GFL Environmental Inc. (GFL) Q4 2021 Earnings Call Transcript

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GFL Environmental Inc.(NYSE:GFL)
Q42021 Earnings Call
Feb 10, 2022, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to the GFL Environmental fourth quarter earnings call. My name is Juan, and I will be coordinating your call today. [Operator instructions] I will now turn over to your host, Patrick Dovigi, founder and CEO of GFL Environmental. Please, Patrick, go ahead.

Patrick Dovigi — Founder and Chief Executive Officer

Thank you, and good morning. I would like to welcome everyone to today’s call, and thank you for joining us. This morning, we will be reviewing our results for the fourth quarter and providing our guidance for 2022. 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 have prepared a presentation to accompany this call that is also available on our website. During this call, we will 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 — Founder and Chief Executive Officer

As we look back and reflect on what we accomplished in 2021, I’m happy to say I’ve never been prouder of the entire GFL family. While we had all hoped that COVID will be behind us with the vaccine roll-out in Canada and the U.S., I think we can all agree it hasn’t been as smooth as we would’ve liked, particularly here in Canada. Add to that the labor shortages in some markets, building inflationary pressures and overall supply chain disruptions, there’s been a lot of challenges to deal with. And as a result, that we can only overcome all of these challenges.

The quality of our asset base and market selection continues to be the foundation of our growth. The strength of our brands supported our talent retention, and the dedication of our team allowed us to excel. GFL now stands with more than 18,000 employees, nine provinces in 26 states in the U.S. Every day we go out and we drive to win.

I think it’s safe to say that no one outwork us and I believe that’s what distinguishes us from others. Count on us not to take the easier path for the pace of most accretive fab. The proof is in the headline results, revenue for the year grew by over 30%. Our adjusted EBITDA grew closer to 40%.

Adjusted free cash flow grew over 50%. And we have exceeded expectations for eight consecutive quarters of the public company. How will we able to consistently achieve these results? I believe that GFL is different. The collective equity ownership of our management team far exceeds that of any others in our industry and I believe that alignment drives a relentless focus on long-term value creation.

We are laser-focused on the leverage of our growth strategy that have guided us since our IPO. Drive organic growth and margin expansion, rationalize our balance sheet to optimize our asset base, and reduce debt costs and execute on strategic accretive acquisitions. ESG continues to be a focus, it is core to our organic growth strategy. We released our updated sustainability report for 2020 in Q4 and we will be releasing our sustainability action plan with our ESG targets, goals, and objectives in our 2022 sustainability report later this year.

As we’ll discuss later in more detail later on the call, capex in 2022 includes investments in our recycling business in fleet conversion to CNG and in RNG projects at our landfills to support our sustainability action plan commitments. In the phase of the pandemic, we deployed 2.3 billion on 46 acquisitions. With our focus on rationalizing our balance sheet, we were also seller of assets when it makes sense to ensure we are achieving the highest invest return from our asset base. In 2021, we sold non-core assets in three separate divestures from what we realized approximately $250 million in proceeds.

Giving us additional capitals to deploy the higher organic growth opportunities in our base business. Later in this call, we will discuss our plans for our infrastructure services business, which is more involved in the divestures we have done to date, but the underlying strategy is consistent. Taking the path that we believe will drive the greatest value for our shareholders from our assets. As I mentioned, rationalizing our Balance Sheet, also, use focusing on our capital structure.

So attached briefly on our view were the impact of higher interest rates. I think you need to look at GFL differently than other industry players who will already investment-grade. As our credit quality continues to improve with our increasing free cash flow, we still have lots of room to decrease our cost of capital. We believe that the spread compression on rates, we can realize as a result of that improvement in our credit quality will mitigate the risk of higher interest rates.

And point us altogether, I believe that 2021 is another example of GFL executing on what we said we reward to do when we went public. We buy when we see accretive opportunities, we prune when we see opportunities and deploy our capital, and we invest when we see opportunities to add complementary lines for our business, like R&D, and doing all of that we create value for our shareholders. I will now pass the call over to Luke, who will take us through the financial results and guidance.

Luke Pelosi — Chief Financial Officer

Thanks, Patrick. I’ll pick up on Page 5 of the presentation. Revenue for the quarter increased over 25% compared to the prior year period, which was a $125 million greater than the guidance we provided in November. While the real performance was primarily driven by contributions from M&A, we also exceeded our targets for solid waste pricing and volume, which came in at 5.1% and 3.4% respectively.

The price growth was 80 basis points better than Q3, and was supported by a pull-forward of price increase plans in certain U.S. markets to respond to cost inflation. Included in the volume growth is the impact of some opportunistic in ancillary revenues we picked up in our Western Canadian operations. Commodity prices softened versus the peak we saw in Q3, so that was a modest drag on the quarter as compared to guidance.

Specifically on M&A, we saw meaningful volume in the Terrapure liquid business continues straight through to December. A deviation from a difficult seasonality profile. We also saw growth exceed expectations in certain of the new U.S. markets, a came through the Q4 2020 acquisitions.

It’s not uncommon that in perfect information on the contribution cadence of recent M&A. And as of late COVID related disruptions and then subsequent catch-ups have compounded some of this forecast uncertainty. Infrastructure and soil remediation continued to see delays in the start-up of new projects. But our pipeline of new opportunities remains robust and our outlook for this segment, as we finally get the other side of COVID restrictions, is exceptionally positive.

On Page 6, you’ll see adjusted EBITDA for Q4 of $388.3 million and a margin of 25.2%. The decline in commodity prices help performance of the relatively lower margin M&A contributors and the ancillary Western Canadian revenues, all combined to partially offset the base number for margin that was largely in line with guidance. While internal cost inflation continued to rise, and now sits around four, we view this quarter as a continued demonstration of the capacity of our platform to respond with price levels that not only cover the cost escalation, but drive organic margin expansion as well. Looking at each of the segments, solid waste margins were 30% or better every quarter this year, up first for the company and a result that is all the more impressive when considering the inflationary backdrop under which it was achieved.

Excluding the impact of M&A, macro headwinds, and certain one-time boast collection volumes, margins expanded organically 20 basis points quarter over quarter, driven by the pricing and overall operating leverage. The margin drag from rising fuel prices was partially offset by benefits mark from commodity pricing. For the year as a whole, solid waste margins expanded 90 basis points, with organic margin expansion in both of our geographies. Liquid waste margins were 21.7% for the quarter and were impacted by the outsize and diluted revenue contribution from Terrapure.

Terrapure margins are right in line with exceptions and we can do with expectations and we continue to see a path to bring the Terrapure liquid revenues up to and then above the average margins to a liquid segments. For the year as a whole, liquids margins increased 80 basis points, overcoming a 100 basis points headwind from M&A and demonstrating the operating leverage associated with post-COVID volume recoveries that we had forecasted. Infrastructure and soil margins improved over 400 basis points period over period as the soil volumes recovery continued and we’re able to leverage the relatively fixed cost structure of the segment. While the first part of 2022 will be challenged on margins from a quarter-over-quarter comparison perspective, we’re confident in our ability to use our pricing levers, as well as cost and asset-based optimization to drive sustained and ongoing margin expansion over the near and longer-term.

On Page 7, you can see adjusted cash flow from operating activities of $321 million, a 33% increase over the prior period. We completed another asset divestitures during the quarter, bringing total proceeds from asset disposals for the year to approximately $260 million. As previously discussed, we are redeploying these dollars into attractive high return growth initiatives within the base business. Because of the success of our portfolio rationalization efforts outpaced our ability to redeploy the proceeds into the business, we have a timing difference between dollars received and dollars deployed.

As such, for the annual adjusted free cash flow reconciliation, we’ve included an adjustment to exclude the excess proceeds realized from asset disposals with the intensive burdening the adjusted free cash flow number with a normalized level of capex. When we discuss our guidance for 2022, we’ll provide additional color as to how we’re thinking about the treatment of these excess proceeds. During the quarter, we normalized for an incremental $5.6 million of working capital related to recent M&A that we believe is better characterized as part of purchase price. We believe our cash collection toward the end of December were modestly impacted by disruptions from the rapid spread of Omicron over the holiday period and also, our working capital was negatively impacted by just under $10 million as a result of the required repayment of 2020 payroll taxes previously deferred under the Cares Act.

Despite this $10 to $20 million working capital headwind, we realized over $540 million of adjusted Free Cash Flow for the year. A result ahead of our guidance and representing over 50% growth as compared to the prior year, an outcome that we believe continues to demonstrate the attractiveness of our ongoing Free Cash Flow growth opportunities. Turning to Page 8, in terms of net leverage, we ended the year as anticipated, at 4.75 times in part due to the previously announced issuance of $300 million preferred equity. We deployed approximately $1 billion into 17 acquisitions during the quarter.

Now over $900 million of this was completed when we last spoke in November. So it’s about $90 million deployed into nine tuck-ins has been net new numbers since we last spoke. For all the acquisitions completed during the year, we expect to generate annualized revenues of approximately $785 million. We previously guided toward the rollover of approximately $450 million related to M&A.

We still believe that to be an accurate net number as the new $50 million of revenue acquired since our last guidance is largely offset by the timing differences related to Terrapure and the incremental negative rollover from incremental divestitures. From a liquidity perspective, we start the year with nearly $200 million of cash on hand and an undrawn revolver which we think is an ideal setup, providing maximum optionality as we evaluate growth opportunities for 2022.

Patrick Dovigi — Founder and Chief Executive Officer

Kicking off on Page 10, we wanted to highlight what we believe to be the final significant step in our near-term portfolio rationalization initiatives. Our infrastructure and soil remediation segment is comprised of two divisions with two different margin profiles. A mid-teen service component and a high 20 solo division. The solo division is a service line that the entire industry participates in.

But the services division has a different investment profile relative to our core solid and liquid waste businesses. We believe that our services division leadership team is best-in-class and with pride has given the opportunity to invest incremental growth capital into its business. That investment has been tempered under the GFL, as we’ve been focused on deploying capital into our solid and liquid waste businesses. On Page 11, we outline our plan.

We will bring together our services business with COCO Paving to create a leading infrastructure services growth vehicle called Green Infrastructure Partners. COCO is a leading vertically integrated civil infrastructure company, was highly complementary assets and service offerings to our existing infrastructure business. I will be the Chairman of the new entity and oversee the new management team, which will be a mix of existing GFL and COCO leaders. With a $180 million of performance EBITDA and meaningful M&A pipeline, we see a highly attractive value creation opportunity by spinning off the infrastructure services business and allowing us to capitalize on the value creation that we believe will far exceed its value within size GFL.

The form of the transaction we’ll see a sell the infrastructure business, the Green Infrastructure Partners for cash and equity interest in the new entity. When complete, we will no longer recognize the results of infrastructure services within GFL financial statements. Instead, we will carry our investment in Green Infrastructure Partners that we can monetize overtime as value is created. While the timing of the infrastructure services the venture is still a moving target, we intend to execute the plan in the near term.

Page 12 illustrates the impact has divested to GFL post transaction. In summary, the weighting of solid waste in the portfolio increases, EBITDA margins increase, and the retaining store mediation division will be combined with our liquid waste segment and remained environmental services simplifying our overall segment reporting. And finally, while not listed on the page, we think there’s an opportunity to take the cash component of the consideration we got for the infrastructure business and redeploying into near-term M&A opportunities to backfill the divested infrastructure services EBITDA. With the increase in the leading a solid waste and opportunity for near-term M&A, this reaffirms our conviction that, there are still a lot of opportunity for growth within our solid waste business, both organically and through accretive acquisitions.

I will now pass it back to talk about further while reviewing our guidance.

Luke Pelosi — Chief Financial Officer

So starting on Page 15, we’ve laid out the details for the guide. We follow the same format as last year so hopefully that makes it easy to follow. Page 15 reiterate the levers Patrick mentioned earlier that we intend to continue to pull and create equity value. We believe we have demonstrate capabilities in each of these areas since we went public, we think the opportunity set looking forward is even greater than what we have accomplished to date.

Looking at page 16, we’ve laid out how we see it all coming together on the top line. Solid waste pricing at high force, a 400 basis points better than the prior year in response to inflationary cost pressures. There could be upside to the pricing number depending on retention rates and actual CPI levels for the time that each of our various resets recalculated. For waste volume at a point to a point and a half, we expect to anchor at the high end of this range with the opportunity to beat if Canada can once and for all moved beyond the linger and lock down disruptions.

Commodity prices are plus 0.25%, whereas non-recurring commodity volumes that we benefited from in 2021 are just over a 0.5 point headwind. So a net commodity impact, we expect to be about 40 basis point drag. The commodity forecast assumes January’s net basket price of approximately a $170 Canadian per metric ton, which was about $25 less than where the basket was when we provided our outlook in November, a decrease as an impact of about $20 million to revenue EBITDA and free cash flow. Liquid and infrastructure expected to generate 5% to 6 % and top line growth largely on expected volume recovery associated with the reopening.

The net M&A rollover, including approximately $40 million negative rollover from divestitures, is expected to be around $450 million. The guidance assumes an FX rate of 1.26 versus the 1.25 average in 2021. That brings you just over 6.3 billion of revenue at the midpoint, or just over 15% growth, excluding the negative drag from divestitures. In the last set of the bridge, you can see that we have backed out for stand-alone guidance with the infrastructure services business that we plan to spin out.

As Patrick said, the timing of the spin out is still a moving target but we intend to execute the plan in the near-term and we’ll segregate the results from this division until the transactions consummated. The last fall on the page, which excludes contribution from infrastructure services shows 5.875 as the midpoint, and this is the number we would highlight at 2022’s base revenue guide. Turning to Page 17, you’ll see that revenue ranges listed on Page 16 convert to 17.10 of adjusted EBITDA and 6.80 of adjusted free cash flow, including infrastructure. As I mentioned previously, the contribution adjusted EBITDA and free cash from commodity prices about $20 million less than we provided our preliminary outlook for November.

Those were the numbers for the business as a whole. We’ve also presented in the blue highlighted call on the guidance, excluding our infrastructure services, 16.45 of adjusted EBITDA, and 640 of adjusted free cash at the midpoint. Again, these are the base numbers that we think you should be expecting for 2022 before considering the impact of any net new M&A, which we’ll touch on in a moment. In terms of the walk from adjusted EBITDA and adjusted free cash against the 16.45 of EBITDA, we’re expecting net capex around $615 million, cash interest expense of approximately $340 million neutral working capital and other net drags of approximately $50 million leverage ending and low fours.

On Page 18, we unpack our capex for both 2021 and 2022 in. We had normal course capex of $540 million. Offsetting this amount was $260 million of proceeds we received from divestitures. And as anticipated, we were able to redeploy just over a $110 million of these proceeds into growth initiatives within our business.

The remaining 150 million proceeds that we do not report during 2021 are normalizing as excess proceeds and expected to invest these dollars in 2022. Looking at the 2022 which is the bottom of page 18, we’ve identified approximately a $150 million of incremental growth opportunities. Substantially all of which will be funded with the excess proceeds from 2021. These investments are centered around new immaterial upgrades to existing recycling facilities, continued investment in the infrastructure and asset basis of certain new markets, and R&D development.

Again, all these investments being funded by the proceeds from our rationalization program. So another way of thinking about these dollars is simply a timing difference between when the cash was received and when it will be spent. That bridge does not reflect any cash proceeds for the sale of Infrastructure Division, as we intend to reinvest those dollars into M&A. Consistent with past practice, our guidance does not include any impact from future M&A.

As Patrick mentioned, our M&A pipeline is robust. In page 19, it summarize how we’re thinking about the landscape. There’s one larger transaction within our footprint that could largely backfill the infrastructure services, EBITDA, we have carved out in our guidance. This opportunity will be immediately accretive and actionable in the first half of ’22.

Then on top of this larger opportunity, we anticipate continued execution of our regular tuck-in M&A program. We highlight this opportunities, $250 million to $300 million of incremental revenue across 25 to 30 transactions, but history has shown that there is upside to this number. If you think about those as potential upside opportunities, Page 20 shows that if executed, we get exit ’22 with adjusted EBITDA of $1.8 billion and adjusted free cash flow of $730 million on a run rate basis.

Patrick Dovigi — Founder and Chief Executive Officer

Page 21 of an overview of the R&G opportunities in a while, not highly relevant for 2022 guidance. We wanted to frame how this ties into how we’re thinking about 2023. We are contemplating using the 50-50 joint venture structure range venture third-parties from development in the landfill sector, we think are viable R&D projects. Using conservative assumptions, we think our portion of the agreement incremental free cash flow from these sites could be a $150 million to $200 million per annum.

We have finalized the arrangement for the first four site during the process of finalizing the next five sites and the expectation that our portion of adjusted free cash flow from these nine sites will be $105 million to $125 million per year. Our portion of the expected capital outlay for these nine projects is $150 million to $180 million. The majority of which will be spent in 2023. We see R&G as a great add-on to our core business, but it will not distract us from our focus on continuing to invest in the fundamental organic and M&A levers to drive our continued growth that we highlighted earlier.

On Page 23, you will see we start with our potential 2022 run rate. At this conservative estimate of the RNG opportunity to normal course and the normal course organic and M&A assumptions for 2023 and we end with an adjusted free cash flow run rate in the big 900, setting a clear path to exceed $1 billion in 2024. As many of you followed GFL through our history, we think you’ll see that there is a consistency when we have these calls with you every quarter. As owners, our senior management team is fully aligned with our shareholders.

Our 2021 results again, reaffirm how that alignment drive this management team to achieve industry-leading results. Even in the phase of the most challenging clients. I’m very proud of what we’ve achieved so far and I’ve never been more optimistic about what GFL future holds. I will now turn the call over to the operator to open the line for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] The first question comes from Hamzah Mazari from Jefferies. Please, Hamzah, your line is now open.

Hamzah Mazari — Jefferies — Analyst

Good morning. Thank you. My first question maybe for Luke is just on free cash flow. It looks like the sector organically grows free cash flow in general high single-digits, maybe if you add M&A maybe it’s 10% or slightly higher.

Your free cash flow profile and growth up yards much higher than peers. And it looks like it’s approaching a billion in the out year. Maybe walk us through what you’re doing differently, how sustainable is this? Do you just feel like your markets have less competition? I know there’s some mix differences in Canada versus U.S. But just walk us through confidence level in that free cash flow profile, and why your numbers are a lot higher than peers.

Luke Pelosi — Chief Financial Officer

Yeah. Thanks, Hamzah. Good morning. I mean, I think it’s a great question, one that we sit around and think about a lot, when we look at where the sort of stock prices and try and correlate the sort of two of them.

I mean, I think you’re right. The normal model in this industry, as you have mid-single-digit top line with a little bit of margin expansion and at the bottom line that equate to high single-digit free cash flow. I think when you look at our business, there has of a market selection, quality of the asset base and all the opportunity you have in the middle, we see an opportunity before considering the capital structure to beat that through the margin expansion. So you’ve been added 5% top line growth.

I think, we can go a little bit of incremental margin year over year, which is going to help drive a bigger number at the free cash flow lines. And when you couple that with where, I think, is a unique opportunity solely for GFL, which is the delivering profile. Or didn’t think today, but net interest cost and be able to leverage that interest cost line going forward as we’ve reached the inflection point of self-funding. Our goal, there’s a meaningful accretion at the free cash flow and it comes from that.

And I think you put those factors together, you can take what a normal course grower is that eight or nine, and organically, you can see that at low to mid teams as a result of what I think is that unique advantage for GFL tied to the markets and the cap structure. Then on top of that, we look at what we’ve been able to achieve and what we continue to achieve in these sort of organic redeployments. I think you have another five to seven basis points easily have sustainable for the next few years on that. And that’s how all the brought free cash flow growth up to high teens, low 20 number.

Then you layer on M&A on top of that, and you look at the numbers we’re suggesting, it was 50%, next year’s 30% at this conservative guide we’re giving. The year above as another 30%. I think there’s a real unique opportunity that’s compounded by not just the outsized M&A and other, but just an organic opportunity that’s unique to the industry. And I think, in time, as people say the results are noisy.

But as that noise subsides, I think it clearly be able to see this organic growth rate at the Free Cash Flow, foreign excess appears, and then complimented if you will, by all this other value-added items we’ve been looking at.

Hamzah Mazari — Jefferies — Analyst

Got it. The other question would just be on the infrastructure announcement. It’s pretty clear, but could you just talk about what kind of proceeds do you expect? Is it too early? What does your equity pick up look like in terms of percentage ownership you want to keep? I know, Patrick, you’re going to be Chairman of that business. Is that distracting? Is that business going to grow to be much larger? Is BC Partners going to be involved in that? Just any more detail around the execution of that.

Patrick Dovigi — Founder and Chief Executive Officer

Sure. For some people I don’t know the story. We organically build that business starting in late 2009, early 2010, and growing that business really over an eight-year period between 2010 call it 2018 free. Thinking about starting to go public and what that would look like in the public route who got from zero revenue today in excess of $500 million on the combined infrastructure business.

It’s always been my view that there is a significant opportunity to create a GFL 2.0 in the infrastructure services business. When we were a private company, we were doing that ourselves. We’re less relevant to how we looked in Phelps compared to the industry peers. I think we had a best-in-class management team in that business line and young hungry, very successful guys, industry leaders in Canada and we just saw this opportunity.

I mean, easiest path will be just, we can just sell it. But I think from my perspective, why would we sell something where we know there’s a significant amount of value to be created for us to shareholders. Back team reports to me today already, so it’s not a good — I’m getting more reports. We have lots of great ideas and COCO being one of the greatest deals we’ve had over the last couple of years, being an industry leader in Canada, one of the most successful best family run businesses in Canada.

Right down the middle of the fairway of what GFL likes to do and work that, got the brain thinking on my side of what we do and this created the opportunities for spin that out. I think when you look at what makes sense for us, the thought process as we said, spin it out, keep it leverage-neutral, get back. What I’m told to round numbers of quarter over billion dollars of proceeds and then get lax with just under 50% equity stake in the new entity. And we’re going to go and build it.

And I think over time as we build it, we’re going to create significant value for our shareholders. And starting with our proforma EBITDA of, just call it, roughly $180 million. I don’t see any reason why we can’t take 180 to a billion over five, six years. There’s a significant amount of opportunity, significantly under service, it meant highly fragmented.

And when you start with the business the quality of ours, if you look at industry comps, this combined entity will have margins that are 400 to 600 basis points higher than the industry norm because of the quality of the two businesses. So it’s very unique opportunity. It will be a great opportunity for our investors to participate in that and follow the GFL story. And for GFL shareholders that have been a part of it are going to contribute to the gate.

It’s a great opportunity as well. So I think it’s a win-win for everybody and I think we’ll just create a lot more value than we probably could have if we just sort of sold it off.

Hamzah Mazari — Jefferies — Analyst

And then just last question, I’ll turn it over. You have a lot going on. You have these free cash flow numbers in a lot of detail up to 2023 and people can probably project beyond that. You’ve been public for two years, Patrick.

Stocks been volatile. It’s been a good stock last year. Obviously the market does what it does. But maybe talk about your role at GFL, do you plan to see this whole thing through? Do you plan on being here over a decade? How are you thinking about your role, given obviously you have a lot of network tied into this, but also, you’ve created a ton of value in the private market for yourself and others over the last decade plus.

Patrick Dovigi — Founder and Chief Executive Officer

I mean, mark and unpack there. But I think from where we sit today, I think we get a lot of — I can’t control the stock price, right? Like the sort of I control all — I can control is allocating capital, making the right decisions for the business that I think are going to create value over the long term. That’s what I’ve done here for 16 years and I don’t think that’s going to change anytime soon. I think as we continue getting respect from the industry, as it continues to season, I’m not going to be happy until I see the stock go from wherever it’s $32 $33 U.S.

to a $100 U.S. And I think that’s at the tip of our fingers. I think — I think it’s always been to the under-promise and over-deliver approach. I think you see that.

I think we’ve — investors have asked us what the pieces of the puzzle look like, and I think that’s why we came out and gave you the pieces of puzzle. I don’t think there’s a more attractive story in the industry today. We’re in an amazing industry with amazing peers that event successful over a long period of time. And there is no better industry that I want to be in today than this one.

And I think there’s a significant amount of value that can be created here over the next little while. And at the end of the day, I’m here because I want to win. I don’t need to be here for a paycheck and — I have enough money. But like anybody, I’m here to make money and make more money, and I’m going to make more money for everybody that’s always call.

We’re going to take the 33 and we’re going to get to 100 and we’re not going to stop until we get there. And then we got the 100 then we align our goals, but that’s where I feel the opportunities here and where we’re going to go.

Hamzah Mazari — Jefferies — Analyst

Got it. And you’re still a young guy so you have a lot of time. Thank you.

Patrick Dovigi — Founder and Chief Executive Officer

Yeah. I’m not ready to go to the mall and hold hands with my wife yet. So we’re going to keep working until we get there.

Hamzah Mazari — Jefferies — Analyst

All good.

Luke Pelosi — Chief Financial Officer

Thanks, Hamzah.

Hamzah Mazari — Jefferies — Analyst

I’ll turn it over. Thank you.

Operator

Thank you. Our next question comes from Michael Hoffman from Stifel. Please, Michael, your line is now open.

Michael Hoffman — Stifel Financial Corp. — Analyst

Hi. Thank you very much. Can we — I’m going to tackle green infrastructure per second. So you’re putting in your $55 million, you’re getting half of the value, you put it in for cash, and then the equity interest.

And help me if I’ve got these numbers right. You’ve then got 180 million starting number, EBITDA, grow it, call it 4%, 5% organically add 20 million of EBITDA from M&A. That’s a two 10 number. Take a public appears at 10 to 12.

It was a $2.1 billion enterprise. I don’t know, you can leverage four and a half times, take out $900 million. That’s sort of 1.16. 45% of that $520 million.

That’s your value plus the cash. Is that the right way so everybody should think about that?

Luke Pelosi — Chief Financial Officer

You have my — I think our math is very good. I mean, I think there’s probably more of an opportunity. All depends on when you would actually want to take the thing public. But yeah, and if you do that, you’re getting close to 2x on your equity.

And so while it may look on the face living today that maybe the 55 isn’t getting maximum value. Following that logic you just described, we think you’re going to end up monetizing that some significant premium to what you would otherwise get for today. And that’s the exact rationale. And if things were well, it could be multiple, higher than what you just said.

Michael Hoffman — Stifel Financial Corp. — Analyst

Right. And I’m using all the low end of things. I’m not trying to overstate stated, take a conservative view. That’s how you create the incremental value for the shareholders.

It’s not that you sure you could sell $55 at 12 times or something. This is creating in a relatively short window of time. How to calculate what the path to the upside?

Luke Pelosi — Chief Financial Officer

Correct.

Michael Hoffman — Stifel Financial Corp. — Analyst

OK. Good. All right. 2022, part of being a young company in a development mode and all the growth, I get the adjustments.

That’s for noise people talking about. It’s 30% of your adjusted free cash flow at the midpoint or our adjustment. How do you get that number sub 10 and when?

Luke Pelosi — Chief Financial Officer

I hear people site the adjustments. To level set, what we’re adding back — never mind blowing up the cap structure in past years with the IPO, what we’re adding back is of $25 million a year at this pace of rebranding where we’re painting everything bright green. You can see that as you travel all over the country and that’s a strategic decision that we do with this M&A and you can debate that. But we say about that is unique as we’re in growth mode and there’s that $20 million spend.

You have $60 million a year roughly of transaction costs. You look at the last four years, we’ve done over a 125 deals and deployed over $11 billion. And across all of that, plus $60 million bucks a year in transaction costs. So $240 million in aggregate over four years in transaction cost to deploy $11 — $11.2 billion.

That’s I think 2%. So what I said to folks is that, we’re deploying capital at this level, there’s going to be transaction costs associated with that. I mean, we don’t pay bankers, we put these lawyer fees and etc., sort of add up and that’s what it is. I would say if you look at the last three years, I think those — that number has been like 50 million every year.

And the free cash flow was — went from a negative to 300 to 500 on a weighted 9. I think the relative quantum of that number is naturally going to decrease through the growth of the free cash. And obviously, if we’re not growing free cash of 50% a year, augmented with the M&A, that number is going to come down. But if we’re deploying this year, $2.3 billion across 46 transactions, I think $50 to $60 million is a fair number of where that’s going to shake out.

That’s the way I think about that. I do think though your comment about the percentage, that’s naturally just coming down in meaningful steps as the base number is growing.

Michael Hoffman — Stifel Financial Corp. — Analyst

Great. I think that helps clarify what — how to think about how business that noise really is. You introduced the idea that we ought to think about margins first half, second half. Do you want to walk us through the cadence so everybody gets that right when the street numbers don’t end up with either drive a truck through it range?

Luke Pelosi — Chief Financial Officer

Starting for we’ve included in the deck, like a pro forma for next — for recasting 2021, if you backed out the infrastructure. So just so we can have a right level set comparison. If you think — we’re not going to give the quarterly guidance. I mean, Q1 look historically sort of 22% to 23%of annual revenue in the normal seasonality cadence.

Now as I said, seasonality sort of getting a little bit wonky now in Canada with the COVID quarantine and stops. But do you think 22.5% times the midpoint of the revenue range at $5.9 billion. I guess it’s a sort of revenue number for Q1. I think — typically, Q1 is the sort of lowest margin quarter here to 250, 200 basis points.

Now so if you’re thinking about high ’27 as the blended number for next year. You’d see in Q1 it’s sort of call it a high 25, or they give you unpack that. You have solid will be a tough comp last year. If you look at last year, Q1 solid U.S.

was at highest margin of the year, which is very atypical for Q1. So normalizing for that, is going have a tough comp, liquid, new liquid, we’ll have some expansion. And, you can bank on the corporate cost bucket being about sort of 3%. So that’s how I’d see Q1 shaking out, then Q2, Q3, and Q4 I think we’ll follow that typical seasonality cadence, peak margins in Q3 and rounding up the year ending at that high 27, below 28 for the guide.

Michael Hoffman — Stifel Financial Corp. — Analyst

OK. And then Patrick, I don’t think you’re going anywhere you have — I think it’s, you have four kids under the age of 10, so now, you’re going to go to work every day. Right. More importantly, how — talk about your bench strength.

Patrick Dovigi — Founder and Chief Executive Officer

We’re going to do an Investor Day. Obviously, being public a week before COVID hit in March of 2020 we haven’t really had the opportunity to showcase the team. Where I sit today from my perspective, I don’t know yet on the other teams, but with this team’s been able to accomplish, at the end of the day, I’m here, I’m a cheerleader. I’m cheering on starting with Greg Yorston, through Luke and his team, to the HR team, to the integration team, the BD team, general counsel.

As we go through the whole list, for my perspective where I said, there’s a handpicked team, best-in-class management team that has delivered exceptional results quarter after quarter for a long period of time. And when we look at that, I think that is a big thing. When you look at the solid waste, which is a lion’s share of our business, if you look at the results that this team has been able to talk and execute on, I mean out of M&A in the face of old inflationary pressures and all the other things, I think it’s exceptional. And I look forward to showcasing that team when we do our Investor Day in May.

We haven’t picked a date exactly as we will just waiting to see what happens with COVID. But I think, when that just gets back and people get the look under the hood, attacker gets hit by a bus for more. I think it’s going to be pretty clear that GFL was going to be just fine. I think we have all the relevant pieces about management team in place.

And they’re just doing and executing and continue to do great things. And it’s really amazing to watch, because from — started on a scale being on the scale to sitting where I am today and then being able to watch these guys execute the playbook, it’s pretty amazing. And I take my hat off to them because, you know what? This guys are doing a better job than I did when I was in the seat and if it wasn’t for them and you handing over the reins we wouldn’t be where we are, so. I’m thankful to all of them for actually making that happen.

But I look forward to showcasing manufacturing team in May when we do that investor day.

Michael Hoffman — Stifel Financial Corp. — Analyst

OK. Thank you.

Operator

Thank you. Our next question comes from Tyler Brown from Raymond James. Please, Tyler, your line is now open.

Tyler Brown — Raymond James — Analyst

Hey, good morning, guys.

Patrick Dovigi — Founder and Chief Executive Officer

Hey, Tyler.

Tyler Brown — Raymond James — Analyst

You guys hear me? Oh, hey, sorry.

Luke Pelosi — Chief Financial Officer

Yeah.

Tyler Brown — Raymond James — Analyst

Obviously, pricing was really solid. It sounds like you pulled forward some PI’s into Q4. But given the pull forward and the fact that CPI will layer in over the course of the year, just how does pricing look as the year plays out? Does it start high and fade or should it be pretty consistent as the year plays out?

Luke Pelosi — Chief Financial Officer

I still think we’re anticipating the start high and then walk down but with less space than a sort of normal year. I mean, Q1 — I mean, January particularly, we have about 40% approximately of our CPI resets are hitting then. And then just a bunch of open market stuff is focused at that time, as well. So Q1 will definitely be the biggest number.

We’ve guided the high 4’s. I think there’s maybe opportunity to beat, and I think Q1 will tell that tale. So if you can see Q1 and it’ll be dependent on how the CPI resets actually hit and what the retention are like, but if you see Q1 at a high 5’s, I think that’s going to set the stage for a beat for the year. But we’ll see how that actually shakes out.

But I think Q1 is the majority step-down in Q2. And then consistently in Q3 and Q4, albeit perhaps not as big of a step-downs as you would have seen in the pre-COVID environment because we will have good support from large CPI hit in Q3 primarily on our U.S. book of business.

Tyler Brown — Raymond James — Analyst

Right. OK. That’s helpful. And then just real quick on RNG.

So to be clear, despite the JV structure that RNG capex will flow through the actual capex lines, is that right?

Luke Pelosi — Chief Financial Officer

So as the structures aren’t all finalized — sorry, that’s still influx. But either way, we’ll parse it out, so you actually see the apples-to-apples. If there’s extent it’s manifest itself on certain transactions as investment in JV, we’ll be sure to ring-fence and isolate, so people can actually see the real underlying economics.

Tyler Brown — Raymond James — Analyst

OK. And then kind of in the same — along the same thinking here, but how in ’23 will you account for the unconsolidated share that the EBITDA from those plans? Will there just simply be an add back to EBITDA or how will you show that financially? I know it’s probably still influx, but just any thoughts there?

Luke Pelosi — Chief Financial Officer

Yeah. Again, it fluctuates because all those agreements aren’t done. But if you look in practice, you end up picking up your proportionate share of the results of the JV. And if you look at those guys who — and Brock is already doing this, they exclude that and they add back their share of the EBITDA.

There’s other — if you look at other R&D players, Darling, just as an example is one, I was looking at that has a bunch of these has what the precedent might look like. But I think there’s something backing out the normal course accounting and then just layering in your share of the EBITDA is probably how that ends up shaking out.

Tyler Brown — Raymond James — Analyst

OK. That’s helpful. This my last one and I appreciate the proformas in the appendix. But when you layer in Terrapure just for modeling purposes, will that new environmental services line be about a billion dollars in revenue? Is that kind of a good placeholder?

Luke Pelosi — Chief Financial Officer

Yeah, that’s a perfect place. I think about 2022 as a billion dollars of environmental services and 4.9 of solid of the base guide.

Tyler Brown — Raymond James — Analyst

OK. Perfect. All right. I appreciate your time.

Thanks, guys.

Luke Pelosi — Chief Financial Officer

Thank you.

Operator

Thank you. Our next question comes from Walter Spracklin from RBC Capital Markets. Please, Walter, your line is now open.

Walter Spracklin — RB

Thanks very much. Good morning, everyone. I want to come back on the renewable energy approach and Patrick, your strategy on how to tap that resource that you have and we’ve seen your competitors take or discuss and reveal some other ways to do it more of a go it alone, invest it all, invest and own the entire thing. But then subject a little bit to some of the volatility that would come with that higher level of investment.

You’re going to partner approach, I’m hearing positive feedback on that relative to the other approach, perhaps talk a little bit more about what led to your decision and how would you — how would you characterize the go it alone, which being much more upside, but perhaps with some more volatility.

Patrick Dovigi — Founder and Chief Executive Officer

The way — initially when we started talking about this, I think, if you went back — if you roll back across eight months ago, I would say, we knew very little about how it actually harvest dollars from this RD. I think some of those other companies that have been going at it alone has significantly more internal resources that have been looking at this for a while. I think that was one thing. Yeah, we could go and figure it out.

I’m not looking at this as a core pillar of — at the day we’re one of our Metal Services Company, R&D is something we found that was not going to be sort of a new business line where we were going to stop doing exactly what we’ve been doing for the last 15 years. There’s like, how do we realize dollars as quickly as we can with experts that know how to do this, that can get a shovel in the ground as quickly as possible, that an inventory to build those, the parts that they need to build out one of these facilities as quickly as possible, had the engineer on site can get us permitted. And most importantly, find the best back-end to be able to maximize profitability on the sale of the actual RNG. Those we’re all things we didn’t know anything about six, eight months ago.

Coupled together with a lot of our sites had — they already had gas rights that were given away. We had royalty agreements, which require our consent to switch those from the typical electric or flaring model to R&G. So that will open the door about the discussion about, hey, R&G certainly makes more sense in these old sort of electrical subsidized agreements, let’s go R&G. But let’s split them 50-50 and makes sense.

I think it’s fair. I think it’ll get us to the market as quickly as possible with experts that do this every day. Where somewhere we didn’t have any division that we don’t have expertise in. And it’s usually profitable.

So I think you should have couple that together. I think we weren’t a loss. I think if we have to go out on our own today, we probably could on some of these sites. But at the end of the day, it’s just something we’re not set out to do.

And let’s just let the other — let the experts to it, because they’re going to do it better than we’re going to do it. It was just my perspective.

Walter Spracklin — RB

Yeah. That makes a ton of sense. OK, switching gears here to pricing, service, and churn. Clearly your driving price as are your competitors.

When a customer gets a big price increase, they may have to take it. But I think their lens gets a little more focused on getting the right service with the higher price, all things considered. Are you seeing either any churn — are you getting worried at all about any trends in churn within your own organization? Or are you looking at any opportunities for churn in other of your competitors that could see you grow market share as a result of this very extreme pricing dynamic we’re seeing emerge continuing into this year?

Patrick Dovigi — Founder and Chief Executive Officer

For me, it’s an interesting time in the market, right? Because even for us as companies, we’re all having to be very selective about new business and ensuring that we’re getting paid the appropriate price to collect new business just for the simple fact that only it’s a challenging labor market. It’s challenging to get new equipment. Everything has been slower. I think we’ve all navigated the situation as an industry very well.

And I think the market is, we’ve all as competitors been very disciplined to ensure that we continue getting price to at least cover our internal cost inflation, either that we’re seeing today’s inflation highest it’s been since ’82. I think there’s very few industries like ours that have been able to sort of pass that on like we have. So, I don’t think the focus of ours is not trying to go out and grab as much market share as we can, be it some of the PI that are going to win the market. I think our customer base knows that the price is needed for us to be able to be remain competitive and provide that service.

And they want to make sure that it’s picked up on time. And I think if you have the luxury of our businesses, the lion’s share of our accounts are between $2 and $500 a month. So even if they’re getting high single-digits price increase, it’s not a material amount for them. I think they have other bigger fish to fry than they normally would.

I’m not seeing any — I think the market is understanding of it. Clearly the headlines every day, the papers around inflation and driver shortages in fuel and insurance, and R&M, and supply chain shortage, backlogs. All of those coupled together have remained in check. I think all of us in the industry is a pretty loyal customer base today.

And it’s not — people aren’t rising to go out to win new market share just at any cost because it just doesn’t make sense today, just given what’s happening in the industry, but I think that’s where it sits today, but nothing that worries me in any which way today.

Walter Spracklin — RB

Perfect. OK. As always appreciate the time, Patrick.

Patrick Dovigi — Founder and Chief Executive Officer

Thanks, Walter.

Operator

Thank you. Our next question comes from Kevin Chiang from CIBC. Please, Kevin, your line is now open.

Kevin Chiang — CIBC — Analyst

Thanks for taking my question. If I could just clarify, I think Luke in the prepared remarks, you talked about, when you get the bridge for 2022 and then you highlighted the upside to solid waste volume, but you made a comment on based on Canada and maybe there’s upside, as we see more of a reopening. Just wondering, what are you building in for recovery within your solid waste? Is that what we’re seeing today in Canada, which is obviously pretty challenged or do you seen — we kind of get back to some level of normalcy through the year.

Luke Pelosi — Chief Financial Officer

Kevin, a good question. To be honest, we’re getting tired of trying to pin the tail on the donkey in Canada. So it’s really — I think you’re sitting here drawn with me today. We seem to be in the right direction.

It’s assuming we continue this, we get back in another two weeks if you let us have full restaurants, etc. and we continue on this progress. If we all get completely locked down again, obviously that would be a headwind. And if we buy this summer, we can actually be fully enjoying life again, that could be a tailwind.

So I think it’s a middle of the fairway right now. I do think there’s upside to the number because I’m very hopeful we don’t go backwards from here, but we’ve tried to guess for the last two years and been wrong. So sort of just taking the conservative approach this time.

Kevin Chiang — CIBC — Analyst

Yeah, I hear you. I’ve stopped [Inaudible] as I’ve been stuck at home as well. Just on your free — when I’m looking at 2023 run rate, you’re implying about a 49% free cash flow conversion. If I go back to the presentation you had this time last year and you talked about what 2023 could look like, I think it was about mid-40s.

Just wondering as we look up, maybe past 2023, do you see yourself being a north of 50% free cash flow converting company? And I guess I ask that because it does seem like you have incremental free cash flow opportunities from RNG which I suspect convert at a higher rates here. Any color there would be helpful.

Luke Pelosi — Chief Financial Officer

Yeah. Kevin, I think it’s a little that page you’re looking at there some footnotes that I think are relevant because the R&G simplicity on that page has just been layered into the free cash number. You can see the table on the page before they tease that up in the footnotes but you’re dividing the free cash in the EBITDA, but it’s not apples-to-apples. So when you do that, it would be more along that line nice for these.

But to your point, we don’t think that’s the ceiling. As we go forth from here you’ve heard Patrick say and we think this can go above mid-40s, and yeah, we are going to break through the 50% level and keep going from there. And I think when you look fundamentally at the opportunity set that lies in front of us and we are the industry as a whole is going to echo Patrick’s comments. I don’t think there’s a ceiling there, and the asset base we have and the opportunity we see a path to continuing that march to a point where we think we can be industry-leading.

Tyler Brown — Raymond James — Analyst

Excellent. I’ll leave it there. Thank you very much for the clarification.

Luke Pelosi — Chief Financial Officer

Thank you.

Operator

Thank you. Our next question comes from Mark Neville from Scotiabank. Please, Mark, your line is now open.

Mark Neville — Scotiabank — Analyst

Good morning, guys. Appreciate it.

Patrick Dovigi — Founder and Chief Executive Officer

Good morning, Mark.

Mark Neville — Scotiabank — Analyst

Maybe just some on the remaining Environmental Service business. Is that something that you would consider core long term? Is it saleable or would you anticipate participating in phone that consolidating by market as well?

Patrick Dovigi — Founder and Chief Executive Officer

As long as we can keep creating value, obviously we’ll have this equity interest and I think the plan is to take that entry public. Unless people participated in from the beginning and we’re keeping — again, we have — there’s a very good plan behind that. I think we’re going to grow the equity value that business post-IPO. But we have the ability to monetize that over time.

And we’ll do that once we create significant value. Are you — sorry, you’re talking about —

Mark Neville — Scotiabank — Analyst

Sorry, Patrick —

Patrick Dovigi — Founder and Chief Executive Officer

Are we talking about liquid?

Mark Neville — Scotiabank — Analyst

The liquid. The stuff that will be left, the liquid and the [Inaudible].

Patrick Dovigi — Founder and Chief Executive Officer

Sorry, Michael. I misunderstood that. The liquid business is great. Like I said, I’m a shareholder first.

Someone to pay a big number for I think, looking at what we’re public paid on the face of it for U.S. ecology, I think U.S. ecology was a high-10s business. We have our business that’s getting at high mid-20’s margin is going to go to high 20’s margins.

Great, similar, comparable asset base, let’s say, moving 14 times for that. So I think from our perspective, we think we have a similar business could be better in some ways, maybe in other ways that we totally set the benchmark of what building with value. That’s what in the base case. But I think we’re going to keep it.

I think it’s a great business. Very comparable free cash flow margins to our existing business. There’s more reason we’re going to keep it. It’s largely focusing the Canadian market today.

So I think we’re of the opinion, we’re going to keep it. It’s a great business why not? And we’ll keep growing it with an exceptional management team with industry-leading margins, as well in that business. We’ll know more thoughts to get out of anything.

Mark Neville — Scotiabank — Analyst

I just want to renewable just and you gave some numbers, I think for the — your capital — your capital investment. To get to the 150 to 200, roughly what sort of your investment reporters just look at linear release?

Patrick Dovigi — Founder and Chief Executive Officer

Just a little bit of a moving target because we’re negotiating. I think some of the benefits of what we’re working on today is the future capital commitments will be significantly less than the original builds. And that’s all some of the developers are differentiating themselves. So I think — I think we’ll be minimal capital were acquired from OCS for the future projects that you see.

So I don’t think there will be much more required given what we’re negotiating of today.

Mark Neville — Scotiabank — Analyst

Maybe just one pop up on clarification. On your report key one, even as the infrastructure hasn’t closed yet. But the plan would be to report with that excluded, is that correct?

Luke Pelosi — Chief Financial Officer

Yeah, Mark, that’s correct. Whether it’s officially done in the financial statements proper or I need to pro forma do it in the report is still TBD. But either way we will get you a clean segment presentation X infrastructure.

Mark Neville — Scotiabank — Analyst

All right.

Luke Pelosi — Chief Financial Officer

All right. Thanks, Mark.

Operator

Thank you. Our next question comes from Jerry Revich from Goldman Sachs. Please, Jerry, your line is now open.

Jerry Revich — Goldman Sachs — Analyst

Yeah. Thanks. Good morning. Patrick, Luke, on the — sudden I have million MMBTu of landfill gas projects.

I’m wondering if you could talk about what proportion of that you expect to use as you build out your CG vehicle fleet versus other when three eligible applications and what proportion you expect to go to industrial non-room three applications based on the off take plans.

Patrick Dovigi — Founder and Chief Executive Officer

We need about 10% of that volume. And that’ll slightly grow that we’re going to put into our own vehicles in the transportation market. And then you lack of 90. We’re in process and have negotiated some long-term arrangements, but I think what you’ll see is most likely 50% of that, the remaining balance going in to the industrial, commercial, long-term agreement.

And then the other 40 will continue into the transportation market for that.

Jerry Revich — Goldman Sachs — Analyst

Got it. And Patrick, when we last spoke with the topic, you had mentioned that industrial market prices in the twenties, is that where it’s shaking out any update as you’ve spent more time with?

Patrick Dovigi — Founder and Chief Executive Officer

So there are obviously, as the written pricing moved up, the pricing moved up a bit. But what we’re seeing now is the ability to actually share in the upside if, for example, if RIN pricing went from it called $3.20 to $2.40 in RIN to four or five. Whatever that — wherever may go. The new agreements are now you have a sharing agreement that sort of correlated to RIN pricing.

So if they go up higher, then the long-term supply agreement has to pay more. In that the fair portion back. So even getting a little bit more lucrative than we originally anticipated back three to four months ago.

Jerry Revich — Goldman Sachs — Analyst

Terrific. And then in terms of the plan to roll up the infrastructure and asphalt industry, not a lot of assets out there that can post mid-teens EBITDA margins. Can you just expand t on what the M&A pipeline looks like for that part of the portfolio? How much heavy lifting will you folks need to do to get acquired businesses to the margin profile, but your business in certainly COCO is running at?

Patrick Dovigi — Founder and Chief Executive Officer

Yeah. So I think it comes down to exactly what we’d be hit on the solid waste and liquid waste business, right? It’s how are our assets performing short of where they are? And I think, at the end of the day it comes out, the market selection and finding the right market in the right places to go. And I think the beauty of us operating nine provinces in Canada in 2016 for the U.S. We generally know what markets to be in and I think you’ll see us focus on markets that have better margin profile than others, right? So with that backdrop, I think it will be the exactly playbook that you’ve seen the GFL and the margin profile of GFL and then liquid these businesses following these businesses.

And I think you’ll continue to see that and I think you’ll continue to see us be very selectful about the markets we go into it that business, and the quality of businesses that we acquire under that profile. So we’ll continue to be — our perspective [Inaudible] industry-leading business and it should go pretty well.

Jerry Revich — Goldman Sachs — Analyst

OK. Great. And lastly, nice to see the pricing pull-forward on the solid waste side. I’m wondering, as you look at that absences from OMICRON and in the first quarter, any new actions that you folks have implemented given higher overtime and other costs? Luke, you alluded to it in potential for pricing to be higher than what you’re guided from.

So I’m wondering, how did that look through Jan and Feb, as you folks have dealt with those constraints?

Luke Pelosi — Chief Financial Officer

Look obviously the beginning of Jan, there’s a labor constraints, I think on the crown. Fortunately, had a very short fuse and a lot of that got behind us quite quickly. I think that the pricing in Q1 is coming in sort of strong. As I said, some of our strongest levels.

And this is keeps up throughout the quarter. I think there’s opportunity to be the high end of that guide that we had provided. Look, I think it’s important to understand the low-end of the guide at 4.5 that’s the number — that’s enough to cover the cost of inflation. So even at the low-end of the guide, we’re good.

I think the opportunity is to beat ever achieved the high end or beat the guide. And as I said on more of the earlier comments, I think Q1 will tell the tale. First, January and February is looking promising in terms of retention, but we’ll see by the time we get to the end of the quarter. Again, if that’s sort of a high five number or six.

I think that’s sort of sets us up for the opportunity this beat the guys of the year, but I just — I think people should rest assure that even the low-end of the guide more than covers the current cost inflation we’re seeing.

Jerry Revich — Goldman Sachs — Analyst

Terrific. Appreciate the discussions. Thanks.

Luke Pelosi — Chief Financial Officer

Thanks.

Operator

Thank you. Our next question comes from Rupert Merer from National Bank. Please, Rupert, your line is now open.

Rupert Merer — National Bank — Analyst

Thank you. Good morning, guys. Patrick on GIP, you mentioned $250 million cash GFL should receive from divestment of the infrastructure assets, can you give us a rough estimate for the ownership stake in GIP. And tell us what’s left to do to finalize the economics on the deal where you might have that final plan.

Patrick Dovigi — Founder and Chief Executive Officer

It’s going to come together over the next five to six weeks. We’re just looking at a bunch of structure of etc. on a — leading up to getting that entity public in September. That’s all pretty fluid now, but that’s generally the parameters of what you’ll see.

Rupert Merer — National Bank — Analyst

OK. You do expect the minority interest and have a joint venture accounting, along the lines of what you explained on R&G, etc.?

Luke Pelosi — Chief Financial Officer

Hi Rupert. The equity accounting, is it won’t be a joint control, it was an unlikely outcome, as Patrick said, it’s still fluid. But it’s probably non-controlling interest, just a regular-way equity accounting, as opposed to actually joint venture account.

Rupert Merer — National Bank — Analyst

OK, great. And then you mentioned your asset rationalizations largely are done. Are there any assets out there, any regions you might consider non-core, you anticipate seeing any other asset sales in 2022?

Patrick Dovigi — Founder and Chief Executive Officer

Yeah. There’s a few things left to do, which we’ll expect to get done Q1 and early Q2, sort of well underway anticipate proceeds probably in the $50 to $60 million range.

Rupert Merer — National Bank — Analyst

Given those real quick, if I could lob one more quick one at you, the R&D projects shares for — what’s the timing on those? I know we’re looking at them in 2023 if you thinking early 2023, mid-late. How should we think about the cadence?

Patrick Dovigi — Founder and Chief Executive Officer

There, maybe for simplicity modeling purposes if you basically get 50% of those revenues in 2023, the reality is, we probably we’re going to shovel ready and starting construction on some of them in March. So typical construction fine on those like 12 to 12.5 months. So, I think like Q1 early Q2. We should be online, particularly with the largest one which is a landfill in Michigan.

That’s like a 10,000 at SCFM site. So we hope to have that often running April-ish next year.

Rupert Merer — National Bank — Analyst

Excellent. Thanks very much.

Operator

Thank you. We currently have no further questions. I will hand over back to Patrick Dovigi for any final remarks.

Patrick Dovigi — Founder and Chief Executive Officer

Thank you so much, everyone, for joining the call. And again, I appreciate your continued support. And, as always, available today to jump on the phone if there’s any further questions thereof. Thanks so much.

Operator

Duration: 70 minutes

Call participants:

Patrick Dovigi — Founder and Chief Executive Officer

Luke Pelosi — Chief Financial Officer

Hamzah Mazari — Jefferies — Analyst

Michael Hoffman — Stifel Financial Corp. — Analyst

Tyler Brown — Raymond James — Analyst

Walter Spracklin — RB

Kevin Chiang — CIBC — Analyst

Mark Neville — Scotiabank — Analyst

Jerry Revich — Goldman Sachs — Analyst

Rupert Merer — National Bank — Analyst

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