I’m sure you won’t confirm this, but north of $2.3 billion of EBITDA doesn’t feel out of the realm of possibility when I look at the puts and takes. Maybe broad strokes if there’s anything you would comment on that in terms of maybe where my math might be wrong or maybe where we might be right?
Patrick Dovigi: Without giving formally updated guidance, you’re heading in the right direction, I would say. But we’re going to come out at the end of Q2 and we’ll give updated guidance for the full year, including the contribution from M&A and any other things that pop up along the way, particularly as we get through the first half of the year and get a real trajectory of volumes and where pricing is going to lie. But, I think, Kevin, you’re on the right path.
Kevin Chiang: I appreciate you taking the time to answer that question. Good results there. Thank you very much.
Patrick Dovigi: Thanks, Kevin.
Operator: Thank you. With our next question comes from Sabahat Khan from RBC Capital. Your line is now open.
Sabahat Khan: Great. Thanks and good morning. I think you noted in the prepared remarks that labor turnover is trending lower and some of the other costs trending lower. Improving EBITDA margins seems to be a bit of a trend we’ve seen in this reporting cycle. If you can maybe give a bit more detail on how much the labor turnover has improved, how you expect that to trend the year — trend through maybe the rest of the year, and maybe a bit more color on the repair and maintenance costs, et cetera, as well? Thanks.
Patrick Dovigi: Yeah. So I’ll give it to Luke on a couple of others. But on the labor front, basically, like we said, in sort of the peak of COVID, jobs market was really tight, labor voluntary turnover, particularly in the residential book of business was trending sort of closer to 30%. That dropped to sort of mid-20s last year and has trended to low 20s this year. Pre-COVID we were in the high teens range. So, we’re getting significantly closer. Still some room to go, but it’s certainly heading in the right direction and you’re seeing that flow through to the P&L and you’re definitely seeing that on the margin front.
Luke Pelosi: Yeah. And then Sabahat, it’s Luke speaking on R&M. I think it’s a similar story and trend line that things are moving in the right direction. I mean, if you look for the quarter, R&M was about 10.3% of revenue. Now, that was flat with Q4, but being achieved on the seasonally lower Q1 revenues, right? And so if you think of how that then rolls forward with the revenue upticks and the improved efficiency in R&M, we see a path to that going back into the sort of single-digit as you get into the middle of the year and probably ending the year in the mid to higher 9s level. So I think there’s still some conservatism in that number and the improvements that we’re seeing across the business should drive incremental opportunity there. So we’re feeling really good with how that trend line is moving.
Sabahat Khan: Okay. Great. And then maybe if I can tease out on Patrick’s comments around that Toronto recycling contract. I know you said you’re still in contract negotiations, but any big picture parameters around kind of the scale, directional margins for this business versus a base business under the EPR regime, just anything you can share even at a high level to give us perspective on what this could mean or what it could look like? Thanks.
Patrick Dovigi: Yeah. I mean, it’ll be — remember, keep in mind, we do 60% of the work already today. 40% of the work is being done by others, mostly city workers. The contract value will be in excess of $50 million a year. I think that sort of margins accretive to what our blended margin is today for solid waste.
Sabahat Khan: That’s $50 million to EBITDA?
Patrick Dovigi: No. $50 million of revenue…
Sabahat Khan: Revenue.
Patrick Dovigi: … in excess of $50 million of revenue.
Sabahat Khan: Okay. Great. Thanks very much.
Patrick Dovigi: But you know, over — it’s a 10-year contract, so the — it’s going to be over $0.5 billion a year or $0.5 billion in aggregate over 10 years.
Sabahat Khan: That make sense. Thank you.
Operator: Thank you. With our next question comes from Jerry Revich from Goldman Sachs. Jerry, your line is now open.
Jerry Revich: Yes. Hi. Good morning, everyone. I’m wondering if you could just talk about the acquisitions that you’ve completed year-to-date since they’re all within your footprint. Can you just give us a flavor for the extent of route consolidation opportunities? How many more stops per truck do you expect post-integration? Just give us a feel for how accretive these opportunities are versus the existing routes in your markets, if you don’t mind?
Luke Pelosi: Yeah. Thanks, Jerry. It’s a key component of our whole sort of M&A strategy, as you’re doing these densifying tuck-ins, getting the efficiency that you’re speaking to. Unfortunately, the small population of, there’s six transactions, one larger, one Angelo, you’ve got five little small tuck-ins. It’s going to be widely varied by market and by region what that opportunity sort of looks like. But you’re thinking about it the exact right way, that if I’m buying a business today that’s operating eight or nine trucks in a market where we’re operating significantly more than that, there’s probably an opportunity to park one, two, three trucks, depending on the sort of density. So what we’ve historically said is on these smaller acquisitions that may be on the face of it, if you’re paying somewhere between sort of 6 times to 8 times for a small one on a pre-synergy basis, post the synergies, you might be able to take anywhere from 2 turns to 3 turns of cost out of that business by virtue of those cost savings from the route consolidation, facility consolidation, headcount consolidation, et cetera.
So it does vary for these specific deals. I’d say they’re no different than typical. So you’re probably going to be in that range. But that’s how we typically think about the M&A on the tuck-in nature.
