GFL Environmental Inc. (GFL) Q3 2026 Earnings Report, Transcript and Summary

Everyone. Thank you for joining us, and welcome to the GFL Environmental Inc. third quarter earnings call. Before we begin, I would like to remind everyone that this call will include forward-looking statements within the meaning of applicable Canadian and U.S. securities laws. These statements are subject to a number of risks and uncertainties, including those set out in GFL's filings with the Canadian and U.S. securities regulators. Forward-looking statements are not guarantees of future performance, and actual results may differ materially from those expressed or implied in the forward-looking statements. These statements speak only as of today's date, and GFL does not assume any obligation to update these statements. This call will also include a discussion of certain non-IFRS measures. A reconciliation of these measures can be found in GFL's filings with the Canadian and U.S. securities regulators. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now turn the call over to Mr. Patrick Dovigi, founder and CEO of GFL. Please go ahead, Mr. Dovigi.

Thank you, operator. Good morning, everyone, and welcome to today's call. I am joined this morning by Luke Pelosi, and together we will be reviewing our results for the third quarter and updating our guidance for the year. The exceptional performance we delivered in the first half of the year continued through the third quarter, allowing for another top-to-bottom beat of financial expectations. The ongoing quality and durability of our operational performance, coupled with the closing of SECURE, allows us to raise our guidance for the third time this year and provides for an extremely compelling set-up for 2027 and beyond. Organic revenue growth accelerated 100 basis points over the second quarter, driven by core pricing ahead of expectations and 50 basis point improvements in both volume and commodity prices. Landfill volumes turned positive, including both C&D and special waste streams. Although we believe that construction development and expansionary manufacturing investment remains tempered, we remain well-positioned to participate in the eventual recovery of these activities. Volatility in fuel prices continue to impact revenues, costs, and margins. Third quarter diesel prices accelerated another 10% over the second quarter and were over 60% higher than the prior year. Our fuel surcharge mechanisms have proven effective at recovering the direct impact of higher diesel costs, although we are seeing a greater degree of indirect cost increases coming through transportation, spare parts, and other cost categories. Our industry-leading margin expansion would have been significantly greater if not for the impact of these fuel prices. 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 improvement in labor turnover and our ongoing focus on cost discipline. These benefits are in part rising from process optimization, along with the realization of self-help opportunities across our portfolio. Nowhere are these impacts more apparent than 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 quarter also saw us closing on the SECURE acquisition. When we underwrote the acquisition, we were impressed with SECURE's market-leading platform of a difficult-to-replicate critical waste infrastructure asset in the familiar and attractive western Canadian market. The transaction was also highly financially compelling, accelerating the achievement of our multi-year financial targets we laid out at Investor Day, and enhancing our balance sheet and free cash flow profile to allow our maximum capital deployment flexibility. Since the time we announced the acquisition, we believe that the macro outlook for SECURE's business in 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 CAD 25 million of underwritten cost synergies in the near term, with opportunity for an incremental CAD 25 million to CAD 50 million of previously referenced synergies around disposal and cross-selling. In addition to SECURE's physical platform, we are equally excited about the people and talent that have joined our team. As previously announced, Allen Gransch was appointed to our COO on September 1st. Allen brings a proven track record of operational excellence that directly complements our long-term growth strategy. Across his nearly 20 years at SECURE, Allen was instrumental in establishing and implementing the company's strategic direction, including leading through transformational change, driving operational execution, and building high-performing teams. Allen's proven leadership capabilities, extensive experience overseeing a large-scale diversified waste management platform, and his broad skill set will make him exceptionally well-suited to advance GFL's operational and growth goals. Furthermore, with Billy Soper staying on in a senior strategic advisor role, we will continue to get the benefit of his deep expertise as he remains actively involved in leading many of our corporate-wide value creation initiatives. Before I pass the call over to Luke, I will walk through the quarter in more detail. I want to take a moment to discuss the ongoing strategic review. You would have read in the press release that the special committee has provided bidders with a final deadline of November 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 are critical to their perspectives of what they view. 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, so stay tuned on that front. However, regardless of the path forward, the confidence we have in absolute earnings growth year-over-year, medium and long term, should be a source of material equity value creation. While the committee completes its review, our team continues to remain focused on optimizing our proven operating model, including delivering on the Investor Day commitments of achieving low to mid 30% adjusted EBITDA margins and free cash flow conversion in the mid 40% range. The quality of our base business has never been more solid. The risk-adjusted growth profile has never been better. We have the right assets. We have the right people. We have the proven effectiveness of our execution, and we are going to continue to win. We are going to keep fighting until we have done so. I will 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 CAD 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 in a CAD 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 at our 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 pulls were flat in the quarter as activity remains tempered. As a result, our volume outlook remains cautious. Q4 volumes are expected to decelerate on the lapping of EPR transition contracts in Canada and exiting certain ancillary services in the Midwest, with underlying base volumes remaining relatively flat to modestly down. Third quarter cost of sales before depreciation, amortization, and integration costs as a percentage of revenue improved 70 basis points, excluding the impact of direct fuel costs and over 100 basis points when factoring in indirect fuel costs as well. SG&A cost intensity also improved 70 basis points when excluding D&A and transaction costs. The ongoing realization of efficiency in labor and R&M costs, as well as operating leverage on our corporate segment, continues to highlight the effectiveness of the cost optimization strategies we laid out at our Investor Day. As expected, fuel costs were a drag on operating costs and margins. Average diesel costs were up over 60% in the quarter and spiked even higher in the first half of September, which resulted in a $5 million headwind to our original Q3 guide. We now expect the impact of elevated diesel prices to result in roughly $125 million of incremental costs for the year as compared to our original guidance. Adjusted EBITDA margin for the quarter was 31.5%, 30 basis points higher than 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 free cash flow was $272.5 million, over 50% greater than the prior year. This result was 15% better than guide, partially on account of the 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 full year 2026. Revenue of $8.055 billion-$8.075 billion, adjusted EBITDA of $2.49 billion-$2.495 billion, and adjusted free cash flow of $1.02 billion, inclusive of cash interest of $455 million and net CapEx of $910 million. Adjusted EBITDA margin increases 40 basis points over our previous guide to 30.9%, despite the significant headwind from elevated diesel prices, which are assumed to continue for the balance of the year. Absent the run-up in diesel prices, full-year margin would have been over 31.5%, an increase of more than 150 basis points over the prior year. As always, the updated guidance does not include the contribution from any further M&A in the year. Our latest guidance represents annual growth of over 20% in revenue, 25% in EBITDA, and 35% in adjusted free cash flow, industry-leading growth metrics by a material margin. Even more impressive is the fact that our set-up 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 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 one to raise your hand. To withdraw your question, press star one 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, you founded the company, have a say in how the process here evolves. Maybe if you can share some thoughts on ultimately what do you want to do here? What are your thoughts on the process that's going on? Thanks.

Yeah. Good question. I think ultimately, we want to keep winning and having fun, whether that's publicly or privately. I think when I look back, we're coming up on our 20th year anniversary, and we're actually reminiscing the last few days just in terms of how the company was founded and went out to one of the original sites, and met with employees. It's amazing. The same employees are there that were there 20 years ago when acquired the first business. Went back to the same scale that I used to work at on the weekends. And you look at what's been built here, it's an exceptional team. I have gone back and sort of scratched my head and looked at the original private equity partners and Genuity and Healthcare of Ontario Pension Plan, and then Jeffrey Keenan and Neal Aronson at Roark backed us. Then Scot French, Mark Rubenstein, Garrett Cockrell backed us up with the HPS team, which is now at BlackRock. Then you had Ontario Teachers, GIC, and BC Partners backing us in 2018 as private companies. I look at the returns that were generated for private equity shareholders and us alone, and I think they believed in this management team and had the philosophy that winners win and winners will continue to win. Whether we do that publicly or privately, I think that ability is there for us to continue winning. I look at us going public in March of 2020. I have the tombstone on my desk. First trade was just over $17, and today we are roughly three times higher than we were in 2020. So it has worked publicly as well. I think the challenge in the public markets is sometimes you have to make unpopular decisions for the short term. I look back to this year, SECURE for some, just not knowing what it was maybe an unpopular decision, and we had to do that over the last number of years. But over the long run, and I think if you look at the equity value that has been created for our shareholders, it has been substantial. Sometimes those unpopular decisions are unpopular in the short term, but over the long term, we are going to continue to drive material equity value. So, selfishly, as a private company, us and the management team would make a lot more money. We would probably have to not manage the quarter-to-quarter movements if we had 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. That makes the business easier to run. The contrary to that is the liquidity opportunities that exist in the public markets. 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 period of time, listen, there is a lot of smart capital sitting on the sideline that identifies winning management teams with a winning business in a great industry that they do not get the opportunity to buy those often. I think, I look at the stock price today. When we give the breadcrumbs for 2027, like Luke Pelosi was mentioning we are going to get into, today the business is trading at somewhere between 12 and 12.5 times 2027. You just cannot buy businesses of that size and scale for 12 to 12.5 times. You look back to what we have done since 2020, even going public. When we went public, the business was roughly CAD 950 million of EBITDA. Today, the public company for 2027 is going to be about CAD 3.125 billion to CAD 3.150 billion, in that sort of range. You have our ES business today, which we look at the budget for 2027, roughly a CAD 675 million EBITDA business, of which we own just under 40% of. And you have the GIP business today, for 2027, is going to be roughly CAD 350 million of EBITDA. You put all those sum of those parts together, we took CAD 950 million of EBITDA and grew it to almost CAD 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 we think the stock, from a multiple perspective, is materially undervalued. Listen, I sit here, I've said a lot. Again, at the end of the day, this management team is going to continue winning and having fun. When I look at now the SECURE platform that we've added and what's happening in Western Canada, what's happening all over Canada, we just have multiple levers that are going to drive incremental value over the coming years. Whether that's public or private, either way, we're going to win. 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? If we go private, and because that's the decision that the special committee makes to bring that to a shareholder vote, then we have, again, we've lived that world for 14 plus years as well, and we know what that entails. But I think I'm fine either way. I think there's been a lot of great shareholder engagement, which has been great. We have a lot of great shareholders, and albeit some have different perspectives, they're all very valuable input that they have. You have a very core group of shareholders that obviously who may have a little longer term thinking in the back of their head, and again, see the path forward to that. There's material equity value creation sitting in front of them. Then you have other shareholders that might be a little bit short term that are prepared to take some capital at a lower price off the table and find the next opportunity. The shareholder engagement we've had over the last couple of months has been excellent. It's been enlightening and the best part is everybody's been very supportive. We'll see how it unfolds over the next week, but from my perspective, either way is a win. Some pros and cons on both sides, and we'll see where it goes. But it's been a great exercise to go through anyways with these people sort of looking, taking a deep dive in the business. We'll see what happens.

Great. Thanks. 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? Then maybe just on sort of the feedback on with your shareholders, is that kind of the bigger buckets? Some are thinking maybe longer term, this thing staying public. Can maybe just shed a few additional color on what sort of the shareholders are coming back to you with as the process has gone on. Thanks. I'll pass it 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? I just look at a couple of tools that were flagged to us just in terms of that when they bring in, again, not mentioning names, but they bring in sort of a chief revenue officer of one of another strategic that is now working as a consultant and coming in and looking at our overweight charges. There's significant pricing opportunity still within the base business. So that, again, gives us a high degree of confidence that there's significantly more upside here. Implementing tools like Harvey on contract management and keeping customers accountable to their contracts, et cetera. We were just using it specifically on the legal side and picking other tools that'll just, again, all things that are just additive and incremental to our business that'll make our business better. Which again, just gives us more confidence in terms of the operating plan sort of moving forward. Again, going back six months, not to sort of harp on this, but the initial reaction when we bought SECURE was negative from some of the shareholders that really didn't understand Western Canada or the SECURE assets. You had some of these organizations that were out actually looking at that opportunity independently because they loved the scarcity value of those assets and the business that was being built and the amount of organic opportunities that existed to put capital load and high returns on invested capital, organically sort of in Western Canada. Again, sometimes in order to be good, you need to be lucky, and we're a little bit lucky just given the timing of when we did the SECURE acquisition, and then what's happened in the macroeconomic backdrop with the Middle East and in Iran, and now with as everyone's seeing with our new prime minister in Canada, Carney wants 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, 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. 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 some of our page one shareholders that have a perspective that GFL's worth sort of well into the sixties. If you're going to continue executing on a plan, which they have no reason to believe we won't, given our track record over the last 20 years, both on the GFL side and now the recently acquired SECURE, that's going to yield an exceptional result as well. 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. If we get the multiple expansion that we believe we deserve as we come out of this, potentially this AI trade that has affected the entire sector over the last sort of 12 months, I mean, I think you're going to have a winning 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, U.S., and Europe, as well as Asia and the Middle East. We've had just a lot of great dialogue, and it's great to get a lot of that out there and put GFL on the map with a lot of different investors. I think, listen, whichever way it goes, we're fine, but we want to bring the process to finality and sort of move on with whatever the decision that the committee and one of our largest shareholders decides to make.

Great. Thanks for the 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, guys.

Hey, Tyler.

Hey, just curious on how we should think about pricing into next year. It sounds like you got some inflation creeping back in, particularly in indirect fuel. 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 think we have identified incremental opportunity. As you know, we like to underpromise and overdeliver, and I think that's just another lever for us to continue doing that. Again, like I said, when we looked at the value creation opportunities that we laid out at our previous Investor Day, I think, again, as AI tools continue to come on, as incremental pricing opportunities continue to come on, again, that's just additive in terms of the long-term plan. Maybe that was going to wind down in sort of 2027, 2028, those initial equity value creation plans. Maybe we can now extend them with some of these incremental opportunity and some of these other incremental AI tools that will allow us to, again, have a deeper dive into our actual customer base, looking at what each customer contract has, what we're allowed to do under each one of those contracts, and summarizing it in a form that allows us to basically better manage our business. I think this is just relying on tools that are coming to the market. Every day there's a new shiny object, but we're just trying to focus on the four or five things that will actually create that value without a lot of disruption.

Tyler, I'd just add to Patrick's comment. If you think about the upside incremental price we articulated originally, we said it was $40 million-$80 million to capture over the next three or four years. That's what we had said in Investor Day. I think what Patrick is suggesting, and we're feeling highly confident in, is that price is something greater than that. Now, the ultimate magnitude remains to be seen. But I think between 2025 and 2026, you're seeing our outperformance as we are realizing those, what I call surcharge opportunities. Now, going into 2027, you have to remember this year, we're getting meaningful support at the price line from some of this EPR-related transition. That you're going to lap in 2027, 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 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. I just think the runway for keep adding something greater keeps sort of getting extended as we're going out.

Okay. Yes. That is extremely helpful. 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 2026, it looks like you are going to be around, let us call it 41%. If I put the pieces together, it is a little bit scary, but if I do, maybe that is like 43%, 44% next year. I do not know if you could confirm that. So when we talk about that mid-40s, is that more a 45%, 46%, 47%? Or what is the art of the possible in that number over the next few years? Thanks.

Yeah. It is a great question, Tyler, and you have always been good at math. We think that is the direction of travel. I will just caveat, this year's number of 41%, you are getting the last four months contribution of SECURE, which has working capital recovery and a little bit of sort of abnormality because it is not a full year. So I think if you are really the pro forma of where we are at today, you are probably more at a 39%, 40% number exiting this year. We go into next year, we think there is going to be expansion on that. I will have a ramp in cash taxes as I am becoming a larger cash taxpayer, but I see the path of next year being in that sort of 41% to 42.5%. I think that is what we had articulated pro forma for SECURE to be. We will continue to grow from there. If you think about the whole 2027 framework, this year's growth being 20% revenue, 25% EBITDA, 35% free cash. With the setup going into next year, you have the opportunity to almost replicate that. You think about that, the top-line growth organically is going to be mid-single digits. The exact pricing number, exact volume number remains to be seen, but that is going to be a number greater than 5%. You think about the M&A rollover already in hand, you sort of have 15% in hand. So you are entering 2027 with a 20% plus revenue number. If our 2026 guide is CAD 8.055 billion or CAD 8.065 billion, 20% growth on that in the next year, that brings you to a CAD 9.7 billion to CAD 9.8 billion number. Right now, if you look at the margin line, what we have said and continue to prove is we have industry-leading organic EBITDA margin expansion. So if the industry has been doing 30 to 40 basis points, we sort of do 2x that. It is putting you at a 50 to 60 basis point organic margin expansion. The rollover of impact of SECURE should be roughly another 30 to 40 basis points. You have already a set up for, call it, 100 basis points of margin going into next year. That takes this year's 30.9%, closer to 32% for next year. So if you take CAD 9.7 billion to CAD 9.8 billion of revenue at 32%, that should be that CAD 3.12 billion of EBITDA that Patrick referenced in his commentary. Then if you apply that 41% to 42% free cash flow conversion, and that is just assuming the normal course drags to EBITDA across CapEx interest, et cetera, that puts you at a CAD 1.3 billion plus free cash flow number. Then, I think there is a high degree of conviction in that, and it just grows from there. So we are feeling very confident in that framework we previously laid out, and I think with the avenues of upside we keep speaking to, as you get to 2028 and beyond, I am not ready to cap what that ultimate free cash flow conversion number could be, because I think there is runway to keep going north.

Yeah. Extraordinarily helpful. Thank you, Luke.

Thanks, Tyler.

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

Kevin, I am not sure. We cannot hear you. Maybe you are on mute.

Okay. Can you hear me?

Yeah. Now we can hear you.

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

I think it's a combination of both. Obviously, the waste assets we own can continue handling more volume generally. That is just sort of all incremental upside. I think, again, what SECURE did very well, which I think was underappreciated by the public markets, was the amount of opportunity they had to deploy capital at very high returns for their customer base. As their customer base continues to expand operations, that affords the ability to deploy incremental capital into incremental opportunities at sort of high returns. East, West pipelines, North, South pipelines, again, that is just going to be plus or coupled together with some of these LNG projects and terminals. All of those are just going to drive incremental activity in Western Canada. Can I quantify that exactly today? No. Do I know for sure that's going to drive incremental volumes? Yes. 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, the floodgates open. I think from a macro perspective, you're going to see a lot of great activity, not only around our business, but even sort of whether that's in the lower mainland or whether that's in Edmonton, Calgary, et cetera. Just that is going to drive incremental volumes and activity throughout the entire region. Again, that was never the thesis for doing the acquisition because we liked it on its own. But I think, sometimes, like I said, in order to be good, you got to be lucky. I think just given what's happened in the Middle East and some of that tension, and what's happened obviously with the U.S. and tariffs and the Canadian government now looking to sort of focus inward versus outward, that is driving incremental opportunity. We're seeing some of these opportunities already. I think, the challenge for us, and going back to being a public company, you go back to being a private company, public market's very prescriptive in terms of how much CapEx you can spend in a year, et cetera, growth versus maintenance, et cetera. But I think, we have to look at these opportunities as the same way we would look at an M&A transaction. 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. Listen, we are going to continue doing what's best for shareholders and what's going to drive the highest return for our shareholders, again, whether 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 Western Canada.

Kevin, I'd just add, when we underwrite acquisitions, and maybe this comes out of our days of sort of higher leverage, while we look for upside cases, we really want to diligence downside cases, right? See what that could be in a really draconian negative scenario. 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 lower production and activity in that part of the world, which could in time degrade earnings. I think where we sit today have the benefit of a very high degree of confidence that over the near medium and probably longer term, the opposite is going to be true. The level of activity and production, and therefore opportunity for the SECURE assets, is greater than otherwise. But so to Patrick's point, quantifying what that upside looks like today is. We're not prepared to do it, but it's something greater than what our underwriting case was, and we were really happy with our underwriting case.

Yeah. When Remy and Allen founded SECURE back in 2007, the actual year we started, remember, they started with nothing as well.

Correct.

Organically built that business. So, I think underappreciated how exceptional the team is there in looking at and identifying organic opportunities to build and scale that business. So, again, you'll see over the long run that if you look at all the regions we're operating in today, the 10 provinces in Canada, 26 states in the U.S., we have a very unique ability here over the next number of years to really win, and I think you're going to continue seeing us deliver these type of results sort of year-over-year.

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

Yeah. If we're continuing to be a public company, depending on the stock price, I think, moving into 2027, you now have the unique ability to add share buybacks into a more material way into the capital allocation plan. Yeah, that's the beauty of the inflection point of where we are. If you look at the free cash flow growth in ramp, 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, 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. As our business continues to grow, we'll sort of look at that. I think we have multiple levers available to us in order to pull, depending on what the situation is at the time.

Kevin, 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. Just illustratively, all other things being equal, if you end 2026 at mid-threes leverage through EBITDA growth and free 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 CAD 1 billion into M&A at eight times, just for round numbers, that would impact leverage by 15 or 18 basis points. Just to say the balance sheet capacity to now do that incremental capital deployment has never been greater. I think to Patrick's point, just providing us maximum flexibility and being able to execute on our strategies while very squarely adhering to 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 Grippin 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 have 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 go private, was kind of an important factor for you and I think the company. But I am just curious, how are you thinking about the possible options and maybe how that could be structured now as this process seems like it has progressed a bit further?

Sorry, maybe I am not understanding the question. Monetizing what, sir?

Sort of realizing this incremental equity value creation, right? You had in the past talked about maybe potentially

Oh

IPO-ing the business if it gets Right?

Yeah. Oh, I think that's the question. I think if you go private, that's obviously a big question in terms of, do 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, 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 there's no closed-ended fund nature, maybe the business actually never goes back to the market, right? Then just given the amount of free cash flow the business generates, you could find ways to continue selling down stakes to incremental LPs as they come in at sort of different times. I think that's always a challenge in a go private, one of the negatives. The liquidity, like we talked about, is one of the positives of the public markets. The negative part of the private markets is there's less certainty on liquidity at various points in time. Now, that's more of a Patrick issue. I think that is solved for employees in other ways. We've done that for 14 years, so this is not an employee issue. This is just like, "Hey, how do you monetize your 28-plus million shares over time?" I'm not a seller, so I'm 47 years old. I'm not looking for Freedom 55 or Freedom 65 yet. But I think, over time, we 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.

All right. Appreciate that, Color. Thank you. 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, what are the drivers there and how are you thinking about your ability to recover those through price and, to the extent there's any lag, potential margin impact?

Well, I think starting point, a lot of people talking about leachate. It was very wet in many areas, right? That just a quarter-over-quarter difference that Michigan had X inches more rain than last year, that can drive incremental leachate. So that is part of it. But I think what you are also just 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 is incurring further transport costs to get it there and the like. So I think this quarter is not necessarily reflective of a structural, material ongoing headwind. It was about $6 million in this quarter, maybe three-quarters of that is, I would call it more timing one-time, and a quarter of that cost is just incremental cost of transport and processing. But I think we have the benefit in an industry that we all suffer the same fate, if you will, and that, as incremental regs or other reasons drive operating costs higher, we need to recover those. You will see us through our various pricing and other mechanisms ensure we are getting appropriately compensated for these critical services that we are providing. So I think longer term, like anything, incremental costs will just add to the broader base of cost inflation on which we use to set our overall pricing. But, in a given quarter, you can get some mismatch between that cost occurrence and subsequent price recovery. But in time, I would not expect you to have the same sort of headwind that you had, and you would 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 maybe volume-price split or just the core disposal business versus maybe some of the other businesses in the quarter?

Yeah. So, again, we have one month of SECURE revenue contribution. There was around CAD 150 million of revenue. It was just over CAD 50 million of EBITDA, so call it mid-30s plus EBITDA margins. You had like CAD 25 million to CAD 30 million of the free cash flow performance came from SECURE. Now, one month I don't think is actually reflective from a CapEx timing, working capital timing, et cetera. I think the contribution, SECURE's profile for the year, they're going to do CAD 550 million of EBITDA, CAD 1.5 billion of revenue, and I think they're very handily positioned to being able to deliver that. The distribution of that revenue across their services is, as we've previously articulated, in any of the small percentage overall profitability coming from the other lines of specialty chemical and energy infrastructure. But the majority of those revenues is their typical waste and waste processing. I'd say right in line with expectations. The team's Q4 outlook is in line with expectations, and we're finalizing budgets into 2026, 2027, but everything is turning out as anticipated with the opportunity for upside that we were previously speaking about.

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

Yeah. I don't think it's material enough that it really affects that much. Yes, been move in interest rates, but when I look at our borrowing costs, 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 can reduce that with swaps and other things, longer-dated swaps. Again, it's something to think about. I don't think it's that material, and I think when I look at some of these larger recent businesses that have come to market that have sold on the ES side. You have ES businesses still continuing to trade at large size and scale, between 13 and 15 times, depending on the market. I don't think it's really materially affected values all that much. Yes, something obviously to 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. Again, when we look at the running that model, 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. Yes, it factors in.

All right. Thank you guys. Appreciate it.

Your next question comes from the line of Stephanie Moore with Jefferies. 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, I guess what should investors expect the next chapter of the company to look like? I guess thinking, what are the key strategic and financial priorities that you think can help drive the re-rating you believe, I think, the company deserves? 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, our path forward is relatively the same under both. It's really executing on all that we articulated at the Investor Day and more. 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 to higher levels from there. But it starts, as I've said always, you think about the algorithm, it starts at the top line. Patrick articulated this, but the industry has a very sound and stable top-line organic growth algorithm, and we believe we have an idiosyncratic opportunity to do better than that very attractive industry algorithm as we benefit from the self-help that's available to us. Now that's mostly from price, but you've also heard us say we believe our market selection should drive incremental volumetric opportunities as well as we benefit from the fact that in Western Canada, what should be our passing there over the next sort of near and medium term. The U.S. Southeast, where a preponderance of our businesses just has a demographic benefit of being a place where people are moving to. So we think top line have a right to sort of win there organically, and I'll speak all this organically before I talk to M&A. Then you look at the EBITDA margin side. If you think about our EBITDA margin performance over the past, call it five, six years that we've been public or 10 years, you want to take, we've continued to produce outsized EBITDA margin expansion as we've demonstrated the efficacy of our strategies. We see runway to sort of keep doing that. Think about our results today, achieving, I just gave a guide for 27 or these breadcrumbs there, too. You're very squarely past the low 30s and moving towards mid-30s, and we see a lot of runway to sort of keep going there. The most exciting part of it for us is this inflection point that's been reached, though, at the free cash flow level. Really what that is now that you're sort of past the de-leveraging hump, if you will, as you go forward and you sort of effectively maintain an interest expense intensity on a relatively sort of flat basis to diminishing, you're getting significant idiosyncratic torque at the free cash flow line that is available for GFL and GFL alone. You put that all together over the sort of next three to five years, as Patrick suggested in the prepared remarks. You don't need to believe a lot to see close to 2x at a free cash flow per share level over that sort of period of time. That is really what the next chapter is. We've built the business together pro forma with SECURE. We now have the balance sheet scale and the free cash flow profile to be able to very squarely execute capital deployment strategies without any longer having to be tempered by the sort of leverage considerations and just doing more of the same. Now doing so with a sort of best-in-class asset base and a management team that has proven the effectiveness. We welcome Allen to the team that brings incremental horsepower, and we are just very excited and confident in the sort of go-forward opportunities to just keep doing all of the items that we have articulated.

Thank you. Appreciate the time.

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

Hey, good morning. Thanks for taking the question. During the prepared remarks, you flagged CAD 125 million, I think, in inflation from diesel. Just curious how much of that you expect to be kind of passed along effectively in 2026, and then if you see any kind of lingering catch-up in 2027?

Yeah, Bryan. Great question. So if you look at it on direct diesel costs, what we sort of pay for the. We have about $100 million-$105 million incremental cost, and then indirectly, we calculate, and this is like third-party transport providers, et cetera, but another $20 million-$25 million. So you got about $125 million of cost. We are going to recover this year about $105 million-$110 million of that. So you have this sort of $20 million-$25 million exposure, which is really a function of those quick ramps, right? Because you take a month like September, where diesel jumps up very quickly mid-month, you have that sort of exposure. You do not get to recover it and ultimately till it rolls over. So we do feel confident in time when diesel rolls over, assuming that that happens, you will recover that incremental $20 million-$25 million. But if you think from a margin profile for the year. We estimate diesel cost, and it is 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 headwind. I think that is consistent with what some of our peers have spoken about, and I think that is more a reflection of the maturity of their recovery programs. And that is 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 will be even better protected as we go forward. But ultimately, diesel rolling over will be a margin tailwind for us.

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

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

Your next question comes from the line of Konark Gupta with Scotia Capital. Your line is now open. Please go ahead.

Thanks, operator. Good morning. I want to go back to the strategic review process. In fact, I wanted to understand in a simplified manner, I guess, what is the process looking like? How will it unfold here? You have November 9th as a deadline by a special committee. If you see the bids and the updates come through by that deadline, what are the next steps going to look like after that? Will there be any potential, I would say, ebbs and flows or holds with respect to bondholders in that process? Any color you have there.

Yeah. I think these transactions are very complex. Again, we have done them multiple times. Obviously, a little bit trickier as a public company. As I have said over and over again, I am not a seller, so I am not really part of the process or the negotiation of whatever that is. You have other potential insiders that would potentially look at selling a whole or part. Again, that comes with its own set of complexities. 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 is a number that represents fair value. All of those things have to align. There is nothing more we can do as a company from a diligence perspective. People just have to arrive now at an answer that works or does not work. Like I said, I'm conflicted because at the end of the day, I'm not selling. It's in someone else's hands and ultimately, that decision will be made. But the process from my perspective has been very good on a multitude of fronts as a public company or a private company. Learning more about our business is always good. Having smart people 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. We've had a lot of dialogue with new potential shareholders around the company. Listen, it's been good. It's been a lot of work. It's been time-consuming, coupled together with everything else we've been working on. But no one in this organization shies away from hard work. We're just going to continue doing the right things and we'll see how the process unfolds over the next week. But from my perspective, management's perspective, we just want to get on with it. It's got to come to a conclusion, and we need to move on and put the chapter behind us one way or another. Hence the reason why it's a deadline of November 9th. I think it's not easy to get all these different groups together and we've been in Toronto the last couple of days where everyone can actually sit down and have fruitful discussions and real discussions about where things are at and what needs to be done. Hence, we feel confident that by November 9th, we can put a pin in this one way or the other.

Again, I appreciate the color there. Thanks. If I can just follow up, Luke, on the guidance bridge. You can see your guidance has moved up on the back of recent acquisitions, obviously. Looking at If I look at the incremental margin on the guidance change, it's 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, Konark. Thanks for the question. Obviously, a lot of moving pieces from the original guidance. With where diesel has gone, FX has been bouncing around, the recovery from commodities. But if you think about from the beginning of the year and if you think about the top line, originally revenue was supposed to grow at just under 6%, 5.8% was our original guide, and now we are saying it is 22%. So you effectively have 16% incremental revenue growth versus the original sort of guidance. 13% of that is 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, from the Canadian dollar weakening, and therefore you are left with 120 basis points of what I call organic. That is mostly diesel recovery and commodities, as price and volume are sort of a wash. Price is 40, 50 basis points better, and volume is 60, 70 basis points negative. So a bit of a sort of wash. That is really what is 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, I think 7.8% EBITDA growth, and now we are saying 25% and change. So you have roughly 17%, 17.5% incremental EBITDA growth. Again, sort of 14.5% of that is coming from M&A, and that is a large contribution from SECURE. You have 180 basis points again of FX, and you have roughly 100 basis point benefit from the commodity price. Now, diesel, as I was saying to Bryan, it 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 is really the sort of margin piece that you have coming through. So obviously, SECURE is driving a component of this and taking the margin profile up. But there is a lot of other sort of pieces, including the underlying just organic margin expansion from a bunch of the cost levers and other optimization that we have been talking about on this call and previously.

Yeah, that is great color. 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 Kooyman on for Jerry. On the RNG EBITDA, I was just wondering whether you could comment on where it sits relative to the $125 million-$150 million range, and what are the in-service dates for the remaining facilities, and roughly how much RNG CapEx remains in 2027. Thank you.

Yeah. I think we're, again, like we said, somewhere between $50 million and $75 million. Some of that's EPR, but we probably have another $50 million to $60 million depending on the structure of the RNG projects. We expect the in-service dates for those to sort of come on late 2027 through 2028, and we have about half of that RNG EBITDA contribution in the P&L today, and that other incremental half to come over the course of sort of on through late 2027 and through early 2028.

Yeah, I think the in-year, what we've said this year, $50 million in-year EBITDA this year from RNG, that's roughly right. We're actually a little bit behind, but directionally there. The next four projects that come on, to Patrick's point, they'll be on the end of 2027, probably no contribution in 2027, just contribution in 2028. That's another $40 million to $50 million of the EBITDA. And then the last four small projects is that remaining sort of $15 million to $25 million of EBITDA that comes on 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 2027 guidance.

Great. Thank you. Appreciate the color.

Your next question comes from the line of James Schumm with TD Cowen. 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? 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 always say it's very simple. It's again, while you have to have an operating plan, you can look at a business, you can buy a business, you can put whatever plan you want on a piece of paper, but then you have to figure out actually how you're going to monetize that. I think it's really just a function of how much leverage do you want to use as a private company. I just say that's the biggest impediment to sort of going public and going public at the right price. We lived that. At the time, when we went public with a $950 million EBITDA business, when we went public in 2020, we did a very large IPO because the business we were operating, the business was 6.5, seven turns of leverage. We had to do a $3 billion IPO, which is a very large IPO today. Now, a large IPO six years ago to today, when you are talking about IPOs of $75 billion to $250 billion, maybe we are in a different market. But from my perspective, listen, if the public markets want to see leverage somewhere between 3.5 and four turns initially out of the gate, you just have to back solve for what that looks like in terms of an IPO. Again, do you want to run the business at six turns of leverage and then have to take out two turns of leverage on an IPO? If the business is, call it, $6 billion of EBITDA, that means you have to fund, do a $12 billion IPO to delever. Do you want to run the business with 4.5 or five turns of leverage where you only have to do a $4 billion IPO to get into that ZIP code where investors want to see leverage for the longer term? Again, you can back solve for that. You can underwrite that in your returns. Do you have to run the business with 3.5 turns of leverage? No, but I think as a private company, you wouldn't run the business with 5.5 to six turns of leverage. I think you would keep leverage at 4.5-ish to five turns, toggle between those as a private company, and then that sets up a very reasonable IPO if you want to re-IPO the business in four or five years. The other thing is, there is material free cash flow that comes off of this business. Right? A turn of leverage doesn't do much. If you are thinking about an incremental turn of leverage, which is just call it $3 billion today, to borrow an extra $3 billion at an interest rate of 5%-6%, you are talking about only an incremental $150 million of interest cost to run that incremental turn of leverage. It's not a material number, and the business still spits off hundreds and hundreds of millions of dollars of free cash flow at that, which would afford you the ability to delever and grow at the same time as a private company. A lot of different paths, but again, I think that's just the biggest impediment to maintaining that. Obviously, what you don't want is to have a bunch of scorched earth 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 am 47 years old, I have no interest in burning a bridge with public investors, although, I believe it's trading at a material discount today. But again, those same anchors that are our top 10 shareholders today would have to be our same top page one shareholders if you were going to re-IPO. So I think that's an important thing to do, and I am cognizant of that, if that is the path chosen. Yeah, that would be the only real impediment.

Okay, great. You actually answered my next question with that as well. Maybe just going back to the M&A, what you are seeing there. We are hearing that maybe there is more. I am 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 private equity competition? Is that sort of maybe driving up valuations?

I have 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 their multiple today is probably trading at a higher multiple than a bunch of the solid waste sector, which has driven confidence on the ES side. That may be on the environmental services business. Things are where solid waste was maybe 15 to 20 years ago. So consolidation opportunities have stepped up. That being said, I have 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 million to 10 million of EBITDA. I have not seen much of a change in that size of business. Where you have seen some change, I think, is in the upper end of the range when you are talking about businesses that are 75 million to 100 million of EBITDA, where you have seen valuations step up because you have a private equity firm that could potentially get a management team and look to use that as a platform and then buy down that multiple with incremental, less expensive M&A. I think that is where you are seeing it. I do not 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 Stifel. Your line is now open. Please go ahead.

Hi. Good morning. Thank you for taking my questions. Patrick, I wanted to ask you a little bit just about the impact of diesel more broadly. You talked about some of the indirect costs in terms of some transportation and some parts, but are you seeing any of that creeping into broader stuff like labor? 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 diesel?

Yeah. Listen, I think, again, quick movements in fuel, knee-jerks, you're going to have to push through price. I think going to Luke's point, annualized impact is probably CAD 125 million. We will recover 95% to 100% of that. So, there's a little bit of a lag sort of on municipal contracts and other things. I think like other businesses that have a transportation component to their business, again, whether it's parts, whether it's long-haul trucking, again, they're going to need to recover that. So those indirect costs will have to be recovered. So depending on what happens with fuel, yeah, that could yield the incremental price that we need to put through in 2027 versus what we thought maybe three to four months ago. Again, the industry, whether it's Waste Connections, whether it's Waste Management, whether it's Republic, whether it's Casella, whether it's the large independents or the smaller independents, we're all in the same boat. I think the industry has shown a very good discipline around pricing and having to price appropriately to cover our sort of internal costs of inflation. You saw that through COVID. As internal cost inflation declined, pricing came down. If inflation goes up, we will price accordingly, and we will do so in a disciplined fashion. No one is doing it in an egregious nature, and I think that's why people love Waste. You look at the results, again, Waste Connections printed an exceptional quarter. Waste Management, from my perspective, printed an exceptional quarter. The industry is doing exactly what it is supposed to do in the face of whatever challenges is being thrown at us. A couple of years ago, it was labor. Now this year, it is fuel. I think whatever gets thrown at us, we can handle and we can adapt to as an industry. That is what we will do.

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

Yeah, that is right, Shlomo. It is 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 transport and effectively just passing that through, being a broker on that piece. As part of the restructuring the contract, we are no longer doing that component of it. So although this CAD 30 million of gross revenue is going away, the profitability of that was de minimis. So you will have that same impact in Q4 as well. I think I said in prepared remarks that Q4 volumes will decelerate, and it will be negative, but a big component of that is, again, just that CAD 13 million again. 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 flat-ish.

All right. Thank you.

Your next question comes from the line of Chris Murray with ATB Cormark 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. When we listen to you talk about the process you're going through right now, I wonder if it changes your opinion of the infrastructure business, especially as we've seen multiples in the construction space move up. And just trying to get a sense of what you would think fair value is on that. I know you guys mark-to-market the earnings, but just any thoughts around GIP or even the ES business would be helpful.

I think, again, multiples I'll start with ES. 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 million 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 million. Over five years, we had a plan to grow that business to roughly $1 billion 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 two and a half to three years. But again, you run that math, take $1 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, call it, $10-plus billion of equity value sitting there, of which we own 40%. If we buy it back at a fixed multiple of 1.8 times, that we would owe the existing shareholders in that, roughly you would have, again, $5 billion of debt. You would owe those other shareholders roughly sort of $5 billion to $5.5 billion. You'd have $10 billion. You'd have $5 billion to $6 billion of equity value of that business in call it two and a half years. GIP, 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 where we specialized our work in. We have won multiple projects that are coming online. We recently got a quarry permitted in Newfoundland that is going to supply a lot of the Northeast into the U.S. all the way down to Florida. 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 is 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 are two to two and a half years away from doing that on both of those businesses. Yes, you could do it sooner, but I do not see any reason why we would do that today and not continue executing that plan. 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 billion to $7 billion that will 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 will 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. Wondering if you could just talk about your assessment of runway for M&A in the U.S. and relative attractiveness of the opportunities versus Canada. 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 are going to stay within the normal algorithm, if I roll out to 2027, I think between organic CapEx spend and M&A spend, and again, share buybacks, you could probably today, back of the envelope math, probably deploy CAD 1.3 billion to CAD 1.4 billion and stay within the leverage targets that the public investors want. And over the next three to four years, as the business continues to grow, that number grows, right? So I think over the next three or four years, that number will grow to somewhere closer to CAD 2 billion that you could deploy. I think as a private company, if you had less of a focus on leverage and maintaining those targets, I think that CAD 1.3 billion to CAD 1.4 billion, you could actually deploy somewhere between CAD 2 billion and CAD 2.2 billion a year, and that number would grow as the business grows. I think you basically have a CAD 600 million to CAD 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, if you spent an extra CAD 600 million to CAD 700 million, you are basically spending an incremental CAD 3 billion over that period. And obviously, as a private company, you wouldn't be spending any money on share buybacks. If 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 CAD 1.3 billion of adjusted free cash flow could you actually realize on sort of an unadjusted basis? It sounds like there's CAD 150 million, maybe plus, of CapEx. Any other big moving pieces we should be thinking about on that bridge?

Yeah, Adam. We are going to have to wait till 2027, as Patrick said, evaluating growth CapEx. That would obviously be a piece of it within SECURE as you think about that bridge. But otherwise, ex that, you have the normal course items we have talked about before, right? You have leases coming off of that. We will have some integration costs, et cetera. So I know there has been focus on the delta between unadjusted and adjusted. This used to be a focus at our EBITDA line, and as our EBITDA grew, the relative impact of those adjustments staying flat on a degree of importance just diminishes. And the same thing is happening at the free cash flow line now. The overall lease and other costs that are a drag against that do not grow at the same rate as the free cash flow base, and you are going to get operating leverage on that. But you have to wait until 2027 official guidance, where we will 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.