GFL Environmental Inc. (GFL) Q2 2021 Earnings Call Transcript

GFL Environmental Inc. (GFL -1.42%)
Q2 2021 Earnings Call
Jul 29, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the GFL Environmental second-quarter earnings conference call. [Operator instructions] I would now like to turn the conference over to Patrick Dovigi, CEO and founder. Please go ahead.

Patrick Dovigi -- Chief Executive Officer and Founder

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 providing our outlook for the remainder of the year. I'm joined this morning by Luke Pelosi, our CFO, who will take us through our forward-looking disclaimer before we get into the details.

Luke Pelosi -- Chief Financial Officer

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.

We've prepared a presentation to accompany this call that is also available on our website. During this call, we'll be making some forward-looking statements within the meaning of applicable Canadian and U.S. securities laws, including statements regarding events or developments that we believe or anticipate may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set out in our filings with the Canadian and U.S.

securities regulators. Any forward-looking statement is not a guarantee of future performance, and actual results may differ materially from those expressed or implied in the forward-looking statements. These forward-looking statements speak only as of today's date, and we do not assume any obligation to update these statements, whether as a result of new information, future events and developments or otherwise. This call will include a discussion of certain non-IFRS measures.

A reconciliation of these non-IFRS measures can be found in our filings with the Canadian and U.S. securities regulators. I will now turn the call back over to Patrick, who will start off on Page 3 of the presentation.

Patrick Dovigi -- Chief Executive Officer and Founder

Thank you, Luke. Our exceptional start to the year continued into the second quarter, allowing us to once again exceed expectations. Specifically, we grew revenue by nearly 40% on a constant currency basis, adjusted EBITDA margin expanded 60 basis points and adjusted free cash flow more than doubled. Thanks for the tireless dedication and capabilities of our more than 50,000 employees, we were once again able to demonstrate the power of our business model and our ability to execute on our stated growth strategy.

In terms of organic growth, the quality of pricing we saw in Q1 continued to accelerate into the second quarter. While we saw solid waste pricing ahead of plan at 4.1%, improved residential pricing, the recovery of price, attracting commercial volume and strong price retention combined to yield this outcome. We remain encouraged with the path to see more than offsetting rising cost inflation through the underlying pricing opportunities we see in the business. Additionally, the inflationary environment should provide a boost to the pricing we see on CPI-linked contracts, a benefit that we will realize as we roll over into 2022.

Solid waste volume growth was well ahead of expectations at 6.3%. The markets that were quicker to ease COVID-related restrictions saw the greatest volume recoveries. That being said, our Canadian business, which is subject to continued, and in some cases, enhanced COVID restrictions through most of Q2, saw 5.5% revenue increase from non-MRF processing volumes, an outcome that we think bodes well for future periods when existing restrictions are lifted. We're hopeful that Canada gets to such a stage soon, but at this point in the year, we think the benefits will be realized primarily in 2022.

Commodity values once again provided a tailwind, although as we've disclosed our sensitivity to price fluctuations continues to decrease as we progress on our strategic shift toward the fixed price processing model. Nonetheless, commodities will continue to provide a benefit and prices remain at current values for the remainder of the year and we've updated our full-year outlook on that basis. Our liquid waste business showed significant recovery during the quarter, growing organically nearly 14%, as the markets in which we operate began to recover. Consistent with our guidance, we saw a significant operating leverage associated with the volume recovery.

Our rigorous focus on quality and revenue and cost management drove nearly 500 basis points EBITDA margin expansion over the prior period and furthers our progress toward the longer-term margin profile we expect for this segment. Recall that our infrastructure and soil remediation business posted positive organic growth in the second quarter of 2020, and the nature of the activity in that segment was the last to taper off at the onset of the pandemic. And what we're now seeing is a bit of last stop and last to restart, as the recovery of the segment is lagging the broader business by a quarter or two. We remain confident that the lag is nearly timing and that while delayed, the pent-up demand and additional stimulus from infrastructure spending will drive volume recovery that we expect will benefit us for the periods to come.

In addition to organic growth, the second quarter also saw us advance several of other value creation initiatives. We successfully refinanced our highest coupon bond and realized nearly $17 million of annualize cash interest savings in doing so. We sold $60 million of non-core low contribution assets and have identified several high contribution opportunities into which we intend to deploy the capital. And finally, we continued executing on our M&A strategy.

In addition to substantially furthering the regulatory process on the Terrapure acquisition, we acquired eight small tuck-ins in the new landfill during the quarter. We expect to close a similar number of transactions in Q3 and remain highly optimistic in our ability to deploy an outsized amount of capital into M&A strategy in the back half of the year, considering the depth and quality of our pipeline. The strong first half results coupled with our confidence in the back half of the year, are leading us to increase our full-year expectations for the business. Luke will walk through the details.

But when you boil that down on a constant currency basis, we're increasing our guidance for revenue and EBITDA by 4% to 5%. We're increasing our adjusted free cash flow guidance by nearly 10%. But perhaps the most relevant of all, we are now guiding to the end of the year with an adjusted run rate free cash flow number of $610 million or better, which we think sets us up to see the multi-year guidance we laid out just six months ago. I know we're still relatively new name for many of you.

But this marks our 6th quarter as a public company. But what we've been doing, we did this quarter for a long time in the private markets, setting expectations for the business and meeting or exceeding them. We said on prior quarterly call that we've assembled the pieces of puzzle that formed the foundation capable of consistently producing exceptional high-quality growth. We believe that this quarter results again demonstrates our ability to execute on this growth strategy.

I'll now pass the call over to Luke, who will walk us through the detailed financial results and then I'll share some closing perspectives, before we wrap up.

Luke Pelosi -- Chief Financial Officer

Thanks, Patrick. I'll pick up on Page 4 of the presentation. Revenue increased over 32% compared to the prior-year period. This was driven by outperformance from the 2020 M&A, strong solid waste pricing and meaningful volume improvements, both sequentially and as compared to the prior period.

You can see the trend in volume growth over the past quarters on the chart at the bottom of the page, and I'll circle back to this chart in a minute. Net solid waste pricing was 4.1%, which was better than what we saw in the prior comparable period and in Q1 of this year. As anticipated, the recovery of IC&I volumes, coupled with the inflationary backdrop has continued to provide incremental price support for the year and provides us the confidence to forecast that we'll be able to deliver at the high end of our pricing targets for the year as a whole. Resetting of CPI-linked contracts, which tend to lag actual CPI movements, should also provide broad-based support to pricing levels over the next several quarters.

Comparable to what we reported in Q1, elevated commodity prices increased revenue 80 basis points as compared to the prior period. The 6.3% positive solid waste volume increase was 5.1% when excluding the MRF processing contracts in Canada that have now lapped in Q2. Excluding these contracts, U.S. volumes were 60 basis points better than Canadian volumes, which while a positive data point for the U.S., we believe, also speaks to the underlying strength of our Canadian business, considering we achieved these results when most major Canadian markets continue to be faced with pandemic-related restrictions on activities throughout the second quarter.

Although Q3 has seen additional easing of COVID-related measures, key Canadian markets such as Toronto, continue to face activity restrictions, which will temper the pace of the volume recovery while they remain in place. Although the lag has become longer than we had originally anticipated, the evidence coming from our Southern U.S. markets has further reinforced our views that when the restrictions are eventually lifted, we will see a meaningful acceleration of volumes. On this point, I'd remind everyone that the majority of the revenue we derived from the fastest to open U.S.

markets, namely those in the Sunbelt and certain pockets in the Midwest, is coming from our 2020 acquisitions and the outperformance of these businesses is therefore being presented as incremental contribution from M&A as opposed to additional volume growth. Also just want to remind folks about the cadence of our volume growth over the past few quarters. So if you circle back to the volume trend chart at bottom on the left, I think it's important to highlight that we're just getting back to slightly above 2019 levels. The volume growth is more a function of the easy comps as opposed to real incremental economic activity growth, which we think is there, but not yet fully showing through in the numbers.

I highlight this to help provide context for expectations. We were only negative 8% for the low of Q2 last year, and were actually positive by Q4 of last year. The lows that we're bouncing off are not nearly as low as what some of the others have experienced. So as we talked about the guidance for the balance of the year, I just wanted to remind that context.

Moving to liquid waste. This segment showed tremendous growth during the quarter as COVID-related volume declines came back online. The volume recovery was more pronounced in our U.S. business, although the Canadian business recovery was also impressive, particularly considering the continuation of the broad-based pandemic restrictions.

Similar to our comments on the recovery of solid waste volumes in Canada, we expect improving strength in the recovery of this segment as restrictions in Canada continue to ease. As Patrick mentioned, the negative infrastructure volumes were in line with our expectations and largely attributable to the tough prior period comp. M&A contributed approximately $288 million of revenue during the quarter, about $16 million of which was from new 2021 M&A with the rollover from 2020 accounting for the balance, which was above our guidance despite the FX headwind from the predominantly U.S. dollar-denominated revenues of these assets.

We continue to identify significant incremental growth opportunities within these asset packages and remain confident in the ability to outperform the original pro forma expectations for these deals. FX was negative 6.4% versus the prior period and about a $25 million revenue headwind versus guidance. You'll recall that our FX impact is substantially all translational and that for every one point change in the FX rate, our annual revenues are impacted by approximately $24 million. On Page 5, you'll see segment results.

Solid waste margins of 30.9% were 10 basis points ahead of the prior comparable period despite a 65-basis-point headwind from recent M&A. Although the net effect of elevated commodity pricing was a margin tailwind, this was more than offset by the impact of higher fuel prices and the strengthening of the Canadian dollar. Excluding these macro factors, we saw strong pricing, cost management and focus on productivity and asset utilization, drive 90 basis points of organic solid waste margin expansion, a result we think is quite impressive when considering rising labor and input cost inflation and the delayed recovery of such costs in much of our CPI-linked revenue base. Liquid waste margins increased 480 basis points, substantially all of which was organic and demonstrative of the operating leverage in this segment.

The ongoing volume recovery should provide support for better than mid-20s margins to continue through Q3 before the seasonal step down in Q4. Infrastructure and soil margins improved 640 basis points sequentially from Q1 despite the ongoing impact of decreased volumes and the change in mix. On Page 6, you can see adjusted cash flow from operating activities of nearly $160 million. This amount includes $63 million of proceeds from our asset sale.

Note that while inclusion of these proceeds seems lopsided for the current quarter, we intend to redeploy these dollars before the end of the year, and therefore, the timing difference will be offset by year's end. Excluding these proceeds, adjusted free cash flow was $97 million, more than double the prior year and ahead of our expectations on the strength of our operating results of the business and continued rigor around working capital management. We continue to expect the working capital investment in the first half of the year to be recovered in the second half of the year, same for any impacts from second half M&A. As previously discussed, we once again demonstrated our ability to reduce our weighted average cost of debt by refinancing our eight and a half percent notes during the quarter.

Repricing at $360 million from 8.5% to 4.75%, reduces annual interest cost by approximately $17 million. We continue to see opportunities for refinancing and will execute as opportunities present themselves. We deployed approximately $200 million into 15 acquisitions for the first six months of the year and almost another $100 million into five additional tuck-ins subsequent to quarter-end. We think these acquisitions will contribute approximately $130 million, $140 million in annual revenues and puts us well on our way to achieving the M&A targets we laid out at the beginning of the year, even before considering the impact of Terrapure, which we are on track to close by the end of the third quarter.

Quickly on Page 7. Net leverage at quarter end further improved, and we continue to have ample liquidity to support our growth goals while delevering our balance sheet. And as I just said, we continue to assess opportunities to reduce our overall cost of borrowing. On Page 9, we've laid out our updated guidance in the form of a revenue bridge.

On the strength of the results in the first half of the year, we're increasing our guidance by $100 million to $115 million attributable to solid waste pricing and volume and assuming commodity prices remain at the current levels. Specifically, solid waste pricing goes to 4%, the high end of our previous range, and solid waste volume goes to the low 2s, despite the lingering restrictions in Canada. Commodities add an incremental $20 million on top of the original guide and the outperformance of the 2020 M&A adds another $20 million. Conversely, with the delays in recommencement of activities, we're now expecting soil and infrastructure to be approximately $30 million less than our original guide.

Again, we think this is entirely timing, and when the sector starts back up, there will be meaningful volume gains. It's just that where we're sitting today, what appears is the majority of that benefit will be a 2022 event as opposed to 2021. We then had the expected contribution from 2021 M&A, which reflects our expectations for the businesses we've acquired to-date and assume Terrapure closes October 1, a date for which we now have a high degree of conviction. $120 million to $150 million presented as contribution from net new M&A is net of the revenue divested as part of the asset sale we completed during this quarter.

That takes you to revenue of approximately $5.3 billion, which is presented on a constant currency basis to what we presented our original guide. The last step on that page normalizes for FX, reflecting the actual FX for the first six months of the year an assumption of a 1.25 FX rate for the second half of the year. From that revenue, we expect to generate EBIT of approximately $1.410 billion, the high end of our margin range and adjusted cash flow of approximately $520 million or $530 million on a constant currency basis with our original guidance, reflecting a 10% increase over our original adjusted free cash flow guidance for the year. So then lastly is Page 10, and we think this page is the most relevant.

What we've done here is updated our expectations for our 2021 exit run rate. So if you start with the actual expected revenue to be realized in 2021, we then have the rollover of the M&A we've already done so far in 2021, and this brings you to an exit run rate of $5.55 billion. So this is effectively what the run rate will look like, but we don't do anything else for the remainder of the year. At the beginning of the year, we laid out incremental upside opportunities related to M&A, refinancing and capital redeployment.

Excluding Terrapure, we basically achieved half of our goals in these areas through the first six months. The last step of $150 million represents the incremental expected contribution if we achieve the targets we laid out for in each of these areas by the end of the year and brings you to an exit run rate of $5.750 billion. From this revenue, we expect a run rate adjusted EBITDA of $1.545 billion and run rate adjusted free cash flow of $610 million. So while we're not currently updating our guidance for 2022 and 2023, we think this page should help set the stage.

If you take the base business organic growth model of mid-single digits at the top line, mid- to high single digits at adjusted EBITDA and low double digits and adjusted free cash flow, layer in some outsized volume contributions that are expected for 2022, some self-funded tuck-in M&A and continued refinancing, we feel highly confident in our ability to exceed the multiyear growth targets we laid out just six months ago. We will formally provide our 2022 guidance on a subsequent call, but just wanted to provide the stepping stones as we know there have been a lot of moving pieces. With that, I will now turn the call back over to Patrick for some closing comments.

Patrick Dovigi -- Chief Executive Officer and Founder

I would like to end our call today with an update on our sustainability initiatives. We are continuing to develop the ESG goals and targets that we will disclose in next year's sustainability report. A focus of our report will be our initiatives aimed at reducing or avoiding GHG emissions. One key area is recyclables.

Earlier this month, we announced the formation of the Resource Recovery Alliance. This initiative puts GFL at the forefront of the move to extended producer responsibility, providing producers with the solutions they need to drive higher resource recovery rates. Another key focus is on renewable energy. We have set up GFR renewables of our vehicles to unlock significant value in landfill gas energy projects at 18 of our MSW landfills that we have identified to-date and to accelerate the conversion of our fleet to CNG.

All in all of these trends we are seeing this quarter and the opportunities we see ahead of us, I've never been more optimistic about the future of GFL. I will now turn the call over to the operator to open up the line for Q&A.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from Hamza Mazari from Jefferies. Please go ahead.

Hamza Mazari -- Jefferies -- Analyst

Hey, good morning. Thank you. Could you maybe talk about directionally how investors should think about free cash flow, given the update in -- given the current update for 2022 and '23? And then maybe just tie that back to the investment increases from the time of the IPO as well?

Patrick Dovigi -- Chief Executive Officer and Founder

Yeah. So I mean, I'll turn it over to Luke. But I mean, high level, I mean, it's -- I guess the irony of this is last year, at this time, we were defending a short seller. That said, the business had no free cash flow, and we were estimating $360 million for 2020 as realized.

I think when you look today, realizing somewhere between sort of $510 million and $520 million this year, with probably some potential upside to that number. And then you roll that forward in to a run rate number, like we've mentioned of the $610 million, there's very good probability that we continue growing this business at double-digit free cash flow growth from there. So I mean, you're looking at somewhere between $675 million and $700 million for 2022. And then when you think about 2023, you're going to be growing at double digits again from there.

So I think fairly conservatively, you get free cash flow in 2023 to sort of mid-800s. And I think that exceeded what we had anticipated at the time of the IPO. But as a piece of puzzle, we continue falling in price which is really what the free cash flow that's driving the business.

Luke Pelosi -- Chief Financial Officer

Yes. I would just add, Hamzah, that the numbers Patrick is saying isn't sort of the official guidance for next year, but rather just you lay out the operating model on our exit run rate. And that's the math that you get even before considering some of this incremental self-help opportunities we've identified within the base business, which could be quite sort of meaningful. So again, I think we're at a very unique inflection point where we start leveraging some of the investment and the capital structure, and you're just going to really see that conversion of what was, as a percentage of revenue, mid- to high single digits, really quickly start approaching the lower than the mid-teens.

And then converse, similarly at the EBITDA line, you can take what was a sort of high -- mid- to high 30s -- EBITDA conversion to free cash flow is going to go to low 40s and then to high. And I mean, I think we're just going to keep laying out the building blocks so the folks understand because I think we're talking about a free cash flow CAGR north of 20%. And I realize there's a lot of moving pieces to get there. But that's the story that we want folks to keep sort of focusing on because we believe that's highly compelling.

Hamza Mazari -- Jefferies -- Analyst

That's great. And then just the second question is just on GFL renewables. Could you maybe talk about the strategy there? Are you separating that business out? Just any broad thoughts on long-term strategy there.

Patrick Dovigi -- Chief Executive Officer and Founder

Yeah. So I mean, particularly over the course of the last six months, and particularly with the increased value of the RIN credits. We have significant cubic feet of gas coming through our landfills. And we've done a study on this really over the last six months, and we sort of bubbled up for a lot of other companies in the industry that I think are a little bit more mature than us.

We have 18 landfills today that we have an opportunity to basically make RNG. When you think about that, I just -- we sort of just gave high level numbers. What I'm talking about now would be all in addition to. Today, we have, like today's RIN pricing, about $175 million of gas that could be sold at today's RIN pricing.

Our perspective is that this gas should add $75 million to $100 million of free cash flow over the sort of next couple of years because what we would do is we would partner with some -- there's two companies we're in dialogue with today to build out this infrastructure at our facilities. And it would be with a fairly minimal capex spend. I think the other thing we would do is we would hedge out the RIN value over 20 years and sign offtake agreements with some others. Now that comes at a discount to where the RINs are currently trading at today, but it takes out a lot of the volatility out of the RIN values.

So when we look at that, I think that $175 million is going to be some economics still with developers, plus then you got to discount it back a little bit because we would enter into a hedge or a presale contract for 20 years with an offtake provider. So at the end of that, we think there's probably $75 million to $100 million of free cash flow that comes back to us without not a lot of volatility. So it's a big opportunity. I'm also separating it out.

There's been some recent transactions where there's been some renewable fuel plays. And these businesses are trading at 40 times to 50 times EBITDA. And I think from our perspective, yes, it will be a nice free cash flow generator. But hey, it's a way to unlock value because some of these other players that are in the business want to come in and pay us a big check to buy the rights to that fuel.

There's billions of dollars sitting there under our nose potentially, and we just wanted to have that in a separate vehicle. And then the other big benefit from an ESG story is with -- as we develop these plants, we'll be able to fuel 100% of our vehicles with cash that we capture in all landfills, which we think is a great story as well. So put all that together, we think this is a very large opportunity. And all additive to the plan that Luke just laid out.

Hamza Mazari -- Jefferies -- Analyst

Got it. Just last question, I'll turn it over. I know you talked about M&A this year. But any thoughts as to the longer-term pipeline, specifically, out of the private company revenue that's out, everybody has their own estimates what that number is in U.S.

and Canada. But do you have a sense of what percent of private company revenue fits your book of business today? You can answer it however you want in the U.S. or -- and Canada. Thank you.

Patrick Dovigi -- Chief Executive Officer and Founder

Yeah. I mean, from our perspective, where we sit today, the M&A market is extremely active. And I think we're fortunate in a few markets where we've become the acquirer of choice because some of those competitors are family businesses that fit very well with us and sort of our culture, but they also fit from a perspective that given the length of the DOJ processes that people have been going through, they try to get deals approved, has led to some delays. And we were part of that on the ADS-WM transaction, and now we're public, gone through a few with the recent acquisitions.

And I think there's some sellers that are concerned about where capital gains are going and that position very well because some of the markets where we don't think we have a very difficult time getting through DOJ, and that's made us an acquirer of choice for some of those businesses. But I think it will be an outsized year. But I think when we look at our pipeline today, over the next sort of 12 to 16 months, I mean, from our perspective, there's easily another $500 million to $1 billion of revenue that we can get our hands on relatively seamlessly over that period.

Hamza Mazari -- Jefferies -- Analyst

Great. Thank you so much.

Operator

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

Michael Hoffman -- Stifel Financial Corp. -- Analyst

Hi. Thank you very much. This is a little bit in the weeds, Luke, but what's the quarterly contribution of Terrapure for the fourth quarter, so we get that progression right?

Luke Pelosi -- Chief Financial Officer

Yeah. So Michael, what we've modeled in as of now is about $80 million to $90 million of revenue. And the reason that's going to be arguably a larger range than normal is on the basis that with the reopening in Canada, I think we're going to see a bit of a shift in the typical seasonality pattern that one would expect with delays. So there's a bit of a moving target there.

But it's around that $80 million to $90 million at the top line is what we've included. And keep in mind, it's at a lower margin than the blended, what we underwrote for the business as a whole, just again, because the typical sort of seasonality pattern in Canada. So it's in the low 20s as opposed to that high 20s that we expect for the full 12 months in Terrapure.

Michael Hoffman -- Stifel Financial Corp. -- Analyst

And then when you think about your comments on Canada and the sort of progressive reopening, but you also have a seasonal issue. Again, how do we think about being back to even 2019 levels? What's your sort of sense about the timing of that relative to Canada?

Patrick Dovigi -- Chief Executive Officer and Founder

Yeah. I mean I think we'll -- your vaccination rates are bad. I think the full reopening plan is planned for, phase in through September and November. And when I say that, it's really sporting events.

It's office buildings, schools, etc., which have been shut for a long period of time. And I think if you see all the guidance that everyone has put out across Canada, it's now OK, we got to live with the virus, and they're going to fade that in between September, November. I mean, we're getting pretty close to 2019 levels today, as Luke mentioned earlier in the call. So I think we turned positive by the end of the year, then certainly, going into 2022 will be back to pre-pandemic levels.

Michael Hoffman -- Stifel Financial Corp. -- Analyst

OK, that helps too. And then on the renewables business, and the wins are a little over $3 right now. Long-term average is sort of $1.50 to $2. Is the intention to sort of hedge down into that long-term average, and that's the point you're not introducing another point of volatility in the model?

Patrick Dovigi -- Chief Executive Officer and Founder

Yeah. That's from my perspective and particularly, we'll look to lock in, call it, 65% on that. So we don't get volatility on 55% of the RIN. And then the other way we will still be -- we have a natural hedging currently, because we would take a sort of that fuel to fuel our trucks.

So we'd be virtually 100% covered.

Michael Hoffman -- Stifel Financial Corp. -- Analyst

That helps on that. And then on the EPR program, can you talk a little bit -- that's a unique issue relative to the United States. We do it at a state level. I doubt it ever happens at a federal level.

So what is a particular strength to GFL given this national rollout, the stewardship programs, buying in the nonprofit, what do all those combine to create as a natural -- within your natural strengths of competitive advantage?

Patrick Dovigi -- Chief Executive Officer and Founder

Yeah. So if you look at today, British Columbia was the first province to enact it. We currently manage that program for producers and for the province. I mean we have a lot of experience, firstly.

And I just think -- and this is dealing with municipal curbside volume. So we're not talking about the IC&I sector here. And today, the producers pay 50% of the cost for the recycling of those materials. That is moving to 100%, and they are responsible for the actual collection processing and the municipalities actually have to opt out.

So I think the value we bring is, I think our asset base, given the amount of collection contracts where we have in Ontario, layering on together the processing facilities we already own, and then coupled together with the experience we have in BC, and then buying the DC facility, which actually has the regulatory reporting and compliance tool. So we put that all together, I think it's a very compelling offer for producers. And at the end of the day, Ontario is moving away from a single model to a multiple pro model, and all the pros are going to have to work together. So we think us working together, it will give us the right feed at the table to structure all these contracts properly and utilizing our assets to the best of our abilities.

Michael Hoffman -- Stifel Financial Corp. -- Analyst

OK. And then within the context of the free cash flow outlook, all of the numbers you're giving are still sort of around a high 30s cash conversion of your EBITDA. So what's the prospect of moving the conversion ratio as well, not just the overall growth of it, but moving the conversion ratio back up into a mid-40s or better level?

Luke Pelosi -- Chief Financial Officer

Yeah, Michael, I think naturally, the conversion improvement driven by the margin improvement that we're talking about is going to fall through. But I think where you're going to get the most torque and something we've spoken about before, is by leveraging that interest line, right? So if you think about the sort of $300 million-ish interest line that's currently in my free cash flow walk, pivoting into next year, I mean, we really turned into the self-funding model and you start leveraging that line. And I think it's through that, but if that represents sort of mid-single digits of our revenue today, as you grow thereafter, you're going to really see that sort of number getting leverage off of that. So as we said before, the plan was from 2020 IPO year to 2025, we thought we could take as a percentage of revenue, up from high single digits to sort of mid-teens.

And if you roll that into the EBITDA conversion ratio, thinking in that mid- 30s to high 40s. So we think that we're demonstrating that, and you're going to continue to see that. But the capital structure component of it, I think, is a unique opportunity for us where we're at in our path that's going to provide extra torque at that conversion ratio.

Patrick Dovigi -- Chief Executive Officer and Founder

OK. And to put that in context, the peers are 2% to 3% of revenues is their interest expense. You're higher than that. And this is an absolute dollar reduction in it or an accelerated growth of revs and therefore, the compounding through the profit?

Luke Pelosi -- Chief Financial Officer

Well, the latter in the near-term and then the former in the longer term, right? As you get beyond sort of 2023 and you start having an excess free cash flow thing, that's when I think you actually start reducing the quantum of dollars. But in the nearer term, we have just leveraging the fixed cost -- the fixed amount of dollars.

Michael Hoffman -- Stifel Financial Corp. -- Analyst

OK. Thanks. That's great. Thanks for taking the question.

Operator

Our next question comes from Walter Spracklin from RBC Capital Markets. Please go ahead.

Walter Spracklin -- RBC Capital Markets -- Analyst

Yeah. Thanks very much. Good morning, everyone. I'd like to come back to the landfill to gas conversion.

Patrick, you mentioned that you're at opportunity right now of $175 million, but the ability to grow significantly beyond that. Can you give us a little bit of sense of what it would take to grow? What level it could get up to? And I think you said a modest capex spend, a little bit more elaboration on the capital required to get up to a higher run rate on your landfill to gas conversion.

Patrick Dovigi -- Chief Executive Officer and Founder

Yeah. So I think when you look at it today, there's -- what I said is there's roughly $175 million today at today's RIN pricing, give or take there's probably some more, so I'm being conservative on that. The question is, we will-our perspective is today we're going to joint develop them. We're not going to develop them on our own.

I think our time to realize those dollars would just be quicker doing it with someone that knows how. So we're going to give up some of the economics of that fuel to somebody else on a revenue-sharing arrangement. But if you look today, today you can sort of lock in some of these forward gas contracts and effectively hedge out the win at somewhere between $1.8 and $2, so you don't take a third of that off. And then the revenue share, I think, you get to somewhere between $75 million and $100 million.

I think the total capex spend to do that portion of it would be $125 million to $150 million is the rough number. The interesting part is, if you enter into these hedges that we're contemplating doing, or these off-take agreements, we would be signing these offtake agreements with an investment-grade utility. We could get investment-grade bonds to basically finance 100% of the build-out, if we did 60%, 65% of the offtake with them. So from an equity perspective, it's very minimal.

And obviously, from an IRR perspective, it's 40% plus. I mean, I don't think there's a better use of capital anywhere today. So that is what's going. And that's why I sort of used the number of $75 million to $100 million over the next sort of two to two and a half years.

Walter Spracklin -- RBC Capital Markets -- Analyst

That's great. And dovetailing that into non-core operations, you made a divestiture just recently. Are there other divestitures that you could then deploy into some of your core areas? Could you frame out how much of noncore are you currently looking at or could possibly look at? And would landfill to gas conversion be, if it gets big enough, and would you look at that as something to spin out and redeploy into some of your core or is that something you want to kind of keep in-house?

Patrick Dovigi -- Chief Executive Officer and Founder

From my perspective, I'm a shareholder first, my priority here is to make money. I'm a single largest shareholder. We kept it separate for that reason. I mean, these renewable play, like I said, there's been a recent one that's just come out with $40 million of EBITDA that's gone public at a $2 billion value.

There's one recently in Canada that I think it had $7 million or $8 million of EBITDA, and it's trading at $1 billion value. We're going to have $75 million to $100 million sitting in here. And I think if someone wants to pay us multiple billions of dollars, I mean, we're happy to take that money, and I think we'd make a lot of people happy with the deleveraging story, maybe some form of dividend or distribution. But that's all we do.

I don't know why we'd just keep it. I mean, I think these businesses are trading at 25 times to 30 times free cash flow, so you potentially could create $3-plus billion of value over the next little while. So one way or another, we think it's going to create significant value, whether that's kept internally or whether longer term, we sell the rights to that gas to someone that's got a crazy multiple in the public markets.

Luke Pelosi -- Chief Financial Officer

And Walter, the gas component aside, just the broader redeployment of capital or noncore. At the beginning of the year, we said there was $50 million to $100 million of potential sort of asset sales to complete. What we did in Q2, it was about $50 million that we sold. What we've put in the incremental upside opportunities in terms of the guide is just that remaining $50 million.

So saying that we still think there's -- in this year, $100 million in the noncore that we're going to sort of execute on and take those dollars to sort of redeploy into other higher growth and return initiatives.

Patrick Dovigi -- Chief Executive Officer and Founder

I think that -- yeah, I think that's a conservative number as well. So you'll probably see us do a little bit more than what we put in the guide on that front.

Walter Spracklin -- RBC Capital Markets -- Analyst

Yes, it sounds like good optionality for sure. Appreciate the time as always guys. Thanks.

Patrick Dovigi -- Chief Executive Officer and Founder

Thanks.

Luke Pelosi -- Chief Financial Officer

Thanks, Walter.

Operator

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

Kevin Chiang -- CIBC -- Analyst

Hi. Good morning. Thanks for taking my question. I know you're not officially adjusting your 2022 and 2023 targets.

But if my math is correct, I think you're applying something with a low 20% -- 27% EBITDA margin out in 2023. But just given the 2021 update, which kind of gets you almost a 27% already. Just wondering how you think of the cadence of EBITDA margin expansion over the coming years here? Do you see a higher upside relative to maybe what you saw six to seven months ago when you put out that outlook initially?

Patrick Dovigi -- Chief Executive Officer and Founder

Yeah. I think from our perspective, we're taking the under-promise and over-deliver approach. I think when we talked about at the time of the IPO, I think we're probably a year ahead of plan in terms of margin expansion. But certainly, our plan is to continue expanding margins and as Luke said that, move somewhere between 28% and 29% as we move out into sort of 2023.

Luke, feel free to pipe in.

Luke Pelosi -- Chief Financial Officer

Yeah. Kevin, what I'd say is the quantum of the margin expansion period over period last year was sort of unique. Coming to this year, the idea was to take it up to high 26s, 26.7%, 26.8%, I think is the guide. I think you're right.

There could be a path to doing a little bit better than that, which is then setting you up next year. I think what you'll see in the guide when we talk for 2022 is if we're able to battle these cost inflation this year without having the benefit of the CPI resets, right? Because, again, that's really going to be a 2022 benefit. So we're eating it for the first two or three quarters of this year before we get the benefit. That's going to likely probably add even more.

So I think you're right in thinking about the original target has probably now been accelerated. The exact timing and new sort of goal post, you have to sort of stay tuned. But I think you're thinking about it in the right context.

Kevin Chiang -- CIBC -- Analyst

OK, that's helpful. And as we sit here today, you're obviously punching above or you're ahead of schedule, as you mentioned, Patrick and Luke. Can you just give an update on when you think cash taxes start flowing into you? And then -- and then with this accelerated free cash flow generation, does that change your priorities? Do you push more of that into M&A? Does the deleveraging become more of a priority with this excess free cash flow here? Just wondering how you think about that.

Luke Pelosi -- Chief Financial Officer

I'll touch on the cash taxes quickly, then let Patrick speak to excess cash flow considerations. On the cash taxes, look, it's largely -- the growth in the U.S. business is what's going to drive the cash tax payment starting. And as of now, that's sort of a little bit in 2024, and then you get into more of a full payer in 2025 and then a real full payer in 2026.

But that's absent continued strategies to sort of mitigate that, which we're constantly evaluating. And certainly, the incremental deployment of capital to M&A helps with that. So Kevin, to your point, I think, yes, on the base plan, the outperformance is accelerating that. However, the counter is excess outperformance in M&A deployment, which I think kind of provides a bit of a sort of buffer.

So we continue to evaluate, I think, holding 2025 as the year, still sort of holds true, but know that we are actively engaged and tend to be as strategic there as possible. In terms of what we do with the excess free cash flow, Patrick, I'm sure you have sort of commentary on that.

Patrick Dovigi -- Chief Executive Officer and Founder

Yeah, I mean, I think from our perspective, like, we've always said we're going to continue deploying capital into smart accretive M&A. We think where we are in our growth cycle that could continue to be prevalent. The free cash flow really starts building between 2022 and 2023. Again, you're going to move to that, I mean, you're also going to move to a sort of a dividend policy when the TEUs come off and we're going to put it sort of back to nominal dividend as some of those TEU interest payments go away, one.

Significantly lower value than we're trading at today. So I mean, I'm not of the mindset today to buy back our own stock at significantly higher value. We'd like to buy some high-quality assets privately today for, I mean. Over time, that's what's going to create a lot of value for us.

I mean, we've been doing this for 14 years. And like I said, all I want to do is take my $800 billion to $1 billion of equity in my option, but I have and continue just driving the value of those forward. I mean, if you look at the recent alternative plan that the MEO signed up for, I mean, no one is getting anything until the stock clears to $50 and then clears to $60. So that is our conviction around where we believe the equity value of this business is going, which is almost 2x where it is today.

So we are very sort of comfortable in the plan that we've laid out, and I think from our perspective, just give each and every one of your building blocks about how we're going to get there. I think it's been six quarters of us articulating exactly what we were going to do even at the time of the IPO, living through COVID and where we are today. We'll just continue delivering and executing on that plan. And eventually, we're going to fill up the box with investors, and that will start driving things forward and getting this trading where we all believe it will be.

Kevin Chiang -- CIBC -- Analyst

OK. Appreciate you taking my question. Thanks very much.

Patrick Dovigi -- Chief Executive Officer and Founder

Thanks, Kevin.

Operator

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

Patrick Dovigi -- Chief Executive Officer and Founder

Good morning, Mark.

Mark Neville -- Scotiabank -- Analyst

Good morning. Maybe first for Patrick. Maybe just going back to the renewable opportunity. Can you maybe just walk us through sort of time lines and sort of milestones to watch for in terms of signing up developers or partners, maybe just help us with that?

Patrick Dovigi -- Chief Executive Officer and Founder

Yeah. So we're well along the line. I mean, I think the first engagement will be signed sort of in the next four weeks. And then you're basically between sort of '15 and 16 months out to build some of them.

Some of the just are already built. They just need to be modified because they've been used for co-gen and power. So I think conceivably, we could start seeing the realization of some of the dollars going into early 2022, but then seeing the real dollars as we get into later 2022 and starting into 2023 through to 2024.

Mark Neville -- Scotiabank -- Analyst

Thanks. Maybe Luke, just a point of clarification on the capex. It sounds like gross and net for the year will sort of net out to the same number if you can sort of spend all that money. But maybe just give us -- maybe just help on the guide for the capex spend for the year?

Luke Pelosi -- Chief Financial Officer

Yeah, Mark. So the -- you're right. It's -- the proceeds from disposal are going to offset any incremental spend. So if you think about the original guide, it was sort of a $510 million number, with the M&A there's another sort of $10 million.

Maybe think about it as a net $525 million. To the extent we can redeploy the capital this year, we'll be sort of doing so. But we're going to average out to a net number of $525 million. We only spend proceeds to push investment above and beyond that.

So while the gross number could be north of that toward, sort of, say, $600 million. We'll make sure they manage through that net number of the $525 million. And it's dependent on how quickly we can deploy some of this capital into a whole host of growth opportunities we've identified in the existing base business and net new things like from the landfill gas that Patrick was talking of.

Mark Neville -- Scotiabank -- Analyst

Got it. Thanks for taking the questions.

Operator

Our next question comes from Jerry Revich from Goldman such. Please go ahead.

Unknown speaker

Hi. This is Adam on for Jerry today. In addition to landfill gas, you folks have a broad set of ESG opportunities. So just wondering if you could help me think about the annual capex associated with green initiatives.

And is it possible to break that out between landfill gas, recycling and any other key initiatives?

Patrick Dovigi -- Chief Executive Officer and Founder

Yeah. So we don't separately break out a bunch of our ESG type initiatives. I mean, that all gets sort of modeled in our maintenance and growth capex for the year, that sort of sits at around 10%. But I think realistically, where we're sort of sitting today is we're deploying anywhere on a given year roughly $50 million on recycling type initiatives.

A year ago was closer to $100 million just because we had a large organic build out and a large recycling facility. But I think $50 million today is probably a realistic number that we're using. We've developed it sort of over the last number of years. On the landfill gas, like I said, I think our spend is going to be somewhere between $125 million and $150 million to capture that over the next 24 months.

But given these creative way of financing with these investment-grade type bonds, with these offtake agreements from an equity perspective, it should have either been even from an IRR perspective. I don't think we'll find something that can produce any IRR that are much sort of higher than that internal opportunity.

Unknown speaker

OK, great. That's really helpful. And then other solid waste peers have talked about gradually shifting their index price contracts to water sewer trash way from traditional CPI. I was wondering if you could provide any color into the makeup of your index contracts.

And if you see that evolving from current levels?

Luke Pelosi -- Chief Financial Officer

Yeah. Adam, it's Luke. What I would say is we welcome the shift, but are very early days in our personal sort of participation in that. So if you look today, we have roughly $800 million, most of which is in residential, but you also have some in MRF processing, landfill and transfer, that's tied to a CPI type index.

Very little de minimis of it is tied to one of the, what I'll call, better indices like sewer water main or utility or some of the others that the majors in the industry have been converting to. We are supportive of the change and think it does better reflect the cost structure of these businesses, but we just see that as opportunity today because we are still sort of pegged to the old way, if you will, of sort of CPI. But that being said, we think even the CPI-linked contracts are going to provide a very nice pickup for the next, call it, four to six quarters as those things sort of reset. I mean, I think the print in June in the U.S.

was north of 5% in Canada, sort of mid-3s. And I think as we now get the resets, a lot of which happened in the back half of the year, we're going to enjoy that benefit going. But I think longer term, pivoting and migrating our portfolio of index-linked revenue to these higher indexes is just an even larger opportunity that's out there for us.

Unknown speaker

Great. Thank you very much.

Operator

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

Tim James -- TD Securities -- Analyst

Thank you very much. Good morning. I just want to go back on the question, Patrick, here, on your comments regarding kind of the change in revenue guidance and where some of that originated from. Was I correct in understanding that the solid waste impact on guidance is primarily originating from acquired businesses and the assets in the Sunbelt in particular?

Patrick Dovigi -- Chief Executive Officer and Founder

No. I think Luke made that.

Luke Pelosi -- Chief Financial Officer

Yeah. What we tried to break out there was the pieces of the outperformance. I mean, what we're saying in the base guide, we're taking up price before we said price was sort of going to be 3.5% and take that up to the high end of the range. We're taking up volume before we said volume would be like sub 1%, now taking that up to sort of low 2s.

And then the other piece of volume is in the M&A bucket, the rollover, but now saying the volume experience we have in that rollover M&A is greater than thought. So that's coming up again by another sort of 1 to 2 points. So I think it's broad-based across all of the buckets as opposed to saying the new M&A. The new M&A was a separate bucket if you look at the bridge.

So I think all of the revenue drivers are sort of coming up -- sorry, commodities is the last one I didn't mention, and in the quantum that I just articulated.

Tim James -- TD Securities -- Analyst

OK. That's helpful. Thank you. And then wondering if you could just talk a bit about what you're hearing from your construction project customers, in particular, in terms of getting back online.

Are there any notable kind of remaining impediments to returning to normal levels of activity in the back half of the year, again, notwithstanding, I guess, any retrenchment in reopenings? And maybe in particular, the lower volume, soil remediation customers, a bit of an update there. I know that's continued to be slow here in the second quarter.

Patrick Dovigi -- Chief Executive Officer and Founder

Yes. So I think it's coming. I think everyone is highly encouraged. Final restrictions came on.

I mean, this is really an Ontario business for us. I mean it's collaborative, significantly GTA. And I think as most of those restrictions came off at the end of June and beginning of July, people are now ramping back up too. But they do take a few months to get these sites ramped up.

So just given they've been struggle -- so as I said, Luke, I think that -- what Luke said earlier, was that the bulk of this is the real upside we're going to get into 2022. When I look at the amount of contracts that you bid and the guys that are talking about going as early as August and as far as sort of earlier next year. I mean, there are some significant projects and -- I mean, tens of billions of dollars that the provincial government has -- is canvasing now, looking for work to be done. So all of that's going to come.

I just think, like we said, it was the slowest to wind down and it was slowest to sort of pick back up. We now have visibility on what's going to be bid, and I think 2022 is going to be a very, very big year for us.

Tim James -- TD Securities -- Analyst

Thanks very much and congratulations on a good quarter.

Patrick Dovigi -- Chief Executive Officer and Founder

Thank you.

Luke Pelosi -- Chief Financial Officer

Thank you.

Operator

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

Tyler Brown -- Raymond James -- Analyst

Hey, good morning, guys.

Patrick Dovigi -- Chief Executive Officer and Founder

Good morning, Tyler.

Luke Pelosi -- Chief Financial Officer

Good morning, Tyler.

Tyler Brown -- Raymond James -- Analyst

I got a call waiting right whenever I turned over. But hey, I know the call has been long here. But Luke, on Slide 9, I really appreciate it, but I want to make sure that I have it. So of the incremental $110 million to $115 million in solid waste, only $20 million of that is from commodities and the rest is just kind of core delta?

Luke Pelosi -- Chief Financial Officer

Yes, that's right. So Tyler, if you think about what we said at the beginning of the year, year over year, the original guide provided plus 10% in commodity. Based on what we've seen throughout this year and now the expectation for the balance of the year, saying there'll be another sort of plus $20 million on commodity. And again, while that's muted compared to what others may be sort of saying, you got to remember that for every dollar the commodity goes up, I give sort of $0.40 of it back to the guy, and so I'm getting less of an impact as it moves.

So there's $20 million macro commodity. The rest is really outperformance on pricing volume.

Tyler Brown -- Raymond James -- Analyst

OK. And on the price and volume, I'm assuming that's largely a positive delta in the U.S., I mean, it sounds like you have pretty reserve comments on Canada.

Luke Pelosi -- Chief Financial Officer

I mean, it's -- I continue to have reserve comments on Canada, but the opening guidance was also reserved on Canada. So it is positive in both, particularly on the sort of pricing, moving both of those up to getting to a higher number than in the original guide. But yes, it's the U.S. business for which we are more -- have a better line of sight because, again, our Canadian government seems to be a little bit more uncertainty in terms of timing.

Tyler Brown -- Raymond James -- Analyst

Yes. OK. And then -- so on the free cash, and I just want to make sure I've got this, because I'm a little confused. So you booked the $50 million of asset sales in the quarter.

That is in your guide, correct?

Luke Pelosi -- Chief Financial Officer

The $50 million is really just going to be an offset for incremental capital, growth capital that we'll redeploy. So I have it this quarter individually. I back it out for this quarter. But no, by the time I get to year-end, I'll deployed it.

And therefore, its inclusion normalizes capex to that right $525 million level.

Tyler Brown -- Raymond James -- Analyst

OK. That's helpful. So it's normal. I'm assuming it's, again, something like $1.4 billion of EBITDA.

You got $300 million or so of cash. That your capex of, call it, $550 million a little bit more and then closure, post-closure, and that's --

Luke Pelosi -- Chief Financial Officer

Net neutral. You got the cash interest in that $300 million. You've got the capex of $500 million in a quarter, before the closure, post closure in that sort of $55 million range and the $8 million to $10 million for cash taxes, and you do that $520 million.

Tyler Brown -- Raymond James -- Analyst

OK. And just on the balance sheet, is it safe to assume that about half of the refis have been done and the other tranches will just come as the call premiums ease?

Luke Pelosi -- Chief Financial Officer

I'd say about two-thirds of the 2021 opportunity has been done, and we anticipate being able to execute on the full opportunity. And then the balance of the balance sheet becomes 2022, 2023 opportunities.

Tyler Brown -- Raymond James -- Analyst

Right. OK, OK. All right, guys. Appreciate it.

Patrick Dovigi -- Chief Executive Officer and Founder

Thanks, Tyler.

Luke Pelosi -- Chief Financial Officer

Thanks, Tyler.

Operator

I our next question comes from Rupert Merer from National Bank. Please go ahead.

Rupert Merer -- National Bank -- Analyst

Good morning. Thanks for taking the question. 

Patrick Dovigi -- Chief Executive Officer and Founder

Good morning, Rupert.

Rupert Merer -- National Bank -- Analyst

Back to GFL Renewables again. You've got a very well-developed organics business. I'm wondering, are you looking at any opportunities for conversion of organics to RNG with AD Systems? And if you can give a bit more color on what the economics of that might be?

Patrick Dovigi -- Chief Executive Officer and Founder

Yes. I mean, I'm not as bullish on the anaerobic digester front, particularly in North America, just because the consistency of the stream that needs to go through those digesters to like run them to most economical. And that's how we've sort of chosen the other path for now. I mean, we all know when we stick at our organic thing from time to time and particularly in Ontario, and it only gets worse as you go into parts of the U.S.

So we're going to stick with that. So no, we're not going to -- we're not enthused of going into anerobic digesters any time soon.

Rupert Merer -- National Bank -- Analyst

And on the last call, you highlighted some royalty agreements on landfill gas operations that are up for negotiation in the next three to five years. How does that play into the strategy? Do you buy those out or do you need to expire?

Patrick Dovigi -- Chief Executive Officer and Founder

That's part of it, for sure, on some of the electrical contracts and which is all sort of well underway and telegraphed in that number. And we think that will happen relatively quickly. Those aren't really moneymaking opportunities for the actual utility. So a lot of them are happy to get out of them.

We moved through this venture.

Rupert Merer -- National Bank -- Analyst

Great. And then just finally, can you give us some thoughts on the timing of investment that's going to be needed to convert to CNG vehicles?

Patrick Dovigi -- Chief Executive Officer and Founder

I'm going to follow the normal course, for sure. I mean, what we're looking at doing is sort of just rebalancing our fleets, moving diesel trucks into markets where from existing area that don't have CNG. And then, well, we spend our major capex for deploying those into areas where CNG makes more expense. So I don't think you'll see any outsized capex component.

It will be a rebalancing and shifting of where those dollars get spent.

Rupert Merer -- National Bank -- Analyst

Great. I'll leave it there. Thank you very much.

Patrick Dovigi -- Chief Executive Officer and Founder

Thanks, Rupert.

Operator

[Operator instructions] Our next question comes from Adam Wyden at ABW Capital. Please go ahead.

Adam Wyden -- ABW Capital -- Analyst

Hey, Patrick. Congratulations on a great quarter. I think my question is more qualitative in nature. If you kind of look back, you guys went public in early 2020 at the depths of COVID, I think you'd obviously have some challenges taking the asset to market.

And look, you guys now adapted to COVID extremely well. You've executed on exactly what you said you would do. You've got the two platforms, you're divesting assets, leverage is coming down. The refinance story is happening.

I mean, I would say that for the last year and a half, you basically delivered on everything you said you would do and exceeded all kind of numerical expectations. That being said, the rest of the industry trades at a substantially higher multiple and marginably has what I would argue in your unit economics on an incremental basis and from an ROIC and all the rest. And so you as an insider and the largest shareholder, unlike the rest of your peer group are faced with kind of a question or kind of something to ask yourself, which is the public markets are resisting the way you deploy capital even though it is far superior to your peer group and you trade at a significant discount to your peer group. I mean, at what point do you pull other levers to kind of tease out the value? Obviously, your concentrated shareholder fees could make it easy to tap the capital markets again.

Interest rates are obviously very, very low. Could this company get reIPOed? Could you do a sale-leaseback on your real estate? That obviously, industrial real estate is at very, very low multiples. I mean, the way we see it, you're trading at like almost a 10-plus percent yield out year and a half. And your real estate is trading at 3, your peers are trading at three.

How do you think about kind of -- from an owner's perspective, from an IRR perspective, the types of levers you can pull? And at what point you say, look, this is a waste of my time. This is enough -- we're not creating value fast enough from an equity perspective relative to the business performance?

Patrick Dovigi -- Chief Executive Officer and Founder

So there's a lot of, I guess, a lot of statements in the lecturing. So I mean, I think -- I'll take a stab at it. I mean, I think from our perspective, I think as a private company, we never really like to focus on the mark of the equity, right? And the mark on the equity is really only relevant if you need the equity to sort of fund your plan. And I think at this point, the plan is largely self-funded, so we don't.

That being said, we do think there's a very compelling opportunity to own this name at a relatively inexpensive cost and correlation to some of the other peers. But I think we've been at it for six quarters publicly, obviously, a lot longer-term privately. And you are right, I do am the largest single shareholder. And at the end of the day, I'm going to keep being the great steward of capital and have been over the last 14 years when we started this company with $250,000 and brought it up significantly over that period.

And I think one way or another, the value will be unlocked at some point. And whether that's private, what that's another M&A transaction, whether that will just continue executing on what we do best, we'll unlock the value over time. And we're giving everybody the roadmap of where we see the value. And like you said, you look out a couple of years, everybody wants to focus on the quarter.

I mean you can't build great businesses quarter to quarter. You've got to take a three, four year view on what you're going to do from a plan perspective and a business perspective, and that's exactly what we're doing. And like I said, a year ago, we were defending that the business didn't have any cash flow. And the equity was well 0, and I think we put our head down, been really strong, continue doing that and have grown cash flow at a 40% CAGR ever since.

And we're saying we're going to continue growing free cash flow at a 15% to 20% CAGR here for the next three-plus years. So I mean, we've given you -- I have no interest in saying it other than saying, OK, wait and see. I mean, watch what's going to happen. And if you want to own it today, own it today; if you don't want to own today, don't own it today.

But these are -- this is exactly what we're going to do. And I think we have a history of beating expectations, and that's my focus. And like I said, one way or another, no difficulty with the renewable side here. We found there's potential gas opportunity that could yield a significant amount of free cash flow.

And we will unlock the value from it, whether that's keeping the cash flow and trading at the 25 to 30 free cash flow that we trade at today or you unlock the value with someone else that's trading at 40 to 50 times free cash flow. So we will do that, and we'll just keep doing the things that we think add value to our equity.

Adam Wyden -- ABW Capital -- Analyst

OK. That's very helpful. Last question. So if you think about the GFL historical strategy, you guys have approached the waste management consolidation somewhat differently than your peers, albeit better.

You buy a very well-run platform. [Inaudible] you don't buy their trucks, you sell their trucks, you keep their trucks, you do consolidation. It might be helpful for me and perhaps others on the call to kind of block folks who put a typical tuck-in transaction to your hub and spoke. So you buy $5 million of EBITDA and put it into your system, what multiple of EBIT is.

Because at least from our understanding, and in fact, it might be helpful for others is that when you buy a platform, you're buying the structure. But when you buy these things and you plug them into your routes, there are substantial capex savings and substantial G&A savings. So I mean, it might be helpful for me and others to kind of say, OK, when we buy things at five or six times EBITDA, it's -- you really should think about them as a multiple of cash flow or EBIT. So it might be helpful just to kind of lay out how that works because it feels like that's where this business is going.

You've gotten those two big platforms. And so the vast majority of your time going forward will be spent on this kind of emblematic transaction.

Patrick Dovigi -- Chief Executive Officer and Founder

Yeah. I would say it's no different in Canada. Look at the margin profile of what's happening in Canada. Canada was a low 20s margin business.

Today is high 20s margin business. And now that happened is we built out the platform across Canada. When you build up the platform, you get all the SG&A requirements, the operating facilities and you have teams in these existing markets, and it's no different than what we're doing now in the U.S. And when you look at what we do is, I say we have a lot of the great pieces of puzzle already in place.

We have an amazing fixed facility and fixed cost base. And now we acquire these smaller collection-only businesses, so we can tuck into our existing geographies and utilize that fixed cost base and utilize those post-collection operations, like transportation, recycling facilities and landfills, those become highly accretive. And when you can put them on those routes on the back of your existing routes, so obviously, you're eliminating a significant amount of capex and you're just increasing revenue on your existing book of business, which drives higher margins and drives higher free cash flow margins. I mean, that we've been doing for 14 years, and that's why our margins have gone from high teens to moving to high 20s, approaching 30s, right? And then for the solid waste business, in excess of 30.

So we will continue. We won't deviate from that strategy. We're not hunters. The lion -- Luke said, the number of opportunities we've acquired this year, 20-plus.

If you look at the relative size of those, again, tiny, and we think over time, those will add the most value to our equity.

Adam Wyden -- ABW Capital -- Analyst

Sure. And how do you think about capex as a percentage of sales from where we are now? And where do you think it could be in five years? I mean, if you continue to execute on this, I mean do you -- I mean, your capex percent of sales has come down a lot. And where do you think it could be in five years?

Patrick Dovigi -- Chief Executive Officer and Founder

Yes. I mean, we were in the early days, we were at 15%. And look, today, it's in the 10-ish to 11% record. keep going from there.

I think -- could it get to 9% to 10%? Sure. I mean, it just depends where we are in the growth cycle and how we want to think about our business four or five years now. Yes, you're right in saying that when you look back in time, if you look at the perspectives, capex's we haven't had to make those investments, has come down as a percentage of the overall revenue.

Adam Wyden -- ABW Capital -- Analyst

Yes. I mean, look, I'll leave you with this. That to me is the most exciting part of this story that, obviously, you're thinking about it as a business owner, and you've got to buy these good platforms, and that's why you've historically paid multiples for these big platforms. But I mean, what you do is you get the great foundation and you bring in these little guys and you don't duplicate the trucks and you get share procurement.

I mean it feels like you think about where we are in the cycle with these two platforms, these deals that you're buying in four, five, six times EBITDA, the multiple of EBIT is considerably lower. So to us, that's the most exciting part of the story. So I look forward to seeing it. And thank you again for all the hard work and great quarter.

Operator

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

Patrick Dovigi -- Chief Executive Officer and Founder

Thank you, everyone, and we look forward to speaking to you when report our Q2 results. Thank you.

Operator

[Operator signoff]

Duration: 73 minutes

Call participants:

Patrick Dovigi -- Chief Executive Officer and Founder

Luke Pelosi -- Chief Financial Officer

Hamza Mazari -- Jefferies -- Analyst

Michael Hoffman -- Stifel Financial Corp. -- Analyst

Walter Spracklin -- RBC Capital Markets -- Analyst

Kevin Chiang -- CIBC -- Analyst

Mark Neville -- Scotiabank -- Analyst

Unknown speaker

Tim James -- TD Securities -- Analyst

Tyler Brown -- Raymond James -- Analyst

Rupert Merer -- National Bank -- Analyst

Adam Wyden -- ABW Capital -- Analyst

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