Konark Gupta

Konark Gupta sought clarification on the pension impact and whether share buybacks are expected to be net accretive to EPS. He then asked about the free cash flow conversion for 2026, noting that a CAD 500 million CapEx reduction from 2025's 70% conversion rate would suggest 80%, and if there are other factors to consider.

Answer

Ghislain Houle, CFO, stated that pension was a CAD 60 million tailwind in 2025 versus 2024, and is expected to be a CAD 40 million tailwind in 2026 versus 2025. He indicated that buybacks are 'very slightly accretive to earnings' after financing costs. Regarding free cash flow conversion, Houle confirmed an expected improvement due to CapEx reduction but highlighted a 'sizable cash tax payment' year-over-year in 2026, as more profits are expected to be taxed in Canada at a slightly higher rate, impacting cash flow.

Konark Gupta sought clarification on the pension impact, whether buybacks are expected to be net accretive to EPS, and details on free cash flow conversion, noting 70% in 2025 and expecting improvement with the $500 million CapEx reduction.

Answer

Ghislain Houle, Chief Financial Officer, stated that pension would be a $40 million tailwind in 2026 versus 2025. He confirmed that buybacks are expected to be very slightly accretive to earnings. He reiterated that free cash flow conversion is expected to improve with reduced capital, but noted a sizable cash tax payment in 2026 due to higher Canadian profits, which contributes to the increasing effective tax rate.

Konark Gupta asked about the source of domestic intermodal market share gains and requested clarification on whether the carbon tax elimination benefited the Q2 operating ratio.

Answer

Interim Chief Commercial Officer Janet Drysdale attributed the domestic intermodal gains to providing "really good service" on a fluid and fast network. CFO Ghislain Houle clarified that the carbon tax repeal was a complete pass-through to customers and its impact on the operating ratio was neutral, though masked by other factors like unfavorable mix.

Konark Gupta requested a holistic view of the full-year guidance, asking why it remains unchanged despite increased market uncertainty and questioning what key factors would drive results to the high or low end of the range.

Answer

CEO Tracy Robinson reiterated confidence in the 10-15% EPS growth guidance, supported by a strong start to the year, line-of-sight on CN-specific initiatives, and easier second-half comparisons. She stated that while uncertainty has increased, the company can hit the range as long as full-year volume growth remains positive. The final position within the range will depend on the outcome and timing of tariff impacts.

Konark Gupta asked about the difficulty of winning back customers following the disruptions of 2024, especially amidst uncertainty from potential tariffs and political changes in Canada.

Answer

Chief Commercial Officer Remi Lalonde acknowledged the challenge and stated the focus is on selling the reliability and service advantages of Canadian gateways. He highlighted the Prince Rupert corridor's speed as a key selling point to rebuild credibility and attract customers seeking a reliable supply chain.

Konark Gupta of Scotiabank asked for commentary on the strong Canadian grain harvest and the potential impact of proposed extended inter-switching rules in Canada.

Answer

President and CEO Tracy Robinson emphasized that CN's strong service is what attracts customers and that extended inter-switching would slow the supply chain. Chief Commercial Officer Remi Lalonde added that CN has performed well on grain, earning market share, but noted the final crop size for next year is still uncertain.

Konark Gupta asked about the top-line growth cadence for 2026, considering the 5% midpoint, and quarterly puts and takes like Healthcare Solutions being a second-half story and tough Q2 wildfire comps. He also asked if volumes would be evenly spread or skewed to the second half.

Answer

CEO Jim Fish indicated that the revenue bridge for 2026 is balanced but with more pickup in the second half (below 5.5% in H1, above in H2), with Q2 having the toughest comp due to wildfire volumes. President and COO John Morris added that residential volume, currently negative, is expected to decline ratably to around 2% by year-end, providing a clear tailwind to volume in the second half.

Konark Gupta, Equity Research Analyst at Scotiabank, asked about WM's full-year top-line growth expectation of 5% at the midpoint, seeking details on the quarterly growth cadence for 2026, especially regarding volumes in the Collection and Disposal (C&D) segment, considering factors like Stericycle's second-half story and tough wildfire comps in Q2.

Answer

CEO Jim Fish and President John Morris explained that the 2026 revenue growth cadence is expected to be more balanced, with a pickup in the second half (below 5.5% in H1, above in H2), and Q2 facing the toughest wildfire comps. They noted that residential volume, which has been negative, is anticipated to decline ratably and become a clear tailwind to overall volume in the second half of the year.

Konark Gupta inquired about the sequential improvement in SG&A intensity for WM Healthcare Solutions, asking if it's on track to hit synergy targets and if other factors contributed to faster improvement. He also asked about the outlook for recycled commodity prices heading into Q4 2025 and early 2026, given the 35% decline in Q3.

Answer

Rafael Carrasco (EVP Enterprise Strategy and President) confirmed a 700 basis point reduction in SG&A since Q3 last year, with initial low-hanging fruit and now a more surgical approach. He expects continued improvement in 2026, tapering down to 17% over a three-year horizon. Jim Fish (CEO) added that SG&A performance was more impressive given top-line softness. Tara Hemmer (Chief Sustainability Officer) noted that OCC prices dipped due to mill closures and weaker box demand, while plastics are at all-time lows. She expects commodity prices to remain around $65-$68 a ton basket in Q4 2025 and early 2026, with a potential bounce back in 2026, but remains optimistic due to automation investments.

Konark Gupta inquired about the SG&A intensity within the healthcare business, noting its sequential decline and asking if it's on track to hit synergy targets. He also asked for an outlook on recycled commodity prices for Q4 and early 2026, following a 35% decline in Q3.

Answer

EVP Enterprise Strategy and President Rafael Carrasco stated that healthcare SG&A has decreased by 700 basis points since Q3 last year, with a target of 17% over a three-year horizon, and further opportunities exist. CEO Jim Fish added that this SG&A performance is impressive given top-line softness. Chief Sustainability Officer Tara Hemmer indicated that commodity prices, particularly OCC and plastics, have dipped due to mill closures and low virgin prices, expecting them to remain around $65-$68 per ton in Q4 2025, with a potential bounce back in 2026.

Konark Gupta of Scotiabank questioned the potential for a domino effect from the residential contract loss and asked for details on the path to achieving the $250 million synergy target for Stericycle, particularly on the SG&A side.

Answer

CEO Jim Fish stated the contract loss was an isolated strategic decision on an underperforming contract and does not expect a domino effect, with residential volume loss expected to moderate. SVP Rafael Carrasco detailed the SG&A reduction plan for the healthcare business, aiming to lower the rate from nearly 25% pre-acquisition to below 20% this year, with a long-term goal of reaching the legacy WM level near 10%.

Konark Gupta inquired about the full-year revenue cadence, asking if normal seasonality should be expected or if new initiatives would create abnormal patterns. He also asked why the WM Healthcare Solutions operating margin did not expand as much as its SG&A savings on a sequential basis.

Answer

EVP and CFO Devina Rankin noted that seasonality should be normal, with the exception of California wildfire cleanup revenue peaking in Q2. She confirmed the full-year revenue guidance remains intact. Regarding the margin question, she explained that higher disposal and fleet costs in the healthcare business temporarily muted the benefit of SG&A savings, but these are areas targeted for long-term optimization.

Konark Gupta of Scotiabank inquired about the long-term growth vision for the healthcare business compared to Stericycle's prior targets, how WM is handling Stericycle's ERP transition challenges, and the expected pace of deleveraging beyond 2025.

Answer

President and CEO Jim Fish and EVP and CFO Devina Rankin indicated it was too early to set a long-term growth rate but that 2026 would be a step-change year, with more color to come at the June Investor Day. Devina Rankin explained WM is focusing on process and change management for the ERP, with another $35-40 million investment expected in 2025. She stated the long-term leverage target is 2.5-3.0x, to be achieved through earnings growth and debt reduction, balanced with acquisition opportunities.

Konark Gupta asked for a split of the updated $3 billion sustainability CapEx between RNG and recycling, and for the outlook on organic margin expansion in 2025, excluding Stericycle.

Answer

SVP & Chief Sustainability Officer Tara Hemmer provided the updated split: approximately $1.6 billion for renewable energy and $1.4 billion for recycling. EVP & CFO Devina Rankin stated that for 2025, the company still targets 50-100 basis points of margin expansion in the core business, but this will be offset by a 30 basis point headwind from the expiration of the alternative fuel tax credit. However, she expects an additional 30 basis points of margin expansion from the growing sustainability business.

Konark Gupta inquired about CPKC's free cash conversion outlook for the year and the reasons behind the seemingly lower CapEx in 2026, including where cuts are being made and the flexibility of the capital plan.

Answer

EVP and CFO Nadeem Velani stated that free cash conversion is in the 75% range, with a long-term goal of 90%. He explained that the CapEx reduction to CAD 2.65 billion in 2026 is due to a shift in investment timing, completion of merger-related infrastructure (Laredo Bridge, sidings), and reduced IS and railcar investments, while still including new locomotive investments.

Konark Gupta, Director of Equity Research at Scotia Capital, inquired about CPKC's free cash conversion outlook for 2026 and the reasons behind the projected 15% reduction in CapEx. He asked for details on where the capital expenditures are being cut and if there is any flexibility in the revised CapEx plan.

Answer

Nadeem Velani, EVP and Chief Financial Officer, stated that free cash conversion is currently in the 75% range, with a long-term goal of 90%. He explained that the CapEx reduction to $2.65 billion for 2026 is due to a shift in investment timing, with many integration-related capital projects (Laredo Bridge, siding extensions, Americold, transload) largely completed. The cuts primarily come from reduced systems integration and railcar investments, while locomotive investments continue.

Konark Gupta asked for Q4 insights into potash and intermodal traffic, specifically October trends, reasons for potash softness beyond comparisons, and any issues with U.S. port imports affecting intermodal.

Answer

EVP and CMO John Brooks stated that potash softness is 'all driven around the compares' due to surge testing in the prior year, expecting Campotex to remain sold out. He anticipates strong domestic intermodal growth from new business and the Americold ramp-up, while international intermodal faces a muted peak season but no additional challenges like blank sailings.

Konark Gupta sought insights into Q4 potash and intermodal traffic trends in October, asking if factors beyond tough comparisons were affecting potash and if U.S. port import issues were impacting intermodal.

Answer

EVP and CMO John Brooks clarified that potash trends are primarily due to tough year-over-year comparisons from surge testing in the prior year, with Canpotex fully committed for the rest of the year. For intermodal, he anticipates a strong close for domestic intermodal driven by new business and Americold reefer ramp-up, while international intermodal faces challenges from pull-ahead volumes and a muted peak season, but no additional issues like blank sailings are observed.

Konark Gupta of Scotiabank questioned the 10% reduction in CapEx, asking how much is driven by market conditions versus new capital allocation decisions, and the proportion allocated to a large defense contract. He also inquired about the long-term strategy for CAE's leverage ratio, given the potential for an under-levered balance sheet if capital discipline continues.

Answer

Constantino Malatesta, Interim CFO of CAE, explained that the CapEx reduction reflects a disciplined approach and the temporary slowdown in activity, with about 2/3 for growth and 1/3 for maintenance, and a 25% reduction in civil CapEx. He noted that 40% of growth CapEx this quarter was for the FSTSS defense program. Matthew Bromberg, President and CEO, stated that the primary focus remains on deleveraging, and any changes to capital allocation strategy would be discussed with the Board, but are not in the near-term horizon.

Konark Gupta asked about the drivers behind the 10% CapEx reduction (market conditions vs. capital allocation decisions), the portion of CapEx related to a large defense contract, and the long-term strategy for managing the leverage ratio given potential under-leveraging.

Answer

Constantino Malatesta, Interim CFO of CAE, explained the 10% CapEx reduction is driven by a disciplined approach and temporary slowdown, with 40% of growth CapEx in the quarter for the FSTSS program. Matthew Bromberg, President and CEO, stated the primary focus remains on deleveraging the balance sheet and ensuring future investments meet return thresholds, with no near-term change in capital allocation strategy.

Konark Gupta of Scotiabank inquired about the potential evolution of executive compensation to align with new priorities like ROIC and free cash flow, and also asked about the drivers of the strong Q1 Defense margin.

Answer

Chairman Calin Rovinescu responded that they are assessing compensation metrics against aerospace and defense peers, with capital allocation being a key focus. On Defense, CEO Marc Parent explained that the strong margin reflects successful execution of their strategy to replace lower-margin legacy contracts with more accretive new programs, putting them on or slightly ahead of their plan.

Konark Gupta questioned the Defense segment's margin guidance of 8% to 8.5% for fiscal 2026, asking what was constraining the outlook given the strong exit margin of over 9% in Q4 2025. He also asked about the working capital outlook for the coming year.

Answer

President and CEO Marc Parent clarified they are not 'putting a lid' on margins and that the full-year average guidance implies continued quarterly progression. He attributed the outlook to strong execution and the ongoing replacement of lower-margin legacy contracts with new, higher-quality work. Interim CFO Constantino Malatesta addressed the follow-up by stating that deleveraging to 2.5x net debt-to-EBITDA is a key priority, supported by a continued focus on non-cash working capital efficiency in fiscal 2026.

Konark Gupta of Scotiabank inquired about the Defense margin recovery, specifically the timeline for legacy contracts rolling off and the feasibility of reaching a 10% margin in 2-3 years. He also asked about potentially redeploying training assets to stronger regions like Asia.

Answer

CEO Marc Parent expressed high confidence in resolving the legacy contracts, stating two of the eight will exit 'pretty darn quickly' and the 10% margin target is anticipated within the 2-3 year timeframe. Regarding asset deployment, Parent noted that while it's a consideration, the current weakness is a short-term issue concentrated in initial training in the Americas, whereas other areas like business aviation and other regions remain strong.

Konark Gupta asked about GFL's sustainability targets, specifically regarding R&G (Renewable Natural Gas) projects, commodity price volatility (RINs), and whether current commodity prices necessitate a reevaluation of R&G investments for next year. Gupta also inquired about GFL's philosophy on its leverage ratio, asking if the company is comfortable remaining in the low to mid-threes range given ongoing buyback opportunities and a strong M&A pipeline.

Answer

Patrick Dovigi (CEO and Founder, GFL) confirmed that R&G projects were underwritten at a $2.25 RIN, maintaining confidence in returns on invested capital despite recent price fluctuations. He noted a slight delay in some projects but plans to restart the program, with paybacks of 3-3.5 years at $2.25 RINs. Dovigi reiterated commitment to keeping leverage in the low to mid-threes range, providing flexibility for share buybacks and M&A, supported by strong free cash flow generation. Luke Pelosi (CFO, GFL) added that while leverage won't be a perfectly straight line, GFL is committed to living within these ranges over four-quarter periods.

Konark Gupta asked about GFL's sustainability targets related to R&G (Renewable Natural Gas), specifically how current volatile commodity prices might affect expectations for next year and if any R&G projects need reevaluation. Gupta also inquired about GFL's philosophy on its leverage ratio, given increased buyback opportunities and a high M&A pipeline, and comfort with remaining in the low to mid-three range.

Answer

Patrick Dovigi, CEO and Founder of GFL, stated that R&G projects were underwritten at a $2.25 RIN, and despite recent volatility, returns on invested capital remain strong, with plans to restart the program. Dovigi and Luke Pelosi, CFO, reiterated GFL's commitment to maintaining leverage in the low to mid-threes, providing flexibility for opportunistic share buybacks and M&A, supported by strong free cash flow generation.

Konark Gupta of Scotiabank requested a breakdown of the drivers behind the updated revenue and EBITDA guidance, including the impacts of FX, M&A, and organic growth. He also asked for an attribution of the Q2 margin expansion to specific factors like EPR, volume, and commodities.

Answer

Executive VP & CFO Luke Pelosi provided a detailed bridge for the guidance change, outlining headwinds from FX and commodities, which were more than offset by outperformance in pricing, volume, and M&A. He also broke down the Q2 margin expansion, noting a 170 basis point underlying expansion after accounting for headwinds from commodities and M&A and tailwinds from the Michigan divestiture and fuel.

On behalf of Konark Gupta, an analyst asked which policy changes GFL is monitoring on the Renewable Natural Gas (RNG) side, including those related to volume, pricing, or tax credits.

Answer

CEO Patrick Dovigi stated that GFL is monitoring all potential policy changes but has not seen any material impact to date. He noted that details on tax credits are expected in September and confirmed that the company's current guidance already incorporates a revised outlook for RIN pricing.

Konark Gupta asked about the expected cadence of net leverage throughout 2025 and inquired if there were any considerations to redomicile the company to the U.S. or switch to U.S. GAAP.

Answer

Executive Luke Pelosi projected that pro forma leverage would start at 3.0x, see a slight uptick in Q2 due to seasonal investments, and then delever to end 2025 at 2.9x on an organic basis. CEO Patrick Dovigi stated that while reincorporating in the U.S. is not tax-efficient, the company is actively exploring paths to either TSX 60 inclusion in Canada or U.S. index inclusion to broaden the investor base, with a decision based on which path adds the most value.

Konark Gupta from Scotiabank requested an update on the status of labor agreement negotiations and asked how much revenue from M&A is included in the updated 2025 guidance.

Answer

CEO Jon Vander Ark reported that sympathy strikes have ended and the company is now focused on negotiating agreements in a few core markets, aiming for a fair deal that protects the long-term health of the business. CFO Brian Delghiaccio specified that M&A is expected to contribute 1.2 percentage points to 2025 revenue growth, with 0.2 percentage points of that being incremental to the original guidance.

Konark Gupta of Scotiabank requested an update on the status of labor agreement negotiations across different regions and asked how much M&A revenue contribution is embedded in the updated 2025 guidance.

Answer

CEO Jon Vander Ark explained that sympathy strikes have ended and negotiations are now focused in just a few markets. He reiterated the company's commitment to a fair deal that does not impair the long-term health of the business. CFO Brian Delghiaccio stated that M&A is expected to contribute 120 basis points to 2025 growth, with 20 basis points of that being incremental from deals closed in Q2.

Konark Gupta asked for the company's earnings sensitivity to changes in commodity prices and for clarification on the financial impact of the CNG tax credits, which are not assumed in the 2025 guidance.

Answer

CFO Brian DelGhiaccio provided the sensitivity, stating that a $10 per ton change in their recycled commodity basket equates to approximately $10 million in annual EBITDA. He also confirmed the CNG tax credits are not in the guide and would represent a ~$20 million annual benefit if renewed.

Konark Gupta from Scotia Capital asked about the expected M&A rollover revenue impact for 2025 and the key drivers and headwinds for margin expansion in the upcoming year.

Answer

CFO Brian DelGhiaccio stated the M&A rollover impact for 2025 is currently negligible at 10-20 basis points, excluding any Q4 deals. CEO Jon Vander Ark reiterated the long-term outlook of mid-single-digit revenue growth with EBITDA growing slightly faster, implying 30-50 basis points of margin expansion across the cycle, which is a reasonable expectation for 2025.

Konark Gupta from Scotiabank asked what specifically brought SMB customers back to the U.S. LTL business and inquired about capacity rationalization needs, such as excess doors or equipment, in both the U.S. and Canadian LTL networks.

Answer

Alain Bedard, President, CEO & Chairman, clarified that SMB customers returned due to improved service and focus, not price cuts, particularly for next-day service which is now on par with peers. He also stated the U.S. LTL network still has 3,000-4,000 excess doors that will be addressed through swaps and trades, while the Canadian LTL network is appropriately sized after recent acquisitions.

Konark Gupta inquired about the drivers of improved employee morale in the U.S. LTL division and asked about the competitive landscape and efforts to regain lost market share.

Answer

Executive Alain Bedard attributed the morale boost to new leadership's focus on growth, not just cost-cutting. He acknowledged that TFI had lost market share in U.S. LTL, primarily due to service quality issues. He outlined a plan to regain share by improving service, specifically by reducing missed pickups (down from 4% to 1.7%) and shifting more linehaul freight from rail to road for better control and reliability, which will help reduce customer churn.

Konark Gupta asked if strength in TFI's other segments could offset headwinds in specialty truckload and TForce Freight for a potentially flat earnings year. He also inquired about the timeline for the re-domiciliation.

Answer

Executive Alain Bedard expressed confidence in the Logistics, Package & Courier, and Canadian LTL segments. However, he identified TForce Freight as the 'big rock in my shoe' and the primary source of problems. He noted U.S. Specialty Truckload will improve but is off to a rough start. For the re-domiciliation, he estimated a timeline of 9 to 12 months to complete the process.

Konark Gupta asked what is required for the U.S. LTL business to achieve an 85% operating ratio, questioning the roles of volume, service, and costs. He also sought clarification on whether the projected $0.50 EPS accretion from Daseke is incremental and includes debt paydown benefits.

Answer

CEO Alain Bedard explained that achieving a lower OR in U.S. LTL requires making the cost structure more variable, improving service to drive volume, and critically, increasing the freight density per stop. He confirmed the $0.50 EPS accretion from Daseke is based purely on operational improvements and does not include interest savings from debt reduction. He noted significant savings will come from integrating Daseke's financial systems.

Konark Gupta from Scotiabank asked about the outlook for the price-cost spread into 2026 and whether EPA involvement at the Chiquita landfill could lead to cost reductions.

Answer

CEO Ronald Mittelstaedt stated that the company expects to maintain its historical price-cost spread of ~150 basis points over inflation, even as headline price growth moderates. Regarding Chiquita, he noted that while there are no changes to cost assumptions yet, EPA involvement could streamline processes and reduce legal and consulting costs, leading to cautious optimism for improvement.

An analyst on behalf of Konark Gupta of Scotiabank inquired about any significant changes in the RNG landscape, including demand, pricing, or competition.

Answer

CFO Mary Anne Whitney responded that Waste Connections has not observed any meaningful changes in the RNG landscape. She noted the company is in a CapEx phase with new facilities coming online in late 2026 and that RINs prices have remained stable around $2.45, consistent with levels seen since regulatory adjustments last year.

Konark Gupta asked about the expected quarterly cadence of margin expansion in 2025 and whether the decline in volumes would be more skewed to the first half of the year.

Answer

CFO Mary Anne Whitney explained that margin expansion would likely be at the lower end of the 50-80 bps range in Q1 due to tough comps on FX, commodities, and RINs, with potential to reach the high end as the year progresses. She confirmed that volume trends would be the inverse of pricing, starting lower in the first half and improving through the year as the company laps the impacts of shedding unprofitable business.

Konark Gupta from Scotiabank asked about the M&A outlook for 2025, including the focus on solid versus non-solid waste, and inquired about the potential size of the cleanup and rebuilding opportunities following recent hurricanes.

Answer

Executive Ronald Mittelstaedt affirmed the M&A pipeline remains robust with a continued focus on core solid waste, noting the company has no plans to pivot its strategy and expects to exceed its traditional acquisition targets in 2025. Regarding hurricanes, he stated it's too early to quantify but referenced the $15 million revenue impact from Hurricane Ian as a potential analogue, noting WCN has more landfills in the current impact zone.