've heard from others and I think the industry as a whole view is that it feels like things are about to take off like a rocket ship. It's just a matter of when that hits, and when it does, I think the volume component of that incremental free cash flow could be far in excess of what we've sort of laid out on the page. But the pricing strategy is there and that's working. The volume story we think will come and will be exciting when it does. We're just uncertain a matter of when, but when you think about the incremental that are going to come from that volume, I think it could far outperform the modest organic free cash flow growth that's on that page. And then the sort of non-organic piece, the financing and the M&A, I mean, again we realize we've been in the public sphere for a short period of time, but we've been doing this for a long period of time. And what I would say, we have a high degree of conviction that we can outperform those two buckets, but we wanted to put down some conservative views. So folks could at least see how we were thinking about it. Patrick, I'm not sure if there was any other pieces.

Yes. Hamzah, I would just say from my perspective, this isn't a six to nine month sort of, I know, it's been a big focus on volume, but I think what you've seen over the last year that this business has been really resilient and it's the whole sector, it's not just GFL. I mean, it's been subject to basic regional reopenings and I think, we've all performed, I would say exceptionally well. And I think what this has proved is, like most businesses, I don't think what people understand is that even with sort of volume declined, all of us were able to maintain price, which is not something you see in every industry. So, I think when you layer that on, and then you look at the hockey stick effect that's going to come in late 2021 and 2022 and 2023 with sporting events reopening, hotels reopening, restaurants, schools like just office buildings. I mean, there's just a big amount of volume that's going to come in. I think we're taking a very conservative approach to what we think organic is going to be, but I think we're in a very good place today.

Got it. That's very helpful. Just on the volume piece, you mentioned you're kind of extrapolating what you're seeing today. So the 2021 guide on volume growth that doesn't include any vaccine expectations or what's your sort of underlying economic assumptions for the volume guide. So just looking to see what potential upside would be?

So, we've modeled basically what we saw in Q4 and what we saw in Q1. I mean, I think the U.S. is probably moving quicker than clearly Canada. I mean, I remember 40% of our revenue today is going to come from Canada. So Canada has been much more conservative on the reopenings now I think that's going to ramp-up significantly with vaccines here over the next couple of months. So I think Canada is probably four to five months behind the U.S., but that being said, we haven't modeled any significant improvement and where we are today. So that's why going back to Luke's point, I think we've taken a very conservative approach and there's probably going to be upside to those numbers as – as things start coming back online relatively quickly here.

Yes. Got it. And then you referenced sort of the near-term pipeline of M&A over the next two years. Could you maybe talk about longer term – is there something larger you can do Patrick, and what are your sort of long-term plans as you think about a much, much larger transaction long-term, just given your overlap with some of the other larger players in the public arena?

Okay. Well, what I would say is firstly, I'm a shareholder, right? And my job here is to create shareholder value. So at the end of the day, I'm not here to practice, we're here to win, which in turn means everybody on this call is going to win. So, I mean, that's the way. I think about it in my own mind. I mean, in terms of our pipeline and opportunities of M&A, like we said, the pipeline is robust. If you look today, we have almost 13 talking transactions under LOI. Again, which we haven't modeled. And like I said, we talked about one larger transaction – truthfully a business that we looked at over the last seven years, but could you just never get the deal over the line for whatever reason? And I'm not one to surprise people in the public markets. I mean, I think that is an acquisition we're actively working on. And I think it could be, assigning is weeks away what's closing in sort of Q3. So, I mean, that's what the pipeline sort of looks like for 2021. So you put that all in a blender, I think we're set up. In terms of a larger transaction, I mean, who knows, I guess is probably the word. Sure, I mean, when you look at it as a shareholder, I mean, you really have to assess, culturally can two companies come together because that's where they're going to succeed or fail and then financially would it work and can you make more money together than apart? I mean, if you look at the industry as a whole big deals have been successful over the years? At least since I've been in the industry, whether it was Republican and Allied, whether it was waist connections and progressive, or whether it was recently WM and ads, I think, done right, you can make money. And I think all of those companies have done those well over the years. So, I mean, who knows, but whether we're included in one of those or we're we happen to be the company that gets to pick up the divestitures from someone else merging would be a good outcome as well, but who knows.

Well, you're a young guy. You've got a long road ahead of you. So that's great. Thank you. I'll turn it over.

Thanks, Hamzah.

Our next question comes from Mark Neville from Scotiabank. Please go ahead.

Alright. Good morning, guys. Appreciate on all the detail here there is lots of feature. Maybe just starting on the M&A; just to clear the, all the M&A that you sort of talked about, all the tuck-in, again, the plan itself on that and maybe there's that maybe there's a need for some incremental debt, but no equity, correct?

Correct. So for the small tuck-in M&A as well as the larger transaction, we would not need any incremental equity we could sell fund through maybe a little bit more borrowing and using the free cash flow to offset any of the leverage related issues, and again, with the commitment to still maintain leverage in the mid-fours.

Right? For the – so these are the larger deals, you've referenced doesn't change that equation.

No, no, no equity would be required. I mean, that shows – that gives from conviction from our side on sort of a multiple would be paying and the synergy opportunity on the existing group of transactions, that I said referencing better under LOI plus the larger,

There's a larger one in solid waste?

How am I going to get into detail on it? But, I think it's safe to say a portion of it is

Okay. Got it. When you saw the margin, again they just so – just to be clear, the 2021 really assumed much upside the volume, but there's a little bit baked in terms of volume recovery, 2022, 2023, that sort of helps them Arizona, correct?

Yes. Mark this is Luke? I think that's right. Obviously 90 bps of organic expansion, 2021, there is some positive volume. We think when the volume comes back; it's obviously at a height sort of incrementally, but very modest and conservative in the quantum of that sort of volume. I mean, if you look today and you think about what the sort of prize is to get back, I mean, on the solid side, we're probably missing $110 million, $130 million of sort of revenue, right? Like that's the sort of loss volume if you look for the year. So what we would order the hat. I mean, when that comes back, we anticipate particularly considering it's mostly in post collection and sort of IC&I, that's very margin accretive when that comes back. So we've been quite conservative in the portion of that, that we're anticipating back in 2021, and then the pretty plain vanilla growth in 2022 and 2023 that we've put out there, obviously isn't inclusive of any sort of hockey stick recovery there either. And then also in the liquid and infrastructure, I mean, you're probably missing that $60 million in liquid and call it another $40 million to $50 million in infrastructure, which is very, very high accretive creative margins, right. Just because of the sort of fixed cost nature of those businesses. So again, a little bit expansion of each of those businesses, but when that volume fully returns, whether that be late 2021, early 2022, or sometime thereafter, we think that represents meaningful upside to the numbers we've laid out.

And again, just sort of just taking what you've said, and I haven't done all the math yet, but this again, if you sort of incremental margin, you spoke with the different lines of businesses and sort of get you to the, the targets that you've sort of referenced earlier in the fall for low-20s, mid-20s, and I think close to 30%, is that sort of where sort of land by 2023 is these sort of hit all these targets roughly?

Yes, I think it's not just the volume, but also just looking at what, how we we've been sort of flexing the business, realizing the synergies of all that we've brought together. So I think it's really all of those leavers together. Our pricing programs are working on the middle and now the expectation of leveraging the sort of refined cost structure that we have as that new volume comes back. I think it's all of those things together that now gives us further conviction of achieving those sort of broader margin targets and totality and by segment as we have articulated.

All right. I appreciate all the good color guys. Thanks a lot.

Thanks Mark.

Our next question comes from Michael Hoffman from Stifel. Please go ahead.

Hi, Patrick, Luke. I hope you're having a good day up there. Just to be clear, your 2021 to 2023 plan doesn't enacts in fact pick up $210 million of pandemic loss business, because it's a – you're only showing a half a point to a point of volume growth over your current view. So…

That is correct, Michael.

Right, okay. So there's a double whammy hereof. Do your job every day plus the upside of – sort of the reopening trade?

Correct.

Okay. I am going to ask some short-term questions. The $105 million to $135 million of year-over-year free cash flow growth, if you broke it into three buckets, cash interest, operating leverage, and M&A, what – how does that – if you want to take the midpoint and split it up, how's that split up?

So, cash interest, Michael, I mean, if you look through the normalization we did in 2020, I'm effectively saying 2020's cash interest was about $295 million and now I'm telling you a guide for next year of $300 million. So there is a minus $5 million from cash interest. You have – the CapEx line year-over-year is going up by $100 million, so you have that. And then – sorry, the last number you referenced, Michael, you're talking about…

So I was thinking of it more from a standpoint of operational leverage and then M&A, so just…

Yes, it’s okay.

…business, what's the operational leverage to free cash? What's the M&A leverage to free cash offset by negative five, four?

Yes. So if you go about it that way, I mean, if you take the M&A, I mean, effectively saying the M&A is adding – the EBITDA from the M&A coming in sort of the high 230s. If you incorporate that in a walk from 2020, you take 2020's number 360, you'd normalize that for FX. Now, the FX, you get some wins on the interest in CapEx line, but net, net FX would have been in sort of $20 million drag. And if you walk through that what you're going to see, I think, is implied organic on the base number. You have $60 million, $65 million of organic sort of free cash flow in that level and which is sort of 17%, 18%. So I think when you strip out all the M&A and the other sort of noise, that's what you're really left with the sort of operating leverage driven by the business.

Okay. And then the other number I'd like to zero in on your cash flow from ops range has improved as a percentage of revenues pretty meaningfully from low double digits up to almost 20%, you're at sort of 19.5%, 20% for 2021 to hit a lot of the – what you're laying out that cash flow from ops number needs to improve. And it's not just net income doing that, but how much working capital do we have to play with that – that can come out of this model and help to drive this into a 22% to 23% of revenues this cash flow from ops.

Yes. So the cash flow from ops by 10/2020, I mean, you really need to look at the adjusted number obviously in the first quarter a lot of sort of noise in that number. And so when you look at the adjusted of where it's at the 770, we had sort of for the year and where that's going, I think there's sort of less of a walk at that point, right? And so really what you're seeing here is the interest component, right? If there's a $300 million drag at the interest line, we're really now leveraging that as we're going forward to adding all this sort of incremental net income, if you will, but without any incremental sort of interest coming off of that. So you're getting, I think, a lot of leverage on that line. Working capital, I mean, in the guide we're giving this year working capitalism noise with CARES, et cetera, but really just modeling a modest working capital improvement for next year. So sort of on the base business if you will kind of plus $10 million to $15 million. We think the working capital priced as we've said in the business is far in excess of that, but again a lot of that exists in our legacy sort of Canadian business and just with the uncertainty on reopenings, et cetera. We didn't think 2021 was the year to guide to a big sort of price on that piece. It's still there. I think it's probably just more 2022 plus number. So really I think once you've normalized and looked at our 2020 adjusted cash from ops as a starting point, you see it's really starting to leverage that sort of finance cost component of it, which historically has been a large drag. And you're being able to see that's sort of true sort of operating income margin of the business come at, come through.

Okay. And then – and back in the fourth quarter and several different virtual settings, Patrick, you offered up that liquids while it was a good business while you grew it, it isn't necessarily a core to the long-term strategies. Do you still maintain that thesis?

I mean, like I said from before, if someone wanted to pay a big price for it, I think it was something we would look at. I think where we sit today, the business is recovering exceptionally well, Canada almost hit budget for the actual year. I mean, our biggest impact was really in the Midwest operations and liquid waste business. Our Canadian business ran at above mid-20s margins for the year. And I think it's recovering well. And I think it's set up to do exceptionally well this year. So, I mean, our view is just sort of given the relative size and scale, but we're going to keep – we're going to – my view is to keep it. It's a good growth vehicle. It's a good free cash flow generator. At this point I don't see a reason that we would do something with it.

Would you entertain that it's paid the right value for it? What you're saying.

Sure. Like anything, right, anybody – any line of business, I guess if someone wanted to – again we would assess whatever that would be at any time.

And then on the portfolio cleanup, what's the timing of those proceeds showing up or do you have a line of sight on that?

Yes, so, I mean, the view is I think it's a first half of 2021. So I mean, I think, definitely a line of sight and the anticipation is we'll get it done in the first half of 2021.

And then the last one for me is there anything you can do to help take the volatility out of the infrastructure margins?

I mean, prior to COVID, I mean, it was like a beautiful sort of – a little – again, it's more of a regional issue, right? Like as we have exposure to Ontario and Quebec and BC in that market and the Northeast is where one of our facilities are. Now the amount of infrastructure dollars I can tell you that are being announced in Canada and even through the Northeast that we've bid on through those facilities. I mean, going back to your earlier point in the recovery, I don't know exactly when, but I would say by late Q3, beginning of Q4, we're going to experience in that LLB, what we've experienced really from 2016 through to 2019 when COVID hit. I mean, there is a significant backlog of projects and things that are essential that actually have to move. Maybe if you look at the Ontario market and Quebec market, the amount of transportation spending has been announced, I mean, which is sort of hits dead smack in the middle of where we receive a lot of the volumes and you look at a bunch of the opportunities on the West coast and some of the recent projects that have been priced to go into our Northeast facilities. I mean I think it's going to be – I'm pretty bullish about it. I mean, there is nothing you can really do today in this situation. But I think, you're going to see that recover at faster rates than you see the rest of the business just because of the impact that we experienced for the last year in that business.

Okay. Thank you very much.

Thanks, Michael.

Our next speaker is Walter Spracklin and he comes from RBC Capital Markets. Please go ahead.

Thanks very much operator. Good morning, everyone.

You're welcome.

So I'd like to come back on your thoughts on leverage and clarify a couple things. So first of all, you ended the year at 4.6. You could – you said you could deploy all of the capital the $350 million to $500 million in a self – kind of self-financing way on the $350 million to $500 million, but then there's the larger acquisition on top of that. So am I right, I think you answered the question that you could do both without the need for equity, so both the $350 million to $500 million plus the larger acquisition. And would that imply essentially you might – you might go above five by the end of the year, but a line of sight to get back down to mid to low for one year later, are we looking at that that right way? Or is there something anything else.

Yes. No, I mean you're directionally correct, but leverage would stay generally in the same range that it would be today if the larger acquisitions got done.

Walter, I think the thing to consider is we start the year at 4.6, that's going to naturally delever even if you do the small tuck-in M&A, you're still going to delever as you go throughout the year. So if you get by the time you get to the back half, which is when it's something larger would potentially close. You brought leverage down and then you're able to sort of do that acquisition was still respecting that that high – mid-to-high 4 is cap that we've talked about historically going above 5 is not in the cards.

Got it. Perfect. Okay, that's great. Just a small one here, the free cash flow guide, you put refi to kind of an opportunity for that $20 million to $30 million, why is an opportunity and not built into your free cash flow guide? What would stop you from doing something like that in 2021?

I think from our perspective, we model that it's just to be honest, it was just analysts models, like of when that actually got realized. And we typically do it when there's an opportunistic point in time to do it. So that could happen next week. It could happen in May. It could happen in June. So I think the view was is that we would just make everybody aware of it when it was done. So people could update their models. But our view is it's going to get done imminently. Whenever that is when that market window was there for us to execute in the best way, but it's going to happen sooner rather than later.

Yes. Walter, I don't think we characterize it much different than the sort of outside volume recovery and M&A. We think those are both things that are probably going to happen in the year, but just don't know exactly when. And so we rather just articulate the art of the possible in terms of what that could look like. So it'd both could consider that in this on the side, but don't have it sort of taints, if you will, the base business guide of what we have today that's really the sort of thought around it.

Yes. That totally makes sense.

Okay. And last question here is really on strategic focus. You look at your book of business right now in terms of what markets or market segments you're in. You mentioned the sale of non-core. Can you give us some color around how you see your business side of your kind of the solid waste aspect? What areas do you like where you see opportunity to scale up and what would it be areas that really might be too small within your organization that you might look to divest?

Yes, I mean so from like we said before, there's a couple of markets that we've acquired with recent businesses. That again they're good assets, they're just in our view, probably more strategic value to some players in those markets where we just don't see a real opportunity for us to really want to deploy a significant amount of capital, because we have better use for a capital. I think from an M&A perspective, I think again capital allocation and like we said, all of the capital that we have allocated for 2021 is going to go into the existing markets and existing business lines that we're already in. So that's the nine provinces in Canada and 27 States in the U.S. I think there is a probably it's more a little bit heavily weighted to Canada today. And again, from my perspective, I think it's an attractive time to acquire in Canada. Number one, we did a lot in the U.S. and those guys are integrating and digesting. But in Canada, the guys have largely been sitting on the sidelines for a little bit. And I think it's an opportune time to acquire. I mean you get to see the highs of some of these businesses that you were on in 2018 and 2019. You watch the lows. You're valuing them off an LTM number. That's probably more reasonable than it was in 2018 and 2019. We have ultra low interest rates. And then we're going to have in our view, a very strong recovery through 2022 and 2023. So I think now is the time to sort of deploy that capital. Then you look at the borrowing rates, I mean, when you're borrowing money at, we're talking borrow money at 1.5% to 2.5%, I mean one can argue, is that an asset or is that actually a liability? Like and that's on a – it's not even on a pretax basis. So I think we're in a very good spot today with the platform. And again, I mean the ones that are going to be the most accretive to us are going to be the ones within that footprint today. And given that platform that we have, I think we're just going to again juice as much of the fruit as we can within that platform and that's going to be the most synergistic.

Makes sense, appreciate the time.

Our next question comes from Adam Jonathan from ADW Capital. Please go ahead.

Hey Patrick, this is Adam Wyden. I guess they have Jonathan in their – our analysts. So look, I think you guys have done a lot in numerical kind of conversation, and I just want to take a step back. I mean you're basically one year into your IPO and you still trade a basically 3.5 turns cheap to waste connections. You clearly have a much longer runway in front of your guidance and your shareholder value creation kind of initiatives are far more ambitious than theirs. Can you talk a little bit about what you think you can do to narrow that gap in terms of communicating it? And then I have a couple of questions kind of qualitatively about the tuck-in program.

Sure. Yes, I mean from my perspective, it's just, again, continuing to execute on the strategy that we've deployed. I mean I think from our perspective, again, grow – continuing to grow free cash flow at double-digit rates, continuing to execute on the M&A. I mean over time the value from my perspective will accrete and we'll continue to close the gap. We started very far behind at the beginning of the year and the gaps sort of close over the next little while. And I think as we continue executing on the strategy, we'll continue to get the respect and trust of the public investor base.

All right. So let me ask a question, we've been a shareholder now for almost a year. I mean as most of you know, we do an enormous amount of primary research on our companies and on industries. And what our observation has been is that these larger companies, whether it's – what waste management roll-ups are not new to society, right. You've got Wayne Huizenga, you've got good deeds up at. And it feels like you guys have been doing it a little bit differently. Based on our research, you guys have been very focused on buying these platforms and then doing tuck-ins and without getting into specifics on different markets. But I mean our understanding is, you buy an ADSW, you buy WCA, you are in Michigan, you bought Rizzo. It's our understanding that you can buy these things at whenever anywhere 5 to 7.5 times EBITDA, once you roll in the back office and you basically integrate the assets you can get them, it's kind of low singles, but even more importantly, if they're on an existing route, you can drive utilization on your existing trucks, i.e. sell their trucks, run them on your trucks and then increase the purchasing parts on future trucks. And so when we do our kind of our back of the envelope math, your return on invested capital is far better than your peer group as a function of kind of how you do integrations. Can you talk about kind of what you see in WCA and ADSW and your ability to drive return on invested capital and margin? I mean look numbers are numbers, but I think it's really helpful for me as an investor and perhaps other people that are new to the waste management industry to qualitatively understand the strengths of your business model in your peers.

Yes. And again, it's a simple model, right. I mean, you go in and you buy a platform, you buy these post collection operations like landfills transportation recycling facilities. You go in with a base of business, and then you go in, I mean all of the tuck-in strategy works really well around those assets, because the incremental margin that you get from a volume that you're talking into those existing facilities and eliminate going in, I mean you have the SG&A savings out of the gate. And then you have the operational synergies around facility consolidations and routing opportunities. And that's where you're going to see the bulk of this year do. And when you do that, you're going to eliminate a significant amount of costs. You're going to do acquisitions. And you're going to delever naturally at the same time, because of the actual effective purchase price of those acquisitions. So I think it all holds together. I think you're right in saying that's what it is. And I think from a scalability perspective and where we are in terms of the overall CAGR number, we're probably in a unique position because we're smaller than the larger big three today. And I think from a CAGR perspective, our numbers going to look a lot larger just because we're in the – we are aware they were sort of 7, 8, 10 years ago. So I think we're in a great spot. I mean I think we've done M&A well. The integration team is exceptional here. They've done this countless times. The business development team is here. We have a very well-oiled machine as most of you know, we did a lot in – we've done a lot previous to 2020, did a lot in 2020 and the factory continues to run here. So I think we're positioned very well for 2021 and 2022 for sure.

But I mean, look without throwing your competitors under the bus, I mean I know you're doing business with them and yourself are the massive thing. At least from our study of the industry historically, most people have not taken the approach to the industry that you have i.e. they buy, they've been bought bigger assets, they run them independently, maybe they get purchasing synergies on trucks. But I mean, in terms of combining routes, in terms of combining back office, I mean, the level and scale of integration doesn’t – is somewhat unprecedented. I mean, you guys have a huge a M&A team, Waste Connections has two guys. I mean, I know you have to be careful what you say, but like, I think it’s important to distinguish in an industry where its capital intensive and your trucks, you guys are doing it better and not just a little bit better, a lot better. I mean, can you comment on that?

I don’t know what the other competitors have in terms of their business development team, I know, we do it well. And like I said earlier, we’re not here to practice, we’re here to win. So we will continue doing what we’ve done for the last 14 years. And like I said earlier, you guys will all be the benefactor of that. And this is – again, this is not a sprint sort of a marathon, so we’ll continue executing the same way we have the last 14 years.

Very good. Well, look, I look forward to seeing your costs to capital in there to your peers. Obviously, you guys have proven that even without it, you’ve been able to create substantial shareholder value. So appreciate all the hard work.

Thanks, Adam.

Thanks, Adam.

Our next question comes from Tyler Brown from Raymond James. Please go ahead.

Hey guys. Good morning.

Good morning, Tyler.

Luke, you may have mentioned this in the prepared remarks, but what is the expectation for closure post closure just out the door annually based on the landfill fleet today?

$55 million to $60 million.

Okay. And since we’re kind of on this, I don’t know if you guys have this off hand. But again, based on the fleet today, how much annual airspace do you think you consume? And I don’t know if you could split that between Canada and the U.S.?

Tyler, I’m going to have to – I tried to purposely have my prepared remarks address all your questions, but you caught me off guard with that one. So I’m going to have to – I have to get back to you on that.

Yes, no problem. No problem. And just my last, I know this call has been long already. But at a very high level, how much of the revenue is tied to CPI? And I don’t know if you can break that also into U.S. and Canada as well.

Yes. So if you think about – I mean, CPI ultimately, but contractually, I mean, if you look at the residential revenue on that line of business, you have a $1.2 billion of revenue going to next year. Now you have about $300 million in Canada, which you should think basically virtually all is some sort of CPI type escalator. Then you have the other $900 million in the U.S. Now the other $900 million in the U.S., you have about $300 million of that $900 million is subscription, right? So more like open market pricing. And therefore, you’re left with that sort of CAD600, but in the U.S. that would be tied to a CPI type escalator. I know there’s a lot of great work being done in the industry, but moving to sort of sewer and water main and et cetera. And we look forward to being sort of joining that train, but we have a de minimis amount of that today. So the vast majority of that CAD600 that’s not subscription would be CPI in the U.S. Then you’d have a little bit of it in the MRFs and in the post collection, where municipalities are using our landfills, but by and large it’s in that residential collection line.

Yes. Okay. All right. Thank you for all the detail. Appreciate it.

Thanks, Tyler.

Our next question comes from Kevin Chiang and he is from CIBC. Please go ahead.

[indiscernible] Just wondering how that might change your cash tax profile over the next few years.

Yes. Kevin, you were very difficult to hear, but I understand you’re saying with all the guidance, what does that look like on the cash taxes line? That’s the question.

That’s correct. That’s correct.

Yes. So if you look today, we continue to have meaningful sort of tax shield that’s going to push out any meaningful cash taxes to sort of beyond 2024. Obviously, the extent to which we continue to invest in the business, both organically and inorganically, if there’s any outsized investments that can sort of augment and continue to push that out from a further sort of runway perspective. Let’s say today in Canada, there’s very clear path to going sort of 2025 and beyond with no meaningful cash taxes. The U.S. absent some other M&A or other things by the time you get to 2025, you’ll eventually start sort of pivoting to a cash tax payer. We continue to look at ways to be as effective and efficient as possible there, and obviously incremental deployment of M&A dollars will help provide additional buffer at that tax point.

Thank you very much.

Thanks, Kevin.

Our next question comes from Tim James from TD Securities. Please go ahead.

Thanks. Good morning. I was just wondering if you could talk about how you’re seeing the resilience of the Canadian markets and I’m thinking kind of liquid waste and soil and infrastructure here in particular, just kind of a comparison between Canada and the U.S. in terms of the resiliency to the restrictions. Is there any difference there in how it’s impacting the business?

I mean, on the infrastructure side, it’s really just been around – mostly around delays, the backlog and the amount of work that has to get done and continues to be announced is significant. And again, I think when you look at the U.S.; again, it’s very regional specific depending on the regions where you’re operating. We’re in the Northeast in the U.S., so again, now a little bit harder hit than some other markets in the Sunbelt where it’s less impacted. Now, it’s all coming back and projects are going, and the facilities through the early part of the year are starting to see the volume come back. But I think in Canada on the liquid waste side, particularly, I mean, listen, post the original shutdown, everything has basically stayed open. Again, we don’t have really any exposure to EMP. This is all really around sort of manufacturing, industrial type uses, and all those have been deemed essential and continue to stay open. So that business, really largely tracked back to almost hitting budget by the end of the year, which is an exceptional results. So I think it’s really just that. I think versus some of the other places in the U.S. where we operate, in the Midwest it was more capital deferral. Again, so those projects will get done probably in the second half of 2021, but more of an impact, while people were going through their own capital mitigation procedures.

Okay. Thanks. And then just quickly, I’m wondering if you could just provide us with a bit of an update on the integration of your two big acquisitions from late last year. It sounds like the results they generated in the fourth quarter were very good relative to your expectations. Just in terms of kind of the integration process, anything kind of turning up that’s better than expected or more challenging than expected.

Yes. Tim, its Luke here. I’d say quickly, just the last minute, before we have to end. I mean, the ADS-WM business, I think all things considered from both sides and I think WM made similar comments was about as good as one could have expected. I mean, although the delays with the process there were painful, it did afford everyone a lot of time for planning and preparation. And I think that was about as seamless as one could hope. Yes, there's hiccups here and there but by and large day one, that was an asset deal moved over to our systems and platforms. And by December 31 that switched everything over. I think we rely on WM for some internet services in some locations, other than that basically completely integrated on the backend. And now we’re executing on operational overlap where we can drive sort of incremental cost savings in those markets that there was overlap. So I’d say that business in integration, they all went phenomenally successful. And we’re very, very happy with how that came together. WCA was a bit more of a staggered approach. Again, there was really a back office consolidation there, minimal geographic overlap. So the integration was very much a sort of corporate back office one. The first wave of that happened at the time of closing is really focused on the sort of C-suite, which was effective and happened as per plan. And then it will be mid Q2 where we do the full conversion of the corporate office into our existing shared services centers. So the planning for that, how they’ve been reporting in the meantime, I’d say all is very much on track, the synergy realization approximately of $15 million that we’ve underwritten also on track. And again, all these things that sort of hiccups, but one of the experiences you get through all the practice we’ve had is figuring out how to sort of manage through those, which I think the team has done exceptionally well.

Okay. That’s really helpful. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Patrick Dovigi for closing remarks.

Thank you very much, everyone. And we’ll look forward to speaking to you after Q1.

This conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.