GFL Environmental Q2 2025 Earnings Report

GFL Environmental EPS Results

• Actual EPS: $0.19
• Consensus EPS: $0.19
• Beat/Miss: Met Expectations
• One Year Ago EPS: $0.29

GFL Environmental Revenue Results

• Actual Revenue: $1.23 billion
• Expected Revenue: $1.68 billion
• Beat/Miss: Missed by -$447.05 million
• YoY Revenue Growth: +5.90%

GFL Environmental Announcement Details

• Quarter: Q2 2025
• Date: 7/30/2025
• Time: After Market Closes
• Conference Call Date: Thursday, July 31, 2025
• Conference Call Time: 8:30AM ET

GFL Environmental (NYSE:GFL) offers non-hazardous solid waste management and environmental services in Canada and the United States. It offers solid waste management, liquid waste management, and soil remediation services, including collection, transportation, transfer, recycling, and disposal services for municipal, residential, and commercial, and industrial customers. The company was incorporated in 2007 and is headquartered in Vaughan, Canada.

GFL Environmental Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: GFL delivered a record Q2 with 34.7% solid waste adjusted EBITDA margins, the highest Q2 level in company history.
• Positive Sentiment: Pricing and volume both beat original forecasts, allowing GFL to raise full-year pricing guidance to over 5.5%.
• Positive Sentiment: Volume growth accelerated for the third consecutive quarter, up 150 basis points sequentially despite industrial and construction headwinds.
• Positive Sentiment: GFL completed three tuck-in acquisitions in Q2, with three more closing imminently and a robust pipeline supporting the $700–$900 million M&A deployment target for 2025.
• Positive Sentiment: Management raised full-year guidance, boosting adjusted EBITDA targets by $50 million (2.6% on a constant currency basis) and forecasting industry-leading organic revenue growth.

Presentation

[Operator]

Good morning, everyone. Thank you for attending today's GFL Second Quarter twenty twenty five Earnings Call. My name is Jerry, and I will be your moderator today. I would now like to pass the conference over to our host, Patrick Dovigi, Founder and CEO of GFL. Please go ahead.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

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

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Thank you, Patrick. Good morning, everyone, and thank you for joining. We have filed our earnings press release, which includes important information. The press release is available on our website. During this call, we will be making some forward looking statements within the meaning of applicable Canadian and U.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

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.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

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.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Securities regulators. I will now turn the call back over to Patrick.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Thank you, Luke. This quarter saw the continuation of the broad based outperformance with which we started the year, driving results ahead of expectations despite multiple external headwinds. We achieved solid waste adjusted EBITDA margins in the second quarter of 34.7%, the highest Q2 in our company's history. And our revised outlook for the remainder of the year is better than we originally anticipated. This consistent delivery of record setting performance once again demonstrates the ongoing dedication and capabilities of our employees and I want to again thank each and every one of them for their commitment to Team Green.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Our top to bottom beat against expectations was achieved despite FX rates and commodity prices moving against us since we provided the Q2 guidance back in May. We believe this is a continued demonstration of the quality of our asset base, the effectiveness of our value creation strategies and the resiliency of our business model. Both pricing and volume were higher than expected for the quarter and continue to trend above our initial guidance. The intentional shedding of lower quality revenue and disciplined pricing strategy ensures we are generating appropriate returns for the high quality services we provide. Because of this, we are increasing our pricing guidance and now expect to deliver over 5.5% pricing for the year.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Volume was positive for the third quarter in a row and accelerated 150 basis points over the first quarter. This result was achieved even with macro headwinds impacting construction oriented volumes and industrial demand. We believe the current tariff environment and broader economic uncertainty are limiting activity levels of many of our industrial customers having a flow through impact on volumes, especially in our roll off collection. Tailwinds from our recent strategic growth investments in EPR together with the positive underlying trends arising from our market selection are more than offsetting these demand side pressures. Although our exposure to cyclical end markets is low overall, we remain well positioned to benefit from any recovery in the macroeconomic environment.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

The effectiveness of our revenue related strategies is also reflected in our margins, where we realized a two thirty basis point expansion over the prior year. Lower labor turnover together with continuing progress in implementing our self help initiatives and M and A synergy realization all continue to contribute to our industry leading organic margin expansion. As highlighted at our Investor Day, we see a clear path in the near term to low to mid 30% adjusted EBITDA margins, which should result in higher free cash flow conversion and returns across all of our asset base. On M and A, we completed three small tuck in acquisitions for the quarter and are anticipating closing three more tomorrow. Our pipeline remains robust and we remain highly confident in our ability to meet or exceed our M and A capital deployment targets for 2025 and beyond.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

The back end weighting of this year's M and A activity gives rise to a lower current year contribution, but sets us up for a larger rollover amount into 2026, positioning us for yet another year of exceptional growth. The strength of our first half results together with the opportunities we see in front of us allow us to increase our full year guidance even in the face of economic uncertainty we see in many of our markets. Our 2025 guidance is industry leading organic revenue growth and adjusted EBITDA margin expansion. Luke will walk you through the updated guidance in more detail, but we are increasing our adjusted EBITDA target by $50,000,000 or 2.6% before considering the translation of impact of FX. I will now turn the call to Luc, who will walk through the quarter in more detail and then I'll share some closing comments before we open up for Q and A.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Thanks, Patrick. Similar to our first quarter discussion, all of our financial results and the associated analysis exclude the contribution from ES from the comparative prior year period. Consolidated revenue for the quarter of $1,675,000,000 was 9.5% ahead of the prior year pro form a for divestitures. Pricing and volume were both ahead of plan, whereas commodity prices, surcharges and contribution from FX were all headwinds to plan as the external factors on which these amounts are calculated changed significantly between the time we gave our guidance and the end of the second quarter. Second quarter revenues would have been approximately $10,000,000 higher if not for these exogenous changes.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

The carry forward of our strong first quarter pricing along with incremental pricing actions enacted in response to ongoing cost inflation in select markets contributed to pricing of 5.8%, 30 basis points ahead of plan. For the full year, we now expect to realize pricing of 5.5% to 5.75%, 25 basis points better than our original guide. Volume was positive in both of our geographies with over 200 basis points of sequential volume growth acceleration in our U. S. Geography as we move past the weather related headwinds that impacted the first quarter.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

The positive volume was achieved inclusive of both roll off pulls and C and D landfill volumes being down in what we ascribe to macro related slowdown. Consistent with the first quarter, recyclable volumes associated with EPR related activities continues to be a tailwind. Second quarter adjusted EBITDA margin was 30.7%, two thirty basis points higher than the prior year and 60 basis points ahead of our guide. The 2024 Michigan residential divestiture, the net impact of lower fuel prices and RNG contributions were a tailwind to margins, whereas commodity prices and acquisitions were a headwind. Excluding all these items, underlying solid waste margins expanded 170 basis points.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Adjusted free cash flow was approximately $137,000,000 a result better than planned on account of the adjusted EBITDA outperformance and the timing of CapEx. The $190,000,000 year to date investment in working capital consistent with our typical seasonal cadence and is expected to largely reverse by the end of the year. Although with the revenue growth outperformance, we now expect a modest investment in working capital for the year as a whole. As Patrick said, despite the multitude of external headwinds, the success of our first half results set us up to increase our guidance for the year. Revenue is now expected to be approximately 6,550,000,000.00 to $6,575,000,000 based on the FX rate of 1,370,000,000 for the remainder of the year.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Recall our original revenue guidance of 6,500,000,000.0 to $6,550,000,000 was based on the then FX rate of 1.41. Every one point move in FX is about $30,000,000 impact to annualized revenues. Our updated guidance would have been 6,625,000,000.000 to $6,650,000,000 on a constant currency basis, representing a 1.7% increase over our original guidance. The updated guidance assumes pricing of 5.5% to 5.75%, volume of positive 25 to 75 basis points and net M and A contribution of 40 to 50 basis points. The guide assumes today's commodity and RIN prices and the current macro environment persists.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Any improvement to these variables will provide upside to the guide. The contribution from M and A incremental to what has been included in the guide will also be additive. Adjusted EBITDA guidance increases to 1.95 to 1.975, a $25,000,000 increase at today's FX rates or a $50,000,000 increase over our original guide on a constant currency basis. At the midpoint, year over year margin expansion increases to 120 basis points, an incremental 20 basis points over our original guidance resulting in consolidated margins of just under 30% as the strength of our base business performance more than offsets the industry wide margin headwinds from muted industrial and construction related volumes and lower commodity prices. In terms of adjusted free cash flow, the $25,000,000 of incremental adjusted EBITDA gets offset by incremental cash interest expense associated with deploying the ES proceeds into share repurchases faster than originally anticipated and capital deployed into M and A.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

As I previously said, we now expect a modest working capital investment for the year as well as net CapEx of approximately $750,000,000 an increase over our original guidance largely attributable to the acquisition of a strategic property that was previously being leased. The expectation is that these incremental investments will be largely offset by reduced cash taxes from recent changes to U. S. Tax legislation. We are therefore reaffirming our $750,000,000 adjusted free cash flow expectation.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

As to the 2025, we expect consolidated revenue of approximately $1,690,000,000 to $1,695,000,000 and adjusted EBITDA of $525,000,000 which implies an adjusted EBITDA margin of about 31% and continued margin expansion over the prior year pro form a for the ES sale. Q3 adjusted free cash flow is expected expected to be approximately $175,000,000 inclusive of $120,000,000 in cash interest, dollars $250,000,000 in base CapEx and $20,000,000 net recovery from working capital and other operating cash flow items. I will now pass the call back to Patrick, who will provide some closing comments before Q and A.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Thank you, Luke. As I said in the quarter, our financial performance continues to prove the quality of our assets and market selection and the effectiveness of our strategic plan that we laid out at Investor Day. The operational resiliency of our business in the face of multiple external headwinds that we demonstrated with our results this quarter further reinforces our conviction that GFL is uniquely positioned for industry leading financial performance and value creation for all of our shareholders in the near term. I'll now turn the call over to the operator to open up the line for Q and A.

[Operator]

Thank you. Our first question comes from Sabahat Khan from RBC Capital. You may now proceed.

[Sabahat Khan, MD - Global Research at RBC Capital Markets]

Great. Thanks and good morning. Just before getting into the business, there are a bunch of headlines in the press over the recent months around the potential options the company might be considering for the GIP business. So maybe just wanted to give you an opportunity to talk about, one, how you're thinking about that business and some options? And kind of second part there, maybe you can just give us some color on the current composition of that business across aggregates and some of the other business lines? And just sort of a third clarification question. There was a $24,000,000 monetization or a gain that was reflected in the quarter. Can you just clarify that as well?

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Yes, Sabahat. Yes. So as you know, I mean, I think we carved that business out of the GFL book in 2022. So we have owned it as a private business now for approximately three years. Think over the at the time, our equity value in that business was was valued on the books of somewhere around $250,000,000 I think you you mentioned a footnote of just the rebasing of that.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

That $25,000,000 is really nothing. It's really because we did an acquisition in in one of the principles of that business that we bought. They actually ended up taking equity in GIP. So technically, we sold them equity at a much higher value. So it's sort of got rebates.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

But by and large, I think what you'll see through the process that we've seen some headlines recently. We're looking to conclude that process over the next two to three weeks. I think we're on the five yard line. We're down to two final bidders and we're in the process of just winding that process down. And I think you'll see a very favorable result, but we'll share that when the final party is selected and we get to the market.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

But I think what you'll see is a rebase of our equity significantly higher consistent with what we thought values of that business could be over the near to sort of medium term. As we said, would be, I think from our perspective, partial monetization, not a full monetization. We continue to see a significant amount of opportunities in that business, but there will be a dividend that comes back to GFL to use again for further M and A within the existing portfolio. And certainly at these levels, continued share buybacks with the proceeds that we get from that sale process. But like I said, nothing is 100% done until it's done, but we're feeling very good about it.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

And we think that we'll have something to report in the next coming weeks.

[Sabahat Khan, MD - Global Research at RBC Capital Markets]

Great. And then just on the margin side, good progress this quarter. It sounds like you pointed 31% for the next quarter. Can you maybe just recap or give us an update on some of the self help levers and the improvements that you sort of highlighted at the Investor Day, where you are on those and what you expect to contribute to this full year guidance here for the rest of the year? So just a bit of an update on the margin side, please.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Yeah. Hey, Saba. Good morning. It's Luke. It's a great question and obviously something that we're sort of really excited about.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

You can see it in the current quarter results exceeding what we're already, we think, pretty sort of ambitious expectations or goals. And it's, as you said, a function of all of those levers contributing to the overall sort of cause. I'd start to the top line. You can see the pricing outperformance of the current quarter. I mean one of the self help levers we had talked about at the Investor Day was on the surcharges line, right?

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

And there's just a whole host of incremental fees that we should be getting for the services we provide. And we've talked about initiatives to get those in place and go out and harvest that opportunity. And while we're early stages, it's starting to contribute. And so some of that price outperformance, I think we had articulated a 40,000,000 to $80,000,000 opportunity for surcharges by the time we got to 2028. Very early stages, but we're starting to realize some of that benefit.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

You're seeing that come through on the top line. As you go down the P and L, I think another key opportunity was labor turnover, right? And just the benefits that will come from attracting and retaining talent and keeping them in the doors for longer. And you're seeing that, a continued sequential improvement in the turnover rates, still not where we ultimately want to be, but probably another 100, 200 basis points improvement in the current quarter versus on a year over year basis. And that accrues into that labor line, right?

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

All in labor you can think of as 25%, 35% of the P and L. And obviously improving that turnover is a key part to driving productivity and cost savings and you're seeing that come through. And then as you just think about the broader buckets of cost, we talked about synergy realization, we talked about procurement optimization. Each of those levers are being pulled and the team is being able to deliver in excess of as I said what was already pretty ambitious 2025 expectations. So you're right, Q3 the expectation is it continues.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

For the guide, the year as a whole, we now see an incremental 20 basis points at the midpoint over what was already our starting 100 basis points. And we're really excited for the continued performance and proud of how well everyone is executing on these strategic plans.

[Sabahat Khan, MD - Global Research at RBC Capital Markets]

Thanks very much.

[Operator]

Thank you. Our next question from Stephanie Moore from Jefferies. You may now proceed.

[Stephanie Moore, SVP - Equity Research at Jefferies]

Hi, good morning. Thank you.

[Stephanie Moore, SVP - Equity Research at Jefferies]

Patrick, you noted previously that your M and A pipeline, the majority of the pipeline you're looking at was tuck in acquisitions within existing markets. Just curious if maybe that has changed at all if you look at the back half. And then if you could maybe speak to the visibility, the M and A you have in the second half of this year. Thanks.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Yes, no problem. Thanks, Stephanie. I think from where we sort of sit today, I mean, it's been a very busy first half of the year. One with the original, the carve out of the ES business and then the, I would say the recapitalization of the infrastructure business combined to sort of what we do every day on the solid waste side. I think we've deployed just over $300,000,000 of capital today into M and A.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

I think we guided to 700,000,000 to $900,000,000 spend this year on M and A And we're fully on track to do that, fully on track to achieve the high end of that range. So visibility is very good. And although there won't be a large in year contribution from the M and A, I think setting us up perfectly for an outsized year of growth in 2026 because of the rollover effect of that M and A that's going to close in the back half of the year here. So very good visibility. In terms of moving to new markets, nothing has changed on that thinking.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Again, continued focus is on densifying existing markets where we have underutilized post collection assets. We think that's going to get at the highest returns on our invested capital. And for the time being, that's where we're focused and we don't see any reason to sort of step outside those markets that we're currently operating in today.

[Stephanie Moore, SVP - Equity Research at Jefferies]

Got it. Thank you. And then maybe just a follow-up to the volume performance. You know, look, I think at this point, we've all seen or heard, you know, that obviously the industrial economy is really weak. There can be lumpiness with special waste volumes, but your volume performance, you know, definitely continues to be a clear standout.

[Stephanie Moore, SVP - Equity Research at Jefferies]

So if you could just kind of talk about the puts and takes to the volume performance in the quarter, specifically with, as you noted, both regions seeing positive contribution. Thank you.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Yeah. Thanks, Stephanie. It's Luke here. Happy to walk through it. It's, again, performance that we're sort of proud of, and I think it speaks to some of the strategies that we've been talking about both in terms of market selection as well as the strategic investments that we've been sort of making.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

I mean, the market selection piece, again, we've spoken to the benefit we have of having large businesses in The U. S. Southeast, where a lot of people are sort of moving to and new houses yields new business, which yields new opportunities for us. And then also regulatory environment. Right?

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

And Canada as a whole tends to historically have been a good volumetric business just by virtue of increased regulation that drives volumetric opportunities. And we're certainly seeing that with EPR, which ties into the sort of strategic investment, right? The regulatory change gave opportunity for capital deployment, and we saw its attractive return profile. And as you know, we have heavily invested in that. And there's been a couple of years we've been on these calls talking about all this investment we've been making.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

But now fortunately, we're finally at the time when we get to see reap the rewards from that. And it's sort of playing out as anticipated. I mean Canadian volume was 6.3% for the quarter. Now it was 6.9% in Q1, but Q1 benefited from one large event driven destruction of a car plant, which is about $10,000,000 of transfer station volume we called out. If you exclude that, Q1 was $4,600,000 So you're really now sequentially increasing to $6,300,000 in Canada for Q2.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Now EPR is a big driver of that as it was intended to be. And so if you back that out for Canada, it's about sort of 2.5% volume growth, which I think is just a sort of function of the quality of the business that we have and a little bit of the catch up of Q1 because recall that was a little bit sort of muted by virtue of the real sort of winter that was experienced in many markets. The U. S. Is arguably the more sort of shining star in volume growth, which turned positive from what we had

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Now Q1, heavily weather related impacts. But print positive volume growth there despite the industrial and construction oriented slowdown, I think, really speaks volumes, pardon the use of that word, to the business that we have there. I mean, if I look at C and D waste, it was down 8% quarter over quarter, which I think is a function of that sort of macro piece. Now as we said in the prepared remarks, we've never been able to grow a business that had high degree of exposure to the most cyclical ends of the market, and that's really coming out of our historical leverage profile. So I think we have more de minimis exposure to some of the soft areas, but it's also just a function of benefiting from the investments that we've been made both organically and inorganically and we're excited to sort of continue as we go forward.

[Operator]

Thank you. Our next question is from Patrick T. Brom from Raymond James. You may now proceed.

[Patrick Tyler Brown, Managing Director at Raymond James]

Hey, guys. This is Tyler. Can you hear me?

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Yep. We can hear you.

[Patrick Tyler Brown, Managing Director at Raymond James]

Hello? Alright.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Yeah, Tyler. We can hear you.

[Patrick Tyler Brown, Managing Director at Raymond James]

Sorry. I I don't yeah. Good deal. Hey, Luke. Can we can we go back to volumes?

[Patrick Tyler Brown, Managing Director at Raymond James]

I just need some clarification because I think it's a little bit confusing. So you printed two and a half percent volumes, but my hunch is the vast majority of that was EPR and RNG investments layering in. Is that correct? And two, on the 25 to 75 basis points on volume guidance, is that excluding EPR and RNG? Or is that what we're going to see in the table? Does that make sense?

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Yeah. Todd, I'm not sure if you just heard my response to Stephanie as I just sort of covered a bunch of that. But just to reiterate, EPR, if you think about for the quarter, EPR is contributing about 20,000,025 million dollars of the global volume number, right? So certainly, EPR is providing a tailwind to the consolidated volumes. Now even without that, Canada volume is positive 2.6% and The U.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

S. Volume is also positive. But yes, you've got a big chunk of it for being EPR. Now remember, EPR was in our base guide, right? So for the year as a whole, the initial guidance was assuming we're going to be, call it, roughly flat on volume.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

I think we said minus 25 to positive 25. The new guide takes that up 50 bps. So now we're saying 25 to 75. A little bit of that outperformance over original guide is incremental EPR benefits. Right?

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

So we're doing a little bit better than what the pro form a was on EPR volume. But the balance of that incremental volumetric guide is just broad based volume across the system. On RNG, just so know, by virtue of our arrangement, very de minimis amount of our RNG EBITDA is actually manifested in the revenue line. Right? It's just all the sort of JV EBITDA pickup.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

So RNG really is not factoring into the volume story, but EPR is, although I would say the guidance raise is less about EPR and more about broad based outperformance.

[Patrick Tyler Brown, Managing Director at Raymond James]

Okay. Okay. That's very helpful. No, I appreciate that. And then I know the CapEx is obviously split between U. S. And

[Patrick Tyler Brown, Managing Director at Raymond James]

Canada, but just any broad color on the dollars of what bonus depreciation means in 'twenty five? And if I go back to the Analyst Day, I think you said that you were expecting, call it, a mid-40s free cash conversion. But with bonus depreciation, does that maybe jog up, say, 100 basis points or something like that? Just any color there.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Yeah. Great questions, Tyler, and, obviously, sort of very topical. For the current year, bonus depreciation is expected to be about $25 $30,000,000 tailwind, right? And that's really, as you said, coming out of the U. S.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Dollar CapEx. But as we said in the prepared remarks, I really have a little bit of extra CapEx, really $25,000,000 associated with one transfer station site that we used to lease and we had to buy because we couldn't lose it, and then a little bit of working capital investment. So that's sort of a wash at the free cash flow line, but 25,000,030 million dollars bonus depreciation benefit this year. And that ramps up $40,000,000 next year and then grows from there, obviously contingent on the U. S.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Dollar qualifying CapEx spend. But to your point on the free cash flow conversion, and I think that's a very important If you think about the page that you're referring to in the Investor Day deck, we said, hey, over the next couple of years, you get up to 28, you got roughly $9,000,000,000 revenue, dollars 2,930,000,000.00 of EBITDA, and we're going to be converting sort of mid low to mid-40s free cash flow conversion. And what were the drivers of that? Well, it was the EBITDA margin expansion. Capital intensity is what it is.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

We're going to enjoy a reduction in cash interest intensity as we migrated towards a more industry norm level of cash interest burden. But partially offsetting that was going to be this ramp in cash taxes, right, because we're now sort of cash taxpayer and we're going to go from cash taxes historically being 30 to 40 basis points of revenue that was gonna ramp up to the sort of 200 basis points of revenue that it represents for all of our peers. What the bonus depreciation is going to do is materially slow down that ramp in the cash tax burden. So all other things being equal, if you go back to that Investor Day where we said 2.9 to $3,000,000,000 of EBITDA, I'd call it 43 to 45% free cash conversion, that would have been 1275% to 13 and a quarter of free cash. And now you'd say you'd be $50,000,000 better than that.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Right? And so to your point, I think it equals about 200 basis points of incremental free cash flow conversion. That 28% is a long way away and there's obviously a lot of moving pieces. But absolutely, wherever we were going to get to before, we probably now have 100 to 200 basis point tailwind that's going to allow us to hit that four handle and go through that at a free cash flow conversion faster than we otherwise would have.

[Patrick Tyler Brown, Managing Director at Raymond James]

Great. Okay. No. Great color. Thank you, guys.

[Operator]

Thank you. Our next question is from Kevin Cheyenne from CIBC Boot Gundy. You may now proceed.

[Kevin Chiang, Director - Institutional Equity Research at CIBC World Markets]

Hey, thanks for taking my question and good morning. Luke, you kind of highlighted the strong organic growth in Canada. EPR is obviously a contributor there. It does feel like EPR is coming in as expected, maybe a little bit better. Just wondering, I know in the past you've talked about as a team kind of upside to EPR EBITDA relative to the base cases.

[Kevin Chiang, Director - Institutional Equity Research at CIBC World Markets]

Is that kind of what we're tracking to now? And or is that something we could see in future years like in 2026, 2027 as you continue to build on this EPR revenue stream?

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Yes. So Kevin, what we're seeing in the current year is not those incremental opportunities. I just want to be clear. This is really picture a scenario of Montreal. We opened our MRF to deal with EPR.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

We're expecting to do volume of 100 in the in the first year, and we're actually doing volume of one ten because our customer base is using our facility on a sort of temporary basis as other sort of components of EPR get up and running. So I think we're benefiting from some transitional style volumes that effectively are going to allow us to ramp to the $130,000,000 of EBITDA faster than we otherwise would have. Because if I use that Montreal example, this incremental volume that I'm enjoying today, I'm not gonna have that necessarily into next year, but incremental contracts are gonna come on that will effectively replace it. So I'd say what we're enjoying today is a modest sort of pickup of just volume associated with the transition to EPR. Now the broader opportunities remain, and I'm gonna let Patrick speak to that.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

But we still, you know, see across the country incremental opportunities as we have before. Patrick, do you want to provide some color on that? Mhmm.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Yeah. So if you look at EPR, I mean, there was, as we talked about, there was a couple of opportunities. One that was in sort of Maritimes on Canada, which we were not successful on. There's still a couple of opportunities in Quebec that we feel we're very well positioned for. And then as Western Canada comes online, again, very well positioned with our assets.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

But everything is tracking to plan. I think the investments we made are going well and are on plan. So I think if we can just keep up this trajectory, you know, we're we're it will play out as, you know, we anticipated.

[Kevin Chiang, Director - Institutional Equity Research at CIBC World Markets]

That makes sense. And maybe just a quick modeling question, I guess, and maybe this is for you, Luke. Obviously, lot of M and A this year, and it seems like the pipeline is huge. You spoke of outsized contribution in 26,000,000 from M and A completed this year. As I think of how that impacts the corporate line item, should we assume that stays flat?

[Kevin Chiang, Director - Institutional Equity Research at CIBC World Markets]

Because if I recall at the Investor Day, you kind of talked about as you build out the platform here that corporate cost gets a little bit more incremental leverage into the bottom line. Is that kind of the right way to think about it as we think about the earnings contribution on a consolidated basis from this elevated M and A activity?

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Absolutely, Kevin. I think you're thinking about exactly right. I mean, we've made investments over the last years into the corporate office just as we grew as a public company and then most significantly over the last couple of years in IT related infrastructure and cloud, etcetera. But I think where we're at today is we have the corporate function that we need and we do not see the need for material incremental investment. So now is the time to drive meaningful operating leverage on that line.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Recall, we had levered that line down to sort of a 2.5%, 3% of revenue, but then with the divestitures, both the smaller pieces through 2023 and then the ES divestiture, that cost bucket sort of jumped back up to the sort of 4% as we retained a lot of that sort of corporate infrastructure. Now we fully anticipate from a modeling perspective for that item to sort of grow organically at a sort of low to mid single digit number, whereas the top line will be able to grow at a faster clip by virtue of the M and A, and you should get the operating the exact operating leverage that you're describing.

[Kevin Chiang, Director - Institutional Equity Research at CIBC World Markets]

Perfect. That's great clarification. Thank you very much, guys.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Thanks, Gautam.

[Operator]

Thank you. The next question is from Konark Gupta from Scotiabank. You may now proceed.

[Konark Gupta, Equity Research Analyst at Scotiabank]

Thanks, Shinda. Good morning, guys. Just probably first on the guidance for revenue and EBITDA. Looks like FX is shaving off 50% to like two thirds 50% to two thirds of your revenue and EBITDA bump for the full year. What about the remaining items that are driving the guidance up?

[Konark Gupta, Equity Research Analyst at Scotiabank]

I mean, I think you had some M and A sort of catch up from Q1, I guess, and then you had to make the M and A, I guess. You've seem to bump up volume and pricing assumptions as well. Can you put some numbers into the buckets in terms of, you know, what's driving those revenue and EBITDA attribution? Hello?

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

I'm sorry. I think we had some technical issues. Can Connor, can you hear me?

[Konark Gupta, Equity Research Analyst at Scotiabank]

I can hear you. Can you hear me now?

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Yeah. I'm sorry, Connor. So I'm not sure where we cut off, but what I'll describe is for the update to the guidance. So really what you have incremental M and A completed, as we've said, we have sort of 70,000,000 to $80,000,000 of incremental M and A contribution. Recall when we gave the guidance for the year of the $105,000,000 we said roughly $30,000,000 of that was already included in the base guide as that happened on January 1.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

So you have an incremental, call it, dollars 70,000,000, 80,000,000 coming out of M and A. You then have $75,000,000 of FX headwinds going against you, and that's just the translational impact of FX. So those are a bit of a wash. So what are you left with? You're left with organic growth, and we're effectively bringing up pricing 50 bps, bringing up volume roughly sort of 50 bps, right, are are driving that.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

And then going against that on the organic side is really commodity and and fuel surcharges. Right? Commodity price about $10,000,000 sort of headwind versus the original guide and same with fuel surcharges, right? And that's just a function where the sort of diesel price went. You have a $5.10000000 dollars headwind on the fuel surcharge line just as that rerates the tide to sort of diesel pricing.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

So you put those, those are the pieces that at the revenue line and the EBITDA bridge just sort of follows accordingly, right? I mean, the M and A comes in at slightly decretive margins initially. Price all falls to the bottom line, volume falls at an appropriate margin. The fuel surcharge really doesn't have an impact falling down to EBITDA as you're getting an equal and offsetting change to sort of diesel costs. And the commodity falls all to the bottom line, right?

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

So that $10,000,000 is straight flow through. The FX is at roughly the consolidated margins. And when you do that bridge, what you're going to be left with is an incremental EBITDA pickup, and that's less about the revenue, but just more about the sort of operational efficiency, productivity and self help levers we've been realizing and getting incremental benefit from that in the current year period.

[Konark Gupta, Equity Research Analyst at Scotiabank]

That's really helpful. Thanks so much for that. And then in terms of the second quarter margin drivers, I think you guys had a pretty solid margin expansion compared to the rest of the industry. I mean, I think you talked about sort of unique markets for you guys and some of the levers. Is it possible to kind of attribute some of these margin expansions you saw in Q2 to some buckets like EPR to the volumes and maybe some commodity impact and all that?

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Yes, Konig. So great question. Again, expansion industry leading, we believe, and something we're sort of proud of. But also as anticipated, obviously, you can see the Canadian segment margin expanding significantly as we're sort of getting the benefits of those investments that we've been made. So that's sort of been beneficial.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

But what we historically do and happy to walk through is the sort of impact of the exogenous factors, right? So if you think for the quarter, commodities was about a 30 basis point headwind to margin, whereas R and G and fuel, two other sort of externalities, if you were, were about 25 basis point tailwind, right? Additionally, Q2 is the last quarter where we're getting the tailwind from the Michigan divestiture. So that was about a sort of 75 basis point tailwind year over year. And then the M and A contribution for this quarter came in about 20 basis point headwind.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

So when you put those all together, you're still left with sort of roughly 160 points, 170 basis points of underlying base business margin expansion. And in there, you have all the pieces. You have the price cost spread, you have EPR, you know, and you have the realization of the ongoing operational efficiencies, both synergy realization and the cost optimization efforts we've been undertaking.

[Konark Gupta, Equity Research Analyst at Scotiabank]

Yeah. No. Again, I appreciate the time. Thank you.

[Operator]

Thank you. Our next question is from Michael Doumet from National Bank of Canada. You may now proceed.

[Michael Doumet, Equity Research Analyst at National Bank Financial]

Hey, good morning guys. Nice quarter. As it relates to margins and the Investor Day expectations, and I think you discussed some of this already, but the guided margin expansion in 2025 suggests you're moving obviously a little bit faster, particularly given some of the headwinds, the known headwinds this year and some of the R and D benefits that you're expecting to realize in the outer years. Would you characterize it as executing more quickly and therefore maybe pulling forward some of that margin expansion? Or are you just finding more ways to expand margins at this point?

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Yes, Mike, that's a great question. I think it's predicated on it was never assumption that, that march to the low to mid thirties margin that we articulated in the Investor Day was going to be straight line. Right? Because there's been some investments over the past few years into things like RNG and EPR that, you know, we're supposed to start bearing fruit in a material way as of '25. So I think you're getting this initial sort of pickup and lift from some of those investments that's gonna, you know, give some significant tailwind to that walk to, you know, our our margin goal, if you will.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

So that's certainly part of it. But look, we're raising the guidance another 20 basis points in the midpoint. And I think that is the acceleration, right? Because we are achieving higher margin than what the initial sort of plan was. And I think that could be viewed as a sort of acceleration component.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

But the outsized margin expansion of 25% was always sort of part of the plan. And I think 26% has an opportunity to be another one, right? Because you're going to continue to have sort of EPR and some of these other investments remain fully sort of come online at their margin accretive profiles. So I think we'd be remiss at this point based on '25 performance to now say the new bogey is something materially higher than mid-30s. But certainly performance like this further enforces our confidence in the ability to execute on that plan that we put out.

[Michael Doumet, Equity Research Analyst at National Bank Financial]

That's fair. Thanks, Luke, that. I guess if I go back to the prior expectations for EPR related EBITDA growth through 27%. I mean, like it seems to me that the EPR should provide, call it, like a baseline organic growth of about 80,000,000 to $100,000,000 per year. And I know that could deviate year to year.

[Michael Doumet, Equity Research Analyst at National Bank Financial]

But does that not translate into the view that GFL should be a consistent 1% to 2% organic volume growth going forward before layering other expectations. Just wanted to get your thoughts on that.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Well, sorry. But just in terms of the growth, Michael, just to be clear, with the majority of EPR is going to be in hand by the 2025. We're going to have a sort of tail into '26 and a little bit in '27. But the majority if we quantified $130,000,000 of EBITDA, you're going to have substantial majority of that in by the '26. So this is really a sort of near term growth profile, and not so much ongoing source of growth over that sort of multiyear projection.

[Michael Doumet, Equity Research Analyst at National Bank Financial]

Okay. No, thanks for the question. Appreciate it.

[Operator]

Thank you. Next question is from James Hsu of TD Cowen. You may now proceed.

[James Schumm, Senior Analyst at TD Cowen]

Hey, guys. Good morning. Nice quarter. In the past, I believe you've noted exposure to economically sensitive businesses was only roughly 3% of your revenues versus like a much higher double digit number at most of your peers. So it seems like an important competitive advantage right now.

[James Schumm, Senior Analyst at TD Cowen]

What do you think drives the difference with peers? And can you sort of outline what your exposure is specifically to construction volumes and or what your exposure is to industrial volumes separately?

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Yes. I think the historical comment was largely driven around C and D related volume, Right? The c and d related volumes at GPO have been sub sort of 5%. You know, industrial volumes are significantly more than that. So I think that'd be pretty consistent with, you know, with our peers.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

I think some of the difference you're seeing is just is regionally focused, right, and where there's more impacts coming from tariffs and tariffs related businesses. And so I think, you know, I don't think our business is materially different. I just you know, I can't speak for what others have in terms of C and D volumes. What our C and D volumes that reference was made to C and D volumes that were sub-five percent of the overall sort of book of business.

[James Schumm, Senior Analyst at TD Cowen]

Okay. And then maybe could you just update us on your fleet conversion either to automated trucks or CNG trucks? What's going on with that at the moment and just how that's proceeding?

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Yeah. I mean, you go look back to the Investor Day, I mean, I think roughly sort of 20 ish percent, 20%, 25% of fleet today is CNG. We had the ability to move that to sort of somewhere between fifty and fifty five reasonably within the book. I think that is largely in track over the next sort of three to four years. So I think we're 50% of the way there in terms of our CNG and automated fleet conversion.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

I think a lot of that will happen on some of the backs of these EPR collection contracts where we're moving away from rear load collection into more automated collection and moving those trucks off of diesel onto compressed natural gas and some of our large residential contracts. As well as on the City of Toronto renewals, We basically renewed two of our largest municipal contracts that come on the renewals take place in sort of mid-twenty twenty six. So again, all of those trucks will be converted to compressed natural gas. So I think you'll see that number start moving up materially over the course of 2026 and 2027.

[James Schumm, Senior Analyst at TD Cowen]

Okay, great. Thanks guys.

[Operator]

Thank you. The next question is from Chris Murray from ATB Capital Markets. You may now proceed.

[Chris Murray, MD & Equity Research - Diversified Industries at ATB Capital Markets Inc]

Yes. Thanks, guys. Good morning. Maybe just a quick kind of question on M and A and just what we're thinking about. If you look at M and A for 2020 the contribution for 2026 as it stands today, like let's not talk about future acquisitions.

[Chris Murray, MD & Equity Research - Diversified Industries at ATB Capital Markets Inc]

What's the rollover amount that you're thinking that you have today?

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Chris, it's Luke speaking here. So I mean, he bought $105,000,000 for the year, you know, the vast majority of that was bought very early in the year. So, you know, you call it roughly, you're left with 30,000,000 to $40,000,000 bought in q two. So you're going to have roughly half a year conversion. I think where we sit today, the rollover is probably measured in, call it, 10,000,000 to $30,000,000 of revenue.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

I think what Patrick's prepared remark comment was really referring to, if you go and deploy another sort of $600,000,000 on the last quarter of the year or back half, say roughly round numbers, means you're buying $300,000,000 in revenue. The majority of that is going to be rolled over into next year and that's what's going to be give rise to a good head start as you think about 2026 growth.

[Chris Murray, MD & Equity Research - Diversified Industries at ATB Capital Markets Inc]

Okay. That's helpful. Thanks.

[Chris Murray, MD & Equity Research - Diversified Industries at ATB Capital Markets Inc]

And then another question just as I'm sitting here kind of listening to the call, we've heard about potentially some proceeds from GIP, certainly the maybe the cash flow conversion number moves up. And I start thinking about leverage, it sounds like you guys are probably comfortable running plus or minus 3x now. So if we start thinking about capital allocation, the business is going to throw off probably enough cash fund what I would call normal course CapEx, probably allow for kind of an M and A bucket that's something where you're at right now. Outside of maybe proceeds from things like the GIP being used for outside share repurchases or something like that, how are you guys starting to think about capital allocation? Because now as the business continues to mature, is there room to start increasing the dividend to bring it more kind of in line with peers?

[Chris Murray, MD & Equity Research - Diversified Industries at ATB Capital Markets Inc]

I know historically, it's always been it's there, but the focus was more on M and A. Is there more a thought around the balance and how you're going to deploy capital as you're kind of getting to be more stable and maybe better earnings and cash flow generation?

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Yes. I mean, we said that we will as part of the capital allocation program and the deleveraging program and obviously with the continued repatriation of funds from some of these assets that we don't own and are not part of sort of our income statement today, think that affords us ultimate flexibility again to continue executing on share buybacks and increase dividends. So that is part of the plan. We think over the next sort of twelve to twenty four months that will continue to be part of sort of our capital deployment plan. So you are correct in saying that and that dividend will start normalizing sort of over that period.

[Chris Murray, MD & Equity Research - Diversified Industries at ATB Capital Markets Inc]

I'll leave it there. Thanks guys.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Thank you.

[Operator]

Thank you. The next question is from John Wyndham from UBS. You may now proceed.

[Jon Windham, Head - Alternative Energy & Environmental Services Equity Research at UBS Group]

Perfect. Congratulations on the result. Bucking the trend here on a better than expected result. Actually, I had a very big picture question. If we could talk about a little bit.

[Jon Windham, Head - Alternative Energy & Environmental Services Equity Research at UBS Group]

The Canadian dollar, US dollar ratio has been more or less range bound for about a decade like 01/25 and January, something like that. Given all the political uncertainty and a lot of changes, how do you feel and what is the strategy to how do you feel insulated to maybe bigger swings in that ratio? If you could just talk through how you you might be insulated in your hedging mitigation strategy, should there be a bigger move outside of this sort of ten year range? Thanks. Appreciate it.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Hey, John. Great question. I mean, often we're in the weeds of price or volume. It's nice to hear something a little bit sort of bigger picture. Certainly something we give a lot of thought to, particularly considering we are the one outlier to the peer group, right, in terms of the implications of changes in foreign currency as we're moving in the opposite direction.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

Underlying when you look, there's a pretty good and nice natural underlying economic hedge when you look at across sort of interest expense, capital deployment, etcetera, between the cash flows that we bring in and those that go out. So from our perspective, where we're really at today is more sort of translational type issue. I think the reality of the business and direction travel is Canada is still a massive growth market for us and will be, but the law of big numbers is going to have The US proportion business grow at a faster clip. And I think you're gonna get to a point where a US dollar functional currency is probably the right choice for the business, and you would flip to be a US dollar reporter and be consistent with our sort of peer group. And, you know, I I don't think that that's not a 2025 activity, but, you know, I'd say that's more in the sort of near to medium term versus the long term.

[Luke Pelosi, Executive VP & CFO at GFL Environmental]

In terms of the actual underlying economics, I mean, obviously, as our business mix changes between Canadian and U. S, that's something we'll continue to evaluate. As I said today, there's a pretty nice natural economic hedge between interest expense and CapEx. But, obviously, as the ratios change, it's something we'll sort of stay on top of. And, obviously, there's a whole magnitude of, you know, synthetic or direct hedging instruments that can be used to navigate, you know, to the extent our exposures are no longer naturally economically hedged.

[Jon Windham, Head - Alternative Energy & Environmental Services Equity Research at UBS Group]

Really appreciate it. Thanks.

[Operator]

Thank you. The next question is from Tobey Sommer from Truist Securities. You may now proceed.

[Analyst]

Hi, all. It's Henry on for Tobey here. Thanks for taking my questions. Maybe just to start with kind of going back to that industrial and construction activity and the macro, obviously, it's soft. You mentioned the soft environment.

[Analyst]

Just your thoughts on how those areas look kind of progressing through the year and into '26? Do you see any sort of a rebound or is it kind of too early to tell?

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

I mean, listen, it's very hard to tell. Obviously, you know, we're in a very sort of uncertain environment just politically and, you know, what's happening sort of globally with tariffs, etcetera. And I think from from my perspective, you know, I personally believe that, you know, I don't I don't see c and d volumes recovering anytime too soon. I think once we get more clarity on tariffs, etcetera, I think the industrial market will pick back up and people will figure out what the new norm is and how they're gonna operate or how they can operate and what under and under what environment they will be operating under. I think just the uncertainty in the market of, you know, today, 10% tariff, tomorrow, 50% tariff, maybe a 30% tariff.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

I think that's just limiting people's ability to make real capital investments at the moment. And I think that will reverse. It has to reverse. It'll just be a question of when, but I think we are, you know, months to a year away from that. Again, once those decisions are finally made, I think then it takes time to sort of ramp back up.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

We're not anticipating anything material to come back for the balance of this year and sort of into the beginning of next year. But we'll see how it goes. Seems like there's some clarity coming forward, but I think people just need to get a really good handle on what environment we're going to be operating under.

[Analyst]

That's very helpful. Thank you. And just a quick one. With the new US administration, I'm just curious if you all are seeing anything around an easier path for M and A, some, you know, more of a deregulatory environment? Any anything around, like, a lack of second request helping that out?

[Analyst]

And I guess, in the long term, you're over the next, you know, three, four years, you expect that environment to get easier? Thank you.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Yeah. I mean, I think under for large scale m and a, you know, I guess, in theory, you know, the the the process maybe will get made made, you know, more straightforward and maybe a little bit less scrutiny. But by and large, you know, we've never had a real issue getting through the sort of HR HSR process. I mean, when we look at m and a opportunities, you know, we assess, you know, our ability to move through that process relatively quickly just given the number of opportunities we have. And keep in mind, you know, if we're doing 45 to 50 acquisitions a year, we may have one or two that cross that threshold of actually needing HSR approval.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

So, you know, the lion's share of what we're doing is is well under the, you know, the HSR cap today of, you know, I think it's today, it's like a 125, a $127,000,000 of of gross purchase price. And lion's share of what we're doing today is is under that. So not a huge differentiator today for us given the administration change. But if we were looking at some large scale M and A, maybe the process would be a little bit quicker, but nothing material.

[Operator]

Thank you. The next question is from Charlie Zacchalia from JPMorgan. You may now proceed.

[Tami Zakaria, Executive Director at JP Morgan]

Hey, good morning. Is my line on?

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Yes, we can hear you.

[Tami Zakaria, Executive Director at JP Morgan]

Hi, this is Tammy Zakaria from JPMorgan. Thank you so much for taking my question.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Sure.

[Tami Zakaria, Executive Director at JP Morgan]

Just one question. Given some of the labor strike that's ongoing in the industry, are you considering any scenario where there could be incremental wage pressure maybe in the future? Any thoughts on mitigating that? I heard that you're raising your pricing outlook, but any comments on what you could expect from a price cost spread perspective in the medium term if there is in fact any wage inflation in the industry?

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Yeah. So I think, you know, from from where we sit today, I mean, 10% of our employee base is unionized today. So, you know, a fairly de minimis amount of of unionized workers. You know, that being said, where we sit today, you know, we think throughout the book, we're always constantly revisiting employee wages, etcetera. We don't think strike mandates are, you know, in the cards of GFL in any material way.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

And we think, you know, with the ramp in labor costs between, you know, late twenty one and through '24, you know, we think the lion's share of our drivers are fairly compensated today and above market for where we're operating. So we don't see that as a material risk within the existing book today. But obviously, we're always constantly reevaluating it. And we continue to do that on a sort of on a quarterly basis. But I think we feel pretty good.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

And I think the turnover stats amongst all of the majors, I think we sort of reinforce that point. You don't have drivers hopping around going and looking for an extra dollar here or there. You have turnover rates coming down into more normalized levels that you would have seen pre COVID. So with voluntary turnover rates in the high teens today at GFL, we think that is is a comfortable place to be. It's a happy balance.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Obviously, we want to continue pushing them as low as possible, but that's a very good indicator in terms of where we are on wages for the environment that we're operating in today.

[Tami Zakaria, Executive Director at JP Morgan]

Understood. Wonderful. Thank you.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Thank you so much.

[Operator]

Thank you. There are no questions waiting at this time. I will pass the conference back over to Patrick for any additional remarks.

[Patrick Dovigi, Founder, Chairman, President & CEO at GFL Environmental]

Thank you very much, everyone, and we look forward to speaking to everyone after Q3 results. Thanks for joining.

[Operator]

This concludes the GFL second quarter twenty twenty five earnings call. Thank you for participation. You may now disconnect your line.

Participants

Executives

• Patrick Dovigi, Founder, Chairman, President & CEO
• Luke Pelosi, Executive VP & CFO

Analysts

• Sabahat Khan, MD - Global Research at RBC Capital Markets
• Stephanie Moore, SVP - Equity Research at Jefferies
• Patrick Tyler Brown, Managing Director at Raymond James
• Kevin Chiang, Director - Institutional Equity Research at CIBC World Markets
• Konark Gupta, Equity Research Analyst at Scotiabank
• Michael Doumet, Equity Research Analyst at National Bank Financial
• James Schumm, Senior Analyst at TD Cowen
• Chris Murray, MD & Equity Research - Diversified Industries at ATB Capital Markets Inc
• Jon Windham, Head - Alternative Energy & Environmental Services Equity Research at UBS Group
• Analyst
• Tami Zakaria, Executive Director at JP Morgan