Superior Plus Corp. (SPB) Earnings Call Transcript & Summary

Hello everyone. Thank you for joining us at the Superior Plus 2021 Investor Day. I am Rob Dorran, and I'm the Vice President, Investor Relations and Treasurer at Superior Plus. As far as the format for today's presentation, we will go through the individual presentations first, and then we will have a question-and-answer period with management at the end of the presentation. If you have a question, please submit your question by typing it in the question-and-answer feature on the left-hand side of the screen. A recording of today's webcast will be available on our website following today's presentation and a copy of the presentation is also available on our website. Before we begin, I'd like to remind everyone that some of the comments made today may be forward-looking in nature and are based on Superior's current expectations, estimates, judgments, projections and risks. Further, some of the information provided refers to non-GAAP measures. Please refer to the forward-looking information and non-GAAP measures sections of today's presentation posted on Superior's website and Superior's 2021 first quarter MD&A and annual MD&A posted on SEDAR and Superior's website for further details on forward-looking information and non-GAAP measures. We have a busy agenda that will take us through each major area of our business. Our CEO, Luc Desjardins, will begin with a strategic overview and introduction to the Superior way forward. Inder Minhas, Senior VP of M&A, will discuss M&A and integration. Rick Carron, Senior VP, Sales and Operations at Superior Propane, will cover the Canadian retail propane distribution segment. Andy Peyton, President, Superior Plus Propane, will cover our U.S. propane distribution segment. Rick Carron will then discuss Superior's digital strategy. Shawn Vammen, Senior VP, Superior Gas Liquids, will cover our wholesale propane supply and sales strategy. Beth Summers, Executive VP and CFO, will discuss the financial overview and outlook. Beth will then cover our ESG journey. Luc will return at the end with concluding remarks. And at the conclusion of the prepared remarks, we will reserve time for questions and answers. As a reminder, you can ask your question by typing it in the question-and-answer box. It is now my pleasure to introduce our first speaker, Luc Desjardins, President and CEO of Superior Plus.

So thank you, Rob, and a sincere welcome to everyone who has taken the time to join us for this event. This is our first Investor Day since 2018. Those who have followed Superior since then will know that the company has undergone some significant changes over the past 3 years. I've never seen -- been more excited about the opportunities ahead of us. Like most companies, we make effort at least once each quarter to communicate our financial results and other significant news to our investors. Today is about looking forward. We will share insight into our overall direction, the strategic decision we have made and the objective we have established for our business. Today, we will provide an update on our businesses in the propane industry as well as introducing our new strategy for the next 5 years that we call Superior forward. For those who are new to our story, it is helpful to start with a quick overview of the company. Superior Plus is one of North America leading retail propane distributor. We're the largest in Canada. And in the U.S., we're in the top 5 distributor based on propane volume delivered, but we have been growing rapidly, and we have plans to continue to expand our presence. The next slide shows some of our key financial metrics. Based on the trailing 12-month period from March 31, 2021, our U.S. segment is now larger [Technical Difficulty] overall. Based on the recent share price [Technical Difficulty] today are in Canadian dollar, unless otherwise noted. Our current dividends of $0.06 monthly or $0.72 annually for a yield of approximately 4.8%. We have a strong balance sheet with a net debt to adjusted EBITDA leverage of 2.9x at March 31, 2021, which is pro forma the sale of Specialty Chemicals. Our adjusted EBITDA for the trailing months period from Q1 2021 was over $405 million. And from 2016 to 2020, it has increased at a compound annual growth rate of 24.5%. These figures exclude the result of the Specialty Chemicals business we recently sold. They reflect the strength of our ongoing energy distribution business. That's a snapshot of our company today. The rest of my comments will focus on where we are headed. What we have accomplished over the past 5 years is nothing short of a transformation of our business. In 2016, we were operating 3 distinct segments: Energy Distribution, which was generating about half of our EBITDA; Construction Products; and Specialty Chemical. We also had a wholesale distill business and our U.S. energy business. We determined that the best path for us was to sell the noncore businesses, Construction Products distribution and Specialty Chemicals and focus on Energy Distribution, establishing a meaningful position in the U.S. market and building a platform for long-term growth. Our transition to a pure-play energy distributor began 5 years ago and completed just last month. In 2016, we sold the Construction Product division, that was the start of the streamlining of the business, which enables management to focus fully on the remaining division. The proceeds from the sale were used to pay down debt, reduce our leverage below 3x and position us well as a larger propane acquisition going forward. Over the next 2 years, we completed 2 major acquisitions. In Canada, we purchased Canwest, which extended our leadership in Western Canadian market. And in the U.S., we acquired NGL Energy retail propane business in 2018. This was the game changer for us in the U.S. market. With over 200,000 customers in 22 states, NGL provided the critical mass we needed to establish a platform for further growth. We also made a smaller divestiture in 2018 with the sale of our wholesale distillate business, which was capital-intensive and generated very low margins. Throughout 2018, we completed the integration of Canwest and started the integration process with NGL. We exceeded our synergy targets for both Canwest and NGL. And as you will hear today, improving businesses and realizing synergy has become a core competence of Superior team. Using the platform we established with NGL, we have accelerated the pace of our M&A activity, including $290 million of acquisitions in 2020, and $258 million of acquisitions so far in 2021. These are important advantages of being a pure-play company beside the fact that investors prefer it. In fact, I believe they prefer it for some very good reasons. First, our business has been rebalanced around the highest growth segment and one that generate consistent and stable free cash flow. Last year, free cash flow conversion was 83% of the energy business. We have also reduced the cyclicality that was inherent of the chemical business as well as our exposure to oil and gas market that have come down. And our entire management team is now 100% focused on energy distribution. The North American propane industry itself has some very compelling characteristic that appears to us as operators. Propane is typically priced at a cost-plus basis, which protects us against change in commodity pricing and result in consistent, reliable cash flow. The customer tanks are typically owned by the company, so we are the only one who can fill them. And customers also face high switching costs if they want a new provider. Margins are attractive with an industry average EBITDA margin in the 20%. Investment in technology can deliver increased operating efficiency and logistic optimization. The industry has been slow to modernize and use digital tool. So we are a leader in that aspect. You will be hearing more about the Superior digital strategy during Rick's presentation. Customers are sticky with an average tenure of more than 10 years, and the market is highly fragmented, particularly in the U.S., with more than 70% of the market share held by small and medium-sized distributors, leading to significant opportunity for growth through M&A. Given this set of characteristics, we believe there's a clean path for sophisticated and modern operator to outperform the industry as a whole and achieve strong returns for investors. Perhaps the most important differentiator of our company within the propane industry is our Superior Way operating platform. We launched Superior Way in 2014 as a continuous improvement program. We took a close look at every aspect of our operation and identify tools and processes that could deliver better results. However, large or small, the impact can be meaningful when we apply it in North America everywhere we win business. What impact have we seen in the Canadian propane distribution for those improvement? Between 2016 and 2020, we achieved organic growth of 4%, which is above the industry growth rate even as we saw a significant decrease in our customer acquisition costs. During the same time frame, operating expense decreased from 65% of gross profit to 60%. And the reduction of this ratio has led to a $15 million improvement in EBITDA for the Canadian propane business. The Superior Way has now become a fully ingrained way of thinking across organization. We have implemented many of these IDs in our U.S. operation and our U.S. team has contributed innovation of its own that we can implement in Canada. We'll continue to follow the principle of the Superior Way and build upon them. Today, we're introducing to our investors the Superior Way Forward, our renewed strategic vision and long-term growth. The Superior Way Forward builds upon the successes I have described; completing our transition to a pure-play energy distribution business, developing a unique industry-leading operating platform, establishing a foundation for U.S. growth and strengthening our financial capacity. With that, let's move into specific of our plan. A Superior Way Forward is our strategic plan to accelerate growth and maximize shareholder returns. We will do this in 3 primary ways. First, we will pursue a robust pipeline of accretive acquisitions. Second, we will apply operating best practices organization-wide to further enhance profitability and innovation. And third, we will employ disciplined capital allocation to drive shareholder return. We expect M&A to be the biggest driver of our growth to 2026, and in particular, acquisition in the U.S. market. And I don't want to steal Inder's thunder. He will be presenting our M&A strategy in detail, but I will offer an overview. This is not a new strategy for us, but rather one that we plan to accelerate. Superior has completed more than 15 acquisitions in the U.S. along over the past 5 years. We have been very successful identifying M&A targets, acquiring them for a fair price and realizing synergy through a proven integration process. The U.S. retail propane sector is highly fragmented, and we see a great number of opportunities for consolidation complete transaction totaling $1.9 billion of enterprise value by 2026. The synergy we target are quite achievable. We realized them primarily through measurable and controllable cost reduction and typically within 18 months of an acquisition. When you compare the EBITDA multiple we pay at the time of acquisition, to the time the multiple after synergy have been achieved, it improves by about 2 turns on average or more than 25% profit improvement. I believe we have mitigated many of the risks typically associated with acquisition through our disciplined process, the improvement in multiple represent significant value for our shareholder. The Superior Way Forward includes specific strategy targets for each of our operating division. First, let's look at U.S. propane distribution. The headline objective for U.S. propane is to complete the implementation of Superior Way in the U.S. and continue to innovate and improve operation. As I mentioned earlier, the Superior Way operating platform was first launched in Canada 7 years ago, but we have been implementing it in our U.S. operations since 2019, and we have seen similar positive results there. The difference is that a significant proportion of our U.S. operation have been added relatively recently, and therefore, they are not as far along on this journey. What that means is that most of our upside from Superior Way is still ahead of us. We believe we can drive further operational improvement and our targets for the U.S. propane for the next 5 years includes 2% organic growth more than the industry, a reduction of OpEx to gross profit from 58% to date to 53%, and overall a $25 million to $30 million increase in EBITDA. Andy Peyton will provide more detail shortly in that regard. In Canada, we are further along in implementing the Superior Way, but no means that we finish innovating. We will continue to invest in technology and other innovation to further drive improvement in operating efficiency. The Superior Way operating platform will continue to evolve, and we believe there's further upside to be realized. We also expect to see a recovery among our commercial customers, many of whom have been impacted by the recent years at low price of oil and recently by the impact of COVID-19. Commercial represents a large share of our business in Canada. The expected impact of these initiatives for Canadian propane will be a 2% organic growth over and above the industry growth, a reduction of OpEx to gross profit from 60% to 56%, which represents a $20 million, $25 million improvement of EBITDA. We will hear more from Rick Carron with more details of the Canadian propane. The slide explains our disciplined approach to allocating capital. We are in an enviable position of having a business that generates significant and steady cash flow. In evaluating how best to deploy capital, we think about 3 main buckets: M&A, $1.9 billion of acquisition in the next 5 years; the dividend; and the growth capital. In any given year, the amount of capital we allocate to each of these category is not fixed. We will take a dynamic allocation approach to direct our resource where they can generate the best return for our shareholders. By remaining flexible, applying disciplined criteria and potential investment in allocating capital to those with the highest return, we believe we can maximize shareholder value and is a key objective of Superior Way Forward. Our CFO, Beth Summers, will revisit this concept and provide additional details for -- during her presentation. On a company-wide basis, we expect Superior Way Forward to make a substantial impact. We are targeting $700 million to $750 million of EBITDA from operation by 2026, representing a compound annual growth rate of 10% to 11% compared to our $402 million we generated in 2020. The 2020 result is for Energy Distribution business only, of course. This chart show that we expect will be under 4 major drivers that grow, all of which I covered in the past slide, but commercial customer recovery in Canada will help, targeting 2 plus percent organic growth, improving the OpEx to gross profit. And most significantly, our M&A program, assuming we reach a target of $1.9 billion of spending. This is an ambitious target. But we believe it is achievable as we execute effectively on the strategic plan we're introducing to you today. Please keep in mind that the growth will not occur in a straight line. It will fluctuate from year-to-year, most notably, depending on the timing of any large acquisitions. Today, we're presenting a number of quantitative goals, and as an organization, the achievement of this target will require us to be fully aligned on the qualitative side. We need to have in place the right vision, the right culture and the right values. Our vision is to become the leader in creating value to differentiation and best-in-class operation and the North American retail propane industry. Our culture is built around several core attributes; entrepreneurship, continuous improvement, execution and accountability of leadership. Our core values are innovation, winning with people, a customer focus and the health and safety for all of our environment we worked in and respect for all the stakeholders is under our radar. As a leadership team, we're passionate about all of these beliefs, and it is our job to spread them to every part of the company. There are a number of key themes that form the foundation, our ability to deliver the Superior Way Forward. We've talked earlier about organic growth, more than the industry, continuous mindset of improvement, a focused organization ready for a lot of M&A acquisition and integration, talent management, very key for me. To get to the best of class, you need to have the right people on the bus. And a major commitment, environmental, social and governance issue. Lastly, it is important to have a strong balance sheet. The final point I will make before getting into the investment highlights of Superior is the importance of our stakeholders. A successful organization must be mindful of its 4 main stakeholder group: shareholders, customers, employees and the community. I believe Superior provides a very valuable service, and we can do in a way that makes each of this group better off and win. We strive to balance the need and concern of each stakeholder group in developing and executing our strategy as well as making all the decisions for the best interest of our stakeholders. I will conclude my comments with a summary of why investors should be excited about Superior Plus. The propane distribution industry is a good and sustainable industry. Hard to be successful in a bad industry. We're fortunate for that. We generate strong and consistent free cash flow, which provide us capital to invest in further growth. We have a substantial runway to achieve growth to M&A and really access to financing to support acquisitions; small, medium or large. We have a proven track record of success in acquisition and integration with the team that are experienced in sourcing and executing. Our dynamic capital allocation framework is a disciplined and unbiased approach to capital allocation designed to maximize shareholder values. And in addition of being a strong growth story, we continue to offer a compelling dividend yield, which is currently in the range of 5%. At this point, I will ask my colleague to present further details on their own area of responsibilities. Beginning with Inder Minhas, our Senior Vice President M&A at Superior Plus. I'll now turn it to you, Inder.

Thank you, Luc. The title of this section is important. It's not just M&A, but M&A and integration. Buying the company is only the first stat. Success or failure is determined by how well we integrate it into our business over the subsequent 18 to 24 months. And our team's evaluation of how effective the integration process is likely to be represent a major part of our investment criteria. I'm pleased to say that to date, our integrations have been quite successful. Let's start with a snapshot of the U.S. propane distribution market. It is a highly fragmented market, which means that there's tremendous runway for consolidation. It is a 10 billion gallon or 38 billion litre (sic) [ 3.8 billion litre ] market, split among -- of more than 3,800 independent distributors nationwide. The number of distributors has been declining in recent years as a result of ongoing consolidation activity. Of the 3,800 participants, the top 4 are what we consider to be large-scale retailers, with a combined market share of 25%. Superior Plus is a part of that group. That leaves about 3/4 of the market in the hands of small and mid-tier retailers. In our experience, many of the small and mid-tier retailers face competitive challenges. They may lack density, sophistication around supply and pricing, digital capabilities and centralized operations, which a large player like Superior can offer. As well, many of them are facing issues related to succession planning and are concerned about changes to U.S. tax legislation. These circumstances create a clear industrial logic for acquisitions. And currently, for reasons specific to each company, there is a limited number of scaled competitors like Superior, pursuing those acquisitions. When looking at the 3,800 market participants, our initial screen approximately shows 1,350 potential acquisition targets for Superior. 1,100 of these are within our existing geographic footprint. This generally improves the economics as whenever you can increase our density and realize local economies of scale, where we are able to realize synergies. Roughly 100 are nearby states that are adjacent to our current footprint, while 170 more are in states that we don't currently have a presence in. Of the retailers in our footprint, we see 10 potential platform targets with EBITDA in excess of $25 million, another 20 are midsize targets with EBITDA in the $10 million to $25 million range, and the remainder would be smaller targets. We are happy to consider deals of all sizes if they meet our criteria. While larger transactions move the needle more rapidly, smaller acquisitions can be observed fairly smoothly without requiring a lot of management's attention. As we gain experience on the integration side, it becomes easier to mitigate risks and apply our proven methodology. I'll return to this slide in a moment. This slide is a representation of the active deals currently in our pipeline. Our pipeline has never looked more robust. The potential targets total $2.6 billion in enterprise value, of which we consider $300 million to be highly probable. As Luc mentioned, our target under the Superior Way Forward is to deploy $1.9 billion of capital towards M&A over the next 6 years. This objective is certainly attainable based on our track record. We executed on approximately $520 million of transactions since Brookfield's investment in Superior since Q3 2020. And we've announced more than $260 million of transactions so far in 2021, with more acquisitions expected through the rest of this year. Many of these current candidates will fall out of contention for one reason or the other, and many will be replaced by new prospects entering the funnel in the coming months and years. As a consolidator, Superior is benefiting from a number of factors. Our credibility grows with each successful integration. People can see that we're serious about growing our presence in the U.S. market. And they know we have the resources to finance these deals typically in cash. When small and mid-tier retailers think about exiting a consolidating market, we're a natural choice for many. And with these dynamics, we can afford to be selective and patient. Our focus remains on building regional density in existing and attractive nearby markets through highly accretive small and mid-tier acquisitions. We remain open to larger platform opportunities should they arise. At this point, I'd like to acknowledge the importance of the entire team responsible for executing on our M&A and integration strategy. We have a team of 25 experts from all major functional areas, from operations to IT, finance, procurement, fleet, et cetera, and we're becoming increasingly proficient as we complete more deals and learn from our experiences. On this slide, we've highlighted the M&A team, which includes our senior leadership team as they devote a significant portion of their time to help execute the strategy. Our executive team is actively engaged and committed to this process. I believe this cross-functional approach has been key to our success. It enables us to complete an accurate evaluation of all potential targets, anticipate any challenges likely to rise and from a detailed integration plan that is ready to go on day 1. Here, you can see a summary of 24 M&A transactions that have been completed in the past 5 years. We have maintained a steady pace of about 5 acquisitions annually. But as you can see from the total enterprise value of the transactions, there's a significant variation in the size of the deals from year-to-year. The 2018 purchase of NGL was a platform acquisition that accounts for nearly 50% of the total dollar value of the purchases over this time frame. Our pace slowed significantly in 2019 as we focused on integrating NGL, which, as you can see from the logos on the slide, was comprised of more than 30 local brands. 3/4 of these recent acquisitions have been U.S. companies, and we'll continue to focus on the U.S. based on the magnitude of the opportunity that exists. But there still have been some good targets in Canada, including 2 of the transactions we announced so far in 2021. Canwest Propane was a major acquisition for 2017 with an enterprise value in excess of $400 million. We measure our success, not by the number of the deals we complete, but how we effectively integrate the acquired companies. This slide shows the EBITDA synergies we achieved on our 2 largest M&A transactions over the past 5 years. In both cases, we set ambitious targets and then proceeded to outperform them. With Canwest, we targeted $20 million of synergies to be achieved within 24 to 36 months of closing. We exceeded the target by 7.5%, reaching $21.5 million of synergies on a run rate basis. And we achieved this within 27 months. On a post synergies basis, we paid 7x EBITDA. On the NGL transaction, we targeted $26 million of synergies also within 24 to 36 months of closing. We exceeded our target by 20%, realizing $31 million of synergies within 14 months. Our post-synergy multiple on NGL was 7.8x EBITDA, which was over 2x reduction of the acquisition multiple. When we look at our small to medium-sized U.S. acquisitions, we see similar results. Excluding NGL as well as wholesale and the IDI transaction in the U.S., we've completed 17 transactions in the U.S. since 2017, deploying approximately $725 million of capital, assuming that the recently announced Freeman acquisition closes. We acquired a combined EBITDA of approximately $82 million. Following the achievement of integration and synergy realization, this is forecasted to increase EBITDA by approximately $115 million after 5 years. That represents a forecasted EBITDA improvement above our goal of approximately 25% as a result of synergies we can achieve through our integration process. In terms of an EBITDA multiple on a post synergies basis, we target a 2x improvement compared to the original multiple at the time of the acquisition. This has been and is expected to be a significant source of shareholder value. I would like to add some color to how we achieve our synergies. Our M&A team has developed a robust and data-driven acquisition playbook. We complete a standardized due diligence checklist that includes more than 1,000 items. This process helps us maintain discipline and accountability. A key step is the implementation of our Superior Way dashboard. Here's an example of one of our dashboard screens on this slide. Implementation starts with the entry of historical data to establish a baseline. As you might expect, there's a significant variation in the way target companies may have maintained their data, but it's important for us to standardize it on our system. The dashboard provides us real-time data in several categories: operational efficiencies, distribution management, tank sensor deployment and workforce planning. Tracking these details serve several purposes. It helps us manage the business both locally and at the head office level. It keeps our managers focused on key operating metrics, including rapid identification of any issues. It aligns our focus around the synergies we've set out, and in many cases, an aligned focus on operating data that can actually accelerate our integration process. One reason for our strong track record in achieving synergies is that our targets are largely based on aspects of the business we can control. The majority of our synergies come from cost reductions by implementing Superior's operating platform. I will highlight examples in 5 key areas. First is our marketing sales approach. We use our in-depth knowledge of market conditions and customer behavior to implement strategic pricing that can optimize revenue while minimizing customer churn. On the distribution management side, we aim to increase our volumes per delivery. This reduces total number of deliveries, and therefore, the cost per gallon. We also look to consolidate locations to reduce fleet and maintenance costs. Next is workforce planning. We typically rationalize customer service and technology staffing roles. We reduced head count as a result of centralizing tasks, consolidating back-office functions and eliminating redundancies. A centralized cost structure allows us to minimize overlap in SG&A. We're able to centralize specific functions such as logistics, technology, office support and other areas that may be historically decentralized. Lastly, supply chain efficiencies. Superior's size enables us to consolidate demand and transition procurement to our internal supply management function. We realize procurement savings by leveraging our scale, expertise and sophisticated purchase agreements. Through this multipronged approach, we typically achieve our targeted run rate synergies within 18 to 24 months of an acquisition, thereby driving swift and attractive investment returns. Our M&A track record is creating a virtuous circle. As we complete successful integrations, we're building a reputation as a buyer of choice for smaller operators who may be interested in selling their businesses to us and that gives us access to better deal flow and potentially more favorable terms. There are several reasons. First, Superior has a strong financial profile. We have substantial access to capital, including existing cash and available debt capacity. This has enabled us to complete both modest and large transactions. And our financial capacity is increasing through the backing of Brookfield as an anchor investor and long-term capital partner and more recently, with the sale of Specialty Chemicals. Something very important to many potential sellers is that we offer a seamless transition that minimizes the disruption to their stakeholders. I've talked about our M&A team and our streamlined diligence process. We offer a customer an employee-focused transition and integration plan. We work closely in partnership with sellers through the closing process and provide on-site support for the first 30 to 90 days. And we assigned a dedicated integration manager for each acquisition. Superior's reputation as an industry leader is growing. We have an experienced management team, best-in-class operations and strong performance in safety, compliance and regulation. And it's well-known that we're focused on creating value through differentiation and our digital approach. Our reputation strengthens -- as our reputation strengthens, we're receiving more inbound inquiries from potential sellers as well as receptive audiences for an outreach. In fact, 3/4 of our deals are exclusive, meaning there's no broker involved, and we're the only party negotiating with the seller. As noted on this slide, I would also like to highlight and reinforce something we feel is an advantage, which is the majority of our transactions are sourced internally through our U.S. deal sourcing team. While larger transactions could resemble more traditional option run processes with multiple bidders, the majority of the deals we execute are internally sourced, and we work on an exclusive basis with the seller. I will leave you with several takeaways on our M&A opportunity. Superior has a platform for growth in the U.S., initially established through our transformative acquisition of NGL. The fragmented U.S. retail market is driving robust and active acquisition pipeline. Under the Superior Way Forward, we're targeting the deployment of $1.9 billion into acquisitions over the next 6 years with an objective of realizing double-digit return on invested capital through our disciplined evaluation process. We have an experienced M&A team with a successful track record of executing more than 25 transactions since 2016 and a proven ability to source mostly exclusive opportunities. And our best-in-class operating platform drives meaningful synergies primarily through controllable cost improvements. I'm very excited about the significant opportunity ahead of us. With that, I'll turn the presentation over to Rick Carron.

Thank you, Inder. Our Canadian propane distribution business includes the retail and wholesale businesses in Canada. I'll be covering our retail propane distribution business, which is known as Superior Propane; and Shawn Vammen will cover the wholesale business a bit later. The retail business includes both residential and commercial lines of business. Superior has an established position in the marketplace as a leader. Our brand is very well-known and is often attributed to our iconic yellow trucks. We have been very successful in the areas of innovation, operational improvements. We plan to build on these successes to further drive gains over the next 5 years, as I will share. I'll begin with an overview of Canadian propane distribution. Superior Propane is Canada's largest propane distributor and the only one to operate from coast-to-coast in 12 different provinces and territories. We truly cover the entire country. We distribute 1.1 billion liters of propane a year to 190,000 customer locations and have nearly 1,700 employees in Canada. We are the dominant and modern propane distributor in Canada with a 38% market share by volume, that's more than triple the next largest competitor. There are a few regional players, and 37% or so of the market is held by about 175-or-so local retailers. The total propane market in Canada is estimated to be about 3.8 billion litres. It's interesting to note, though, that approximately 83% of this volume demand comes from commercial customers, whereas in the U.S., the majority, as Andy will share, is residential. Based on our leading position in Canada, we have had the opportunity to benefit from many economies of scale, investment in innovation and implementation of operational improvements. This slide shows Superior's customer mix in Canada. Reflective of the overall market, our business is more heavily weighted to commercial and industrial end uses. Residential customers typically use propane for heating, powering appliances, and off-grid electrical generation. This group represents about 30% of Superior's gross profit. The other 70% of our business is commercial customers. We sell a range -- we sell to a range of sectors, including hospitality, mining, forestry, agents such as Costco, who resell our fuel, oil and gas companies, auto fleets, agriculture and construction. Residential consumption tends to be fairly steady, with fluctuations resulting from weather. Our commercial users have been recently impacted by COVID and by a slowdown in the oil and gas sector. Superior has been able to grow in both residential and commercial segments based on our competitive advantage. In residential, we provide a simple digital value proposition supported by digital marketing to provide simple, no worry service. In commercial, we have a solid reputation for delivering to complex technical solutions such as mining and oilfield applications that are supported by sophisticated digital tool sets, making it easier for those large industrial and commercial accounts to manage their business. As Luc mentioned, we first implemented the Superior Way platform in Canada. It's contributed to a significant improvement in our financial results in the recent years. On the left-hand side of the slide, you can see that Canadian Propane's EBITDA from operations in the past 5 years. The growth has been consistent until last year's challenges in the macro environment related specifically to the pandemic and less economic activity in general. The line on the chart shows our OpEx to gross profit ratio over that same period. And we use gross profit rather than revenue simply because of the variability of revenue based on fluctuating commodity costs. We've seen improvement from 65% to 60% due primarily to operational improvements, driven by Superior Way initiatives. In 2020, OpEx to GP increased from 2019 or -- increased from 2019 levels as a result of impact of lost volumes related to, as I mentioned, COVID-19 and weaker economic activity. On the right-hand side of the slide, we show the increased number of delivery locations in Canada. We've excluded the locations we've added through acquisition, meaning the growth you see in the chart, which is accelerated from 3% to 5% annually is organic. We tend to focus on net delivery locations to measure our organic growth as volumes can fluctuate based on weather and economic conditions, as I talked about. We want to ensure that we're growing our customer base organically by at least 2% more than the industry grows on an annual basis. We'd like to remind people that the Superior Way platform is designed to drive growth, not just reduce costs. And I'll give some examples of that in the next few slides. We've made significant investment in digital marketing with impressive results. Our initiatives range from targeted online ads to search engine optimization and lead generation tools. We've increased awareness, made it easier for people and our customers to buy from us. Our sales team subscribe to a consultative sales approach. Based on this approach, a refined value proposition and truly the most professional sales team in North America in our industry, we are able to differentiate the sales experience with prospective customers. It's a competitive advantage that is unmatched. On the slide, we've highlighted some improvements that we've realized between 2016 and 2020. For example, productivity per sales reps have increased by 58%, sales generation from marketing activities has increased by almost 5x. Marketing costs per acquisition have fallen by 10%, and total customer acquisition costs have decreased by 34% in that time frame. Our sales and marketing initiatives have helped us grow faster than the overall Canadian marketplace, which has tended to increase at a rate closer to 1% per year. I'll present -- I'll be presenting a separate segment on other aspects of our digital strategy later this afternoon. The previous slide focuses on attracting customer while this is one -- this is about our strategy to improve, it also there is some focus that needs to be on our existing customers. Again, digital has formed a backbone of many of these efforts. We have developed tools that enable automatic deliveries, for example. Our technology gives us real-time data on usage, tank levels and future delivery dates. And we can offer our customers peace of mind that they won't run out of fuel. We've also invested in our centralized call center technology and made a commitment for faster call resolution. One of the measures of our success is Net Promoter Score or NPS. This is a standardized metric showing the percentage of our customers that would promote our business to others minus the percentage that would not. Anything above 0 is related to be positive. As you can see, our NPS score has improved dramatically by over 200% in the last 5 years, and is approaching a level that would be considered by many to be world-class. The ultimate goal is to reduce churn by retaining our customers for the long term. We have spoken for several years about our tank sensor program. Sensor deployment is a key metric for us since it enables us to improve multiple aspects of our operation and our customer experience. Currently, we have approximately 84,000 tank sensors installed in Canada, covering about 75% of our delivered volumes. Deployment has increased significantly, as you can see over the past 5 years. We make very good use of the data that we collect from our sensors. It enables us to use things like our AI, machine learning to further optimize delivery scheduling and efficiency. And it reduces the need for manual dispatching while improving delivery accuracy, reducing labor costs per liter and reducing total kilometers driven. By no means that we completed our journey to improve operating efficiency. We believe there's still a runway for further gains. On this slide, we've highlighted 3 current initiatives to share. The first is the automation of our service technician business. We do still have a very manually-driven administrative process in place related to tank installations and service work. We are upgrading our systems and processes designed to improve efficiency and offer customers self-service scheduling and billing options, just to name a few. The second improvement comes from the digitization of customer interactions in our delivery business. This involves moving our customers' contacts from voice to digital with the goal of reducing costs and improving our overall experience. We're also implementing automated outbound messaging, which is a proactive and low-cost way to promote customers or prompt customers with a will call delivery and help with smooth demand. The third initiative is centralizing our North American back office. Consolidation of the back office will enable us to reduce SG&A costs across the entire energy distribution business in both countries. We are targeting a further 400 basis point improvement to OpEx to gross profit by 2025. My final slide summarizes the target set out for the Canadian Propane distribution division under the Superior Way Forward plan. As I mentioned, we're aiming to further reduce OpEx as a percentage of gross profit from 60% last year to 56% by 2025. This is over and above the significant improvements we've seen over the last 5 years. We are targeting growth in delivery locations of 2% to 3% per year, excluding the impact of any acquisitions, and we plan to have sensors installed in more than 80% of our tanks within 5 years. We expect to achieve these targets through further cost service -- cost to serve initiatives, which will reduce costs and improve overall customer service. We also expect to generate EBITDA improvements driven by organic growth in residential and commercial customers. And we will pursue additional growth opportunities in areas like auto gas, power generation, fuel conversion projects in remote communities, including indigenous areas and partnering program opportunities. In total, we expect our continuous improvement in organic growth initiatives to drive between $20 million and $25 million in EBITDA growth compared to 2020 levels. This concludes the review of the Canadian retail business. I'll pass it over to Andy Peyton, President of Superior Plus Propane.

Thanks, Rick. A major component of our U.S. strategy is M&A and integration and Inder has already covered that topic in detail, so I won't repeat it. My focus will be on the operations side and how we'll drive further improvements to our U.S. business. Of course, the context is that recent acquisitions will represent a significant percentage of the business for the foreseeable future, assuming we continue to execute on that M&A strategy. So this can be a challenge. As you speak to -- as you ask people to do things differently than they have in the past. But there's also opportunities to drive meaningful improvements and our employees always take satisfaction in seeing operational improvements. So we're excited about that. Superior's position in the U.S. is quite different than it is in Canada. We actually distribute more propane to more customer locations than our colleagues in Superior Propane. However, our share in the U.S. market is smaller at approximately 2%, which speaks to our opportunity to grow in the United States. We are growing rapidly as we take advantage of these consolidation opportunities and effectively differentiate ourselves from smaller players in the market. In 2020, we distributed 1.2 billion liters to 590,000 customer locations. And we employ more than 2,100 people and operate in 22 states. Our U.S. business is heavily weighted towards residential and small commercial customers who represent 74% and 25% of our gross profit, respectively. They're primarily using propane for heat. These are the customer groups I'll be focusing on in my remarks. And Shawn Vammen will be discussing our wholesale business a bit later. So if I take some time here to talk about our progress. Since 2018, our growth has accelerated significantly, with adjusted EBITDA doubling by 2020 to $207 million. The major catalyst in this was our NGL acquisition, which both Luc and Inder have discussed. This was a transformative acquisition for Superior establishing a platform for us for future growth in the United States. Since that time, we've made 13 more acquisitions in the states, leading to increased market share and higher density in our core markets. Having established ourselves as a top 4 competitor, we now have an opportunity to apply the Superior Way best practices first developed in our Canadian operations to drive further profitability and organic growth in the states. In fact, the process has been underway for the past few years, but there's significant runway for further gains. To name just a couple of examples, the installation work we've done with tank sensors and the integration of that data with our customer website creates opportunities to improve our delivery efficiency and the overall customer experience we provide. Secondly, by optimizing data analytics and the implementation of operational data boards -- dashboards, our modernization of the NGL and tuck-in acquisitions has already delivered significant synergy, and it's expected to drive further operating cost reductions as we move forward. We're still at a relatively early stage in the deployment of our tank sensors in the U.S. We have about 66,000 sensors currently installed, representing about 21% of our tank locations and 17% of our total volume delivered. Our goal, though, is to deploy sensors covering 70% of our delivered volume over the next few years by 2025. The integration of these tank centers with our digital platform allows us to increase our routing automation and predict customer demand more efficient and ultimately results in more efficient refills and refill timing. If we take a look at the best practices that we've picked up from Superior, this slide shows one measure of the tremendous progress we've made in our operational performance. Our OpEx as a percentage of gross profit has declined from 81% to 58% over the past 5 years. This is a result of the combination of factors, starting with the adoption of Superior Way best practices, which have led to significant operational improvements. If I talk about just a few of those, we've improved our business mix significantly by selling our wholesale distillate business and also focusing on higher-margin propane customers and less on the low-margin distillate business. We've taken a data-centric approach and optimized our distribution logistics. And we've implemented a state of the art software, creating a virtual network of call agents, providing greater efficiency and a better customer experience. The improved customer experience has contributed to reduced customer churn following acquisitions, and we've had the ongoing realization of synergies on all the businesses we've acquired. We've also taken some of the tools from Canada, such as the KPI dashboard, and we've improved them to provide us with real-time operating metrics and improve our efficiency and profitability. And we've really only just begun on this process. We're more than confident that there's significant room for further improvement as we move further down the line and integrate future acquisitions. I want to take a minute just to touch briefly on our Freeman gas acquisition and some highlights regarding that. Freeman is a premier independent propane distributor, primarily operating in the Southeast. The Freeman name is widely known and well-respected in the markets they serve. Freeman adds 25 million gallons of delivered volumes, primarily in North Carolina, South Carolina and Georgia and the operations in our existing footprint areas in these states. So we expect synergy opportunity to be significant as we integrate these operations. Freeman also has an attractive customer mix with residential customers in great suburban areas. A good mix of commercial and other nonresidential customers. And that will help us significantly reduce the impact of seasonality in the Southeast. Such a great acquisition for Superior highlights the midsized opportunities that are also available in other parts of the country. So we're really excited to get started with Freeman. If I conclude and talk a little bit about our U.S. propane objectives over the next 5 years under the Superior Way Forward. We plan to further reduce our operating expense to gross profit ratio to 53% by 2025. One initiative will be a move forward to our flexible work to reduce costs related to seasonal demand fluctuations. We expect to see our organic customer growth in the area of 2% to 3% per year, and our goal is to have tank sensors deployed on 70% of our delivered volumes and then related to that very closely is we look to achieve tank fill rates in excess of 60%. We'll continue to focus on the execution of our M&A strategy with the goal of generating double-digit return on the capital to be deployed. And overall, our objective is to drive $220 million of EBITDA growth through the execution of this M&A strategy and a further $30 million in EBITDA growth through our operational initiatives. We expect to see that savings by 2026. So that's a little overview of the U.S. business for you. And right now, I'm going to turn things back over to Rick, and he's going to talk about our digital strategy.

Thank you, Andy. By now you've heard several of us speak about the importance of our digital strategy. I covered it in the Canadian Propane section. Andy spoke about it in the U.S. PD section. And Inder touched upon it in his M&A and integration discussion. At its most basic level, propane distribution is an old school business. We'll always be driving trucks likely to our customer locations and filling their tanks. That's the way it's been done for decades. As you've heard by now, however, digital technology can drive significant efficiencies in our operation, improve the experience of our customers and help us sell more effectively and differentiate us from other players in the industry. I'm going to take a few minutes to really showcase our digital strategy. Superior's digital strategy is at the core of our transformation from a traditional propane distributor into an optimized digitally based logistics business with the industry best customer experience and cost structure. Let's take a look at 5 areas of our business that are benefiting from our move to digital. The first is tank sensors, as we've talked about. We intend to have tank sensors deployed, covering more than 80% of our delivered volumes within 5 years. This is a starting point for helping us use real-time data and usage to really manage at an individual customer level. The mySUPERIOR Portal and App is a unique set of digital tools that allow our customers who are so inclined to manage their relationship with Superior. They can use it to handle routine interactions. They can avoid having to call us. And we believe our customer portal and app are best in our industry, and they differentiate us and improve our retention of our customers. Our centralized logistics centers are designed to provide customers with accurate and timely deliveries that leverage data from our tank sensors. We use advanced algorithms and AI to optimize delivery schedules, which reduce our costs while providing customers with visibility and most importantly, reassurance. Our multichannel contact centers and tools provide customers with 24/7 support as needed. We also conduct proactive real-time outreach and provide updates on delivering account statuses through digital engagement. Lastly, on the sales and marketing side, digital marketing and best-in-class sales structures have resulted in what we believe to be the lowest cost to acquire new customers and really help us drive organic growth much faster and much more effectively than our competition. As you can see, virtually every area of our business benefits from digital innovation. Here's another way to think about the importance of technology to our business. This slide really illustrates the many automation and digitization factors that come into play throughout the service cycle of a customer. So let's start from the moment one of our tank sensors sends out an alert. It tells us that it's time to order a refill for that customer. We receive that order at one of our logistics centers and add the customer into the delivery queue based on scheduling algorithms. As soon as the date has been chosen, we send an automated notification to the customer providing them with delivery details. This is likely the first time the customer becomes aware that they need their tank refilled. Our truck is dispatched for refueling based on the schedule determined by our software. In the case of enterprise customers, where orders are larger, more frequent, and there's likely controls in place to manage that, they can confirm receipt through electronic workflows and approvals, which is industry-leading and differentiated. Next, the invoice and transaction record are sent to customers through the mySUPERIOR portals. The customer pays the invoice through it and we processed the payment all instantly. At any time, the customer can go to mySUPERIOR and review their transactional history, their propane usage, payment amounts, other information, request of delivery, request a service engagement, all on a self-service basis. Again, that functionality is unmatched in Canada and the U.S. Throughout this entire process, very few Superior employees are needed to keep things going, except, of course, our truck driver. As you can imagine, this helps us tremendously in our efforts to control costs and our customers really appreciate the hassle-free simplified process. They receive the propane they need without having to place an order, wait on a phone or fill out unnecessary paper work. Smaller and even some of the mid-tier players just don't have the resources to replicate this process. They may use off-the-shelf technology or even try to customize it, but they will find it very challenging to achieve the same results that we have in the same time frame. For Superior, digitization is becoming a very strong differentiator from our competitors. SMART Tanks for all. We developed marketing campaigns around our SMART Tank offerings. While pricing plays a role, fundamentally, customers' biggest concerns is running out of fuel. We address this head on with a no runout guarantee. This drives peace of mind and confidence that Superior will not let them down. Peace of mind drives loyalty with these digitally enabled customers. We can summarize the way our digital strategy creates value in 3 different categories. First, digital lowers our cost to operate. Our deliveries become more efficient, interactions are fully digital, there are fewer calls to handle, and will reduce our manual labor. The second is customer differentiation. We offer customers access to simple and compelling digital tools. We provide value-added services such as advanced delivery notification and confirmation of delivery that are very valuable to customers and eliminate any of the concerns I've addressed earlier. We achieve better customer retention rates as a result, and we employ many digital methods for new customer acquisition. Third way digital creates value and final way is through industry modernization. Superior realizes many synergies, as I've reviewed. There's a higher retention of value customers as discussed, and we're providing a very value added service we have margin opportunity across the spectrum of customers. We believe our digital strategy can drive significant EBITDA improvement as I've reviewed by the end of 2025. That concludes our spotlight on digital. I will hand it over to Shawn Vammen, our Senior Vice President of Superior Gas Liquids.

Thank you, Rick, and good afternoon to all of you on the call. Today, I am covering the 2 key aspects of our wholesale business, which falls within the Superior Gas Liquids division. First is about the advantages Superior derived from being a major North American propane distributor, and therefore, a large buyer with access to a vast network of suppliers and the others about our wholesale business, which allows us to bring our advantages to the marketplace, selling to other retail companies throughout Canada and United States. Now we have a large supply and logistics network and an attractive financial position, which enables us to secure supply for cheaper than our competitors, resulting in higher margins and also ensures our customers don't run out. The wholesale business also gives an additional link to the retail players in the market and more importantly, opens the door to potential acquisition targets. And conversely, there are opportunities for wholesale assets that come available through the retail acquisition targets that fit our expansion plans within Superior Gas Liquids. To provide some background on our division, Superior Gas Liquids supplies propane to our company's internal needs as well as other retailers and distributors, both in Canada and the United States. Last year, we delivered a total of 2.1 billion liters, which is 556 million gallons through our network to approximately 145 customer locations. This includes volume delivered to the Canadian and U.S. propane distribution businesses as well as our third-party customers. We also have 67 employees in the wholesale group, and we deliver to customer locations in 11 provinces and territories in 21 states. And lastly, through our acquisition of United Pacific Energy in 2018, we became a significant player in the state of California, which is an attractive propane market and in fact, is in the top 5 states for retail propane sales volume. So when we speak about Superior's procurement and supply advantage. As mentioned on the previous slide, we procure over 2 billion liters of propane each year, making us one of the largest buyers in North America. And this scale allows us to bring competitively priced product and the diversity of supply options to our customers. When it comes to sales, we believe in utilizing local market expertise, what we call boots on the ground, in the markets to service our internal supply requirements and third-party customers. We feel it's important to have people in the markets we serve to create long-term successful relationships. And when it comes to pricing, our large variety of supply points and pricing arrangements allow us to offer competitive price solutions to our customers, further adding to our value proposition. Another important aspect of our business is the logistics. Through our people and terminal infrastructure, we manage storage, supply requirements, pipeline deliveries, railcar and truck transportation to provide security supply and to capture locational arbitrage opportunities. These are things the small retail companies can't do for themselves, but we can. And lastly, when it comes to supply, we purchase supply from numerous counterparties in North America, giving us diversity and options during challenging times as well as providing a variety of pricing options to allow us to be more creative in what we offer our customers. So we mentioned reliable and flexible supply options. But what does this all mean to our customer base? Well, it means a security of supply ensures demand is met when supply is constrained. And a great example was how we successfully navigated through railroad strike and blockades in 2019 and 2020, where our competitors certainly struggled. The flexibility and diversity also adds -- allows us to capture arbitrage opportunities between different regions, and this adds to the bottom line. We have a reputation of creditworthy, safe and reliable operations, which is very important in the propane business. And like the other divisions, we also utilize technology and system optimization tools to make us more effective and efficient in how we deliver volume. This platform is helpful when adding new business or facilities to our group and drives synergies. Now you can't have reliability without good logistical expertise and market knowledge to answer -- enhance our customer offering. And lastly, when we leverage our retail propane network for expanded wholesale business, we as well can use our wholesale sites to help provide supply security for our retail operations. So exciting part of our business is that we have a significant opportunity to grow our wholesale division, both organically and through acquisitions. We have been having great success over the past 5 years, but we're still only a small percentage of the available market in North America. So there's a lot of runway ahead for us. Now there are 2 main avenues for our growth. First is through third-party sales growth, which is expanding relationships and reaching into new markets with retail customers, and also the United Pacific acquisition in California substantially increased sales volume and access to one of the largest U.S. markets and it creates the ability to expand into adjacent states such as Nevada, Arizona, Oregon and Utah. The other avenues for growth are through leveraging our existing retail and wholesale sites in the United States and Canada to expand sales, further expansion in the U.S. and Central and Atlantic Canada through acquisitions and greenfield opportunities, such as buying other small wholesalers and other terminals. And lastly, we are also well positioned with our infrastructure and relationships in the market to expand into green or renewable propane, making a positive impact on carbon reduction both in Canada and the United States. California is a market that is in front when it comes to emission reduction, and we are well situated to be the provider of choice through our network of terminals in that state. And lastly, I just want to say that given our inherent volatility, the wholesale business is expected to remain at less than 10% of overall consolidated EBITDA. Well, that is all for me. Now I will pass it over to Beth Summers, who will cover our financial strategy and outlook. Thank you.

Thank you, Shawn. As we all know, a strategic plan is only as solid as a company's ability to finance it. Our financial position today is stronger than at any time since I joined the company in 2015. Our current financial strength is the result of many years of effective execution of our strategic road map by our entire team. We have an excellent track record of delivering on the guidance we've provided each year, and that includes 2020, which was a year of unprecedented challenges. Our transition to a pure-play energy distribution business over the past 5 years has put us in a position of generating stable and predictable cash flows. We've implemented a disciplined and dynamic capital allocation model that we expect will drive double-digit EBITDA growth and corresponding returns to shareholders. And we have a strong balance sheet with access to low-cost financing to fund our growth. I'll elaborate on each of these points on the following slides. This chart shows our adjusted EBITDA performance over the past 5 years after backing out the Specialty Chemicals business. We delivered year-over-year growth over that time frame with the largest annual increases driven by the NGL acquisition we completed halfway through 2018. 2020 was a relatively flat year due to the combined impact of COVID-19, warm weather and reduced oil and gas drilling activity. Despite these challenges, we still met the midpoint of our adjusted EBITDA guidance range for the year, demonstrating the resiliency of our business. In fact, we've now met or exceeded the midpoint of our annual financial guidance for the past 5 years in a row. The midpoint of our 2021 guidance of $370 million to $410 million would represent a 10% increase over our 2020 adjusted EBITDA, excluding the CEWS benefit. As Luc mentioned, our longer-term targets under the Superior Way Forward plan call for adjusted EBITDA growth averaging 10% to 11% annually. We also target a long-term leverage target of 3x to 3.5x adjusted EBITDA. We're currently below that range, following our recent refinancing activity and the sale of Specialty Chemicals. Here, we see our capital expenditures and free cash flow conversion over the same 5-year period. Our free cash flow conversion percentage has been increasing over the period, exceeding 80% for the past 2 years. On the CapEx side of the chart, we've broken down annual CapEx into the maintenance growth and capital lease addition categories. Our growth CapEx category includes equipment to facilitate growth like tanks as well as nonrecurring efficiency and process improvement expenditures such as technology improvements. In 2020, we reduced our expected CapEx by approximately $30 million in response to COVID-19. We'll catch up on some of that spending this year, and we have guided for $120 million to $140 million of total CapEx. For the remainder of the next 5 years, we expect to see both growth and maintenance CapEx in the $40 million to $50 million range each year, excluding the impact of planned acquisitions. We have a balance sheet which has been strengthened significantly since the start of the year. This provides us with a clear runway to finance our planned growth. Our leverage ratio is currently 2.9x adjusted EBITDA at the low end of our targeted range. Our $750 million revolver is currently undrawn and available to fund acquisitions at a rate of BA/LIBOR plus 170 basis points. Furthermore, we can expect to repay any borrowings fairly quickly through our robust free cash flow conversion. Our long-term debt schedule is favorable with no maturities until 2026 and a weighted average pretax cost of debt of 4.4% on our high yield notes. In March of this year, we effectively replaced $350 million a 7% senior unsecured notes maturing in 2026, with USD 600 million a 4.5% notes maturing in 2029. And similarly, in April, we announced the issuance of CAD 500 million, a 4.25% senior unsecured notes due in 2028. At the same time, we announced the redemption of 400 million notes -- and redemption of our 400 million notes and CAD 370 million notes due in 2024 and 2025, respectively, both bearing interest in excess of 5%. Overall, this results in reduced interest costs for Superior in the range of $15 million to $18 million annually. Combined with the $600 million of proceeds from the Specialty Chemicals sale, we now have excess liquidity on our balance sheet, and I consider this to be a positive situation given the significant near-term opportunities we've identified for deploying our capital. We've mentioned we follow a disciplined capital allocation framework. This slide provides more details on the Framework Luc presented in his opening remarks as we manage the company to maximize shareholder value. Our business generates significant free cash flow, and we expect to generate $2.6 billion to $2.8 billion of free cash flow through to 2026. The free cash flow, proceeds from the sale of the Specialty Chemicals business and the available capacity on our credit facility can be used in our disciplined capital allocation approach. As Luc described, we've identified 3 major uses of capital that we believe will drive shareholder value. Based on anticipated returns, M&A is a high priority, and we believe our U.S. acquisition pipeline represents our largest and most compelling opportunity. Of course, the actual amount will be dependent on finding the right deals at the right price, but we anticipate while keeping leverage in our long term range, we could deploy approximately $1.9 billion for acquisitions over -- upto 2026. We pay a dividend, and we feel comfortable with the current level of $0.06 per month, which is expected to meet our payout ratio of 40% to 60%, and allows us to maintain our 3 to 3.5x leverage range. We're committed to maintaining this payment to provide an attractive yield as we transition into a growth company. We also expect to spend $200 million in growth or nonrecurring CapEx over the next 5 years. As I mentioned in my comments a moment ago, about our expectations of $40 million to $50 million annually through to 2026. The key to our approach is that we'll be dynamic in our decision-making with investment dollars deployed towards the investments that will generate the highest returns and maximize our shareholder value. This slide shows our available financing options. We intend to fund the Superior Way Forward with a combination of existing cash, internally generated cash flows and available low cost debt. We had $200 million of cash at the end of Q1 2021. Our revolving credit facility, which is currently undrawn, is set at $750 million with an additional $300 million of capacity available with the consent of the lenders. In total, these pieces provide us with access of more than $1.2 billion of available funding. And of course, our free cash flow, which we've been converting at over 80%. This will provide an ongoing stream of cash, which will be available for us to invest. Historically Superior and has been moving towards a pure-play energy distribution company, it was difficult to identify a clear concept. Now that we've transitioned to a pure-play with an accelerated growth strategy, we believe it still isn't that straightforward. While other propane distribution companies, which are provided at the top of the slide are obvious, we believe we did differ as a result of both our organic growth profile and a roll-up of acquisition strategy. We believe our business also has similar attributes to other route-based services. We generate our EBITDA from the delivery of propane to our customers and have utility-like demand. We also have similar growth margin and cash flow conversion metrics to these entities, which are in the middle of the slide. Finally, we also believe we have some similar attributes to some other scaled companies that are growing rapidly through the roll-up of their industries with opportunities to drive substantial value post-acquisition synergies similar to ourselves. These entities are provided towards the bottom of the slide. In summary, I'll briefly touch on how we expect to generate shareholder value over the next 6 years. We expect our continuous improvement in organic growth initiatives will generate 2% to 3% of annual EBITDA growth after the impact of inflation. As I mentioned a couple of slides back, we pay a dividend with a compelling yield of approximately 5% based on where we're currently trading. Our acquisition strategy is expected to generate EBITDA growth of 5% to 8% annually over the next 6 years. And then combining these 3 factors, results in expected total shareholder return of 14% to 16% over the next 6 years. Let's now change gears a bit, and I'll focus on how Superior approaches ESG. ESG is important to us as a company. We recognize that our product has an environmental impact, and we're committed to managing and ultimately reducing that impact. As Luc said in today's first session, we take all our stakeholders into account; customers, communities, shareholders and employees. And each of these groups has become more focused on sustainability issues in the recent years. Last month, we published our first ever sustainability report. It was an important step for us to improve our transparency and to hold ourselves accountable. I would encourage everyone to read the report if you hadn't already had the opportunity to do so. We could devote an entire session to our approach to ESG issues and perhaps one day we will. But for today, I'm going to focus on covering some of the highlights. To start, I'd like to remind everyone that propane burns more cleanly and emits significantly lower greenhouse gases than alternatives like gasoline, diesel, coal and heating oil and it's comparable to natural gas. To give a couple of comparisons, propane emits 60% less carbon monoxide than gasoline and 98% less particulate matter than diesel. The U.S. Alternative Fuels Act recognizes propane for its low emissions and environmental impact. That's one of the reasons propane is increasingly displacing heating oil in homes and businesses and displacing diesel for power generation in remote communities and job sites. Residential and commercial customers who are concerned about their own impact are increasingly taking these factors into account, and these uses have been a moderate driver of growth in our business. That said, we still have work to do to reduce our own impacts. Superior is committed to integrating sustainability into our operations. Approximately 14% of our fleet vehicles run on a dual fuel system that reduces our dependence on diesel and gasoline. The innovation and investment in technology that we've spoken about today doesn't just save us money. It also leads to improved delivery efficiency and fewer miles driven to deliver the same amount of fuel. Our U.S. propane drivers use an onboard driver feedback system to operate trucks as efficiently as possible. All of our vehicles in California are Certified Clean Idle under California strict idling regulations. We call it our sustainability journey because it will always be an ongoing process. Every year, we look for ways to improve our performance, even if only to realize small incremental gains because these gains clearly add up over time. We are committed to creating long-term shareholder value in a socially responsible and sustainable manner. I have already touched on lowering greenhouse gas emissions. In terms of our people, we've integrated diversity initiatives into our hiring practices. 27% of executive officer roles and 40% of corporate senior management positions are held by women. Over the past year, we provided flexibility for our employees during COVID-19 through programs such as Superior Propane's voluntary reduced work arrangement. We work hard to maintain a strong health and safety program. From the most senior levels, we promote a culture focused on leading best practices to ensure safe and healthy working conditions for all employees. Our Board has a health, safety and environmental committee, which has established processes for internal compliance certification as well as divisional safety surveys and benchmarking. In 2020, we reduced our recordable injuries by nearly 20%. We have an ongoing commitment to community investment. Along with our employees, we've raised over $2.6 million in the past 10 years for various charities and organizations. We've working relationships with more than 1/3 of the indigenous communities across Canada, and we help to support indigenous programs for education, training and employment. This is just a sample of the initiatives we've undertaken. For anyone who wishes to speak to us in greater detail on our ESG performance, please get in touch with us, and we'd be happy to spend some more time on the topic. Well, that concludes my part of the presentation. So I'll now turn it back over to Luc for a wrap-up.

Well, thank you, Beth, and thank you for the entire management team presenting today. We have covered a significant amount during the presentation, and we have set an ambitious target for us to accomplish by 2026. However, we have the right talent, a best-of-class operating platform, and a strong balance sheet. I could leave you with one message today is that this management team have proven that they can execute, and we will continue to execute and the best of class. Before we turn to Q&A, we're agoing to take a short 5-minute break, and we'll see you in 5 minutes. [Break]

Good afternoon. I got Luc on. Start with our first question from David Newman. It looks like 75% of growth is to arise from M&A and 25% from organic growth, implying low single-digit organic growth. What's driving SPB to over-index the market in terms of growth?

Rob, I'll jump in, and Andy can support me, here is a couple of things. I think we've demonstrated in the presentation, our ability to leverage digital marketing to identify customers to target on the commercial side and to really entice customers on the residential side to contact us through our sales channels. Definitely, Andy and I share best practices across North America from a sales and marketing perspective. I would say, as I pointed out in the presentation that we definitely have best-in-class consultative type sales approach strategies across North America as well. And then just starts to part and really have great interactions with customers and provide them a worry-free, easy-to-do business offer as a result of that. So with those underlying core principles, we're able to outpace the market from an organic growth perspective.

Yes. I guess I'd just tag on to that, Rick, and say that in the U.S., we over-index on growth is as we buy companies that typically are demonstrating significant organic growth rate. So we're targeting that in our acquisition process. We then do not change that trajectory or do anything to stifle their momentum. What we do is work with Rick and sort of proven things we have going on in Canada, and we work to reinforce those efforts, those local sales and marketing efforts. We'll augment those with the industry's leading digital marketing assets and our experienced sales team and that proven sales process that Rick has talked about.

And the next one comes from Jacob Bout with CIBC. We've provided some organic growth guidance in the U.S. and Canada, and how does that compare to the industry in these geographies? And if it's different, what would explain the difference?

Andy, do you want to start with that one?

Yes. I think you see industry growth rates in the U.S., they kind of do fluctuate from regions. Strongest in the Northeast, maybe not so strong in the south, and the South Central. But generally speaking, I go back to we're over-indexing based on who we're buying, and then the process that we're applying. We're not kind of ripping the heart and soul out of that local business. We're doing well locally with what they did locally, and then we're augmenting the process with those proven marketing and sales processes that we do in Canada.

Yes. Same answer here, outpacing based on our value proposition and growth in Canada is a little bit more consistent because of the penetration across the country of propane retailers. So again, the market grows at about 1% per year as an industry, and we've demonstrated the ability to grow at 3% to 5% growth rate based on what Andy and I shared.

Next question comes from David Newman. In your guidance, what sort of mix of small and midsized deals do you assume? And what are the average effect of multiples paid in average synergies?

It's really a mix of step-up transactions and tuck-ins. Given the robustness of our funnel and our financial discipline, the mix will change over time, but we feel that target is achievable. Of the $1.9 billion, that level of acquisitions, we certainly feel is achievable based on our current funnel and our estimate of future opportunities. And obviously, our past experience within the North American propane market consolidating, we see that funnel to continue to be robust. At a high level, we're estimating about $250 million of EBITDA from M&A by the end of 2026. That $250 million of EBITDA is a combination of acquired EBITDA and realized synergies. So if you take the $1.9 billion and divide it by the $250 million of EBITDA, that will be an average multiple of about 7.5x, which is a reasonable proxy, when you're thinking about it. You'd also have to consider that the acquisitions completed towards the end of the forecast period would likely not have full synergies realization at that point.

Here's one for from Joel Jackson, so -- at BMO. The goal seems to be to focus on smaller and midsized acquisitions. Does this mean larger deals aren't on the table? Or is there some read in the market indicating larger deals are less attractive, harder to add value or other factors?

Well, thank you, Joel. Very good question. Yes. No. Thank you. Good question, Joel. Small and medium, we have access and we can cut and fill them because they always come available. When you think of larger deal, there's 3 large company in the industry, we're not against that, but they're for sale or they're not. And if they -- one of the large one was to go to an event one day, we would certainly consider that as well. The only reason why it's so many small and midsized deal is because we have access to that, and we know many of them comes available every year.

Here's one from Jacob Bout again. Do you know what the intention of Marquard & Bahls is?

Yes. I can take that one. Yes, I can take that one. So the discussions that we've had with M&B to date, they've communicated that they're interested in acquiring up to 19.9% and certainly holding there being a passive investor. So at this point, that's our understanding. And I mean, they've been very supportive, comfortable with our strategy going forward based on the discussions that we had to date.

Another one from David Newman. Could we expect a bump in 2021 guidance post close of Freeman sometime in June?

Yes, I can take that one as well.

Will you take that, Beth?

Yes, I'll take that. Historically, what we've done is we'll increase guidance when a transaction closes. And so at that point in time, we'll do a reassessment. So we would expect at this point in time that when we reassess that it would have an impact on guidance.

One from Jacob Bout. What could potentially upset the $1.9 billion in acquisition targets, regulation, technology or competition?

Maybe I can take that one.

Inder, you want to take that?

Sure, Luc, yes. And then maybe yourself or Andy can add to that. So we feel that $1.9 billion is a reasonable target given our past experience and the number of opportunities that come to market. But obviously, deal flow can vary from year-to-year. That could negatively impact our ability to hit our number or expected returns. But regulation technology right now don't seem to be immediate concerns. Andy, I don't know if you want to add anything to that, or Luc?

Yes. I mean, I think you kind of -- I think you covered, except competition for the deals might have some type of impact, regulation, probably less; technology, probably less.

Got one from Steve Hansen at Raymond James. What are the market share limitations or max thresholds you see in any one U.S. regional market? Or does this even come into consideration in your strategy?

Yes, it's -- hopefully, you can hear me well. It's very hard to think that one day, there'll be enough market share in the region to not continue to acquire $1.9 billion in the next few years and can even double and triple that in the same time. So the market share, as you think of Competitive Bureau, they usually don't like it when you're getting closer to 40%, 50%. And we're talking here about the 3 largest players together, including for, let's say, for a 25% to 30% market share today. You could buy all like biggest competitor, and we'll still be under that radar. So I think we've got lots of room to grow there with no barrier to the Competitive Bureau.

Have one for Shawn here. Maybe you can discuss Enbridge Line 5 and the pipeline work around should it shut down for a period of time?

Sure, absolutely. So it definitely is a concern, the shutdown of line 5. For Superior, we've taken steps to mitigate any impacts to our supply and to our customers if the line were to shut down. We've taken out incremental storage, put volumes in strategic locations in Eastern Canada to make sure that we will continue to have supply for our customers even if the line does shut down.

Perfect. One from Ben Isaacson at Scotia. I think this one is for Beth. So based on Page 19, it looks like only half of the EBITDA growth of $325 million from 2020 to 2026 is related to M&A or about $165 million. Based on a $1.9 billion spend, the implied post-synergy multiple is 11.5x, which is much higher than you have traditionally paid. Can you reconcile this, please?

Yes. I think the best way to think about it is if you -- from modeling perspective, it's roughly in this range of $250 million that's actually being generated from the $1.9 billion. So from a multiple perspective, if you calculate that, it works out to roughly 7.5x, which is more consistent with what we've seen historically. And that 7.5 is after synergies.

One from Elias at IAS. In terms of U.S. acquisition strategy, have you contemplated moving into the North Central U.S., Montana to Wisconsin, where residential propane use is higher? And for that geography, would you need a platform acquisition to get started?

Yes. I'll start on that one and Inder could add something. When we think of all the 22 states we're in today in the California and the wholesale -- couple of states around California, and we think of the East Coast, there's a lot more synergy when you acquire in your backyard. So I think we got so much growth and so much opportunity in those markets that we want to focus on that. Does it mean that one day, we will end up not going into other regions because there are some other good regions in the States, of course, taking up the Northwest, in all when we go north of California to Seattle, there's a lot of other regions. We're now going to focus on those for the moment. And opportunity permits down the road, we will start considering other regions as well, not for the moment. And I think your point about the platform is good. If we end up going into another region that's good size, we would want to buy a good-sized company, and then you acquire 10, 15 around it. So for the moment, focus on those 2 big markets. Lots to do, lots of opportunity. And then as time will evolve, we'll evolve and communicate regularly to the market if we have our new other opportunities in time.

Another one on the M&A side. Do you expect execution on your M&A pipeline of $1.9 billion to be back-end loaded or evenly distributed over the years and what is the expected split by regions between U.S. and Canada?

I can take that one.

I'll start with U.S. and Canada, Inder, you could take the rest. On the U.S. side and Canada -- can you hear me?

Yes.

On the U.S. side, I would say you might be $30 million, $40 million in Canada in the next 5 years. If $50 million, we will be lucky. But the majority with our 37% market share, there's still opportunity in Quebec. Not a lot of deals will come to the market for sale, but they will grow in time. Now if we had to give a number, I would say, $30 million to $50 million in Canada and the rest in the state, the bigger -- big chunk in the States.

Okay, one from Daryl Young at TD. Given the significant fragmentation and resilient business model, why do you think there hasn't been a bigger presence from private equity players?

That's -- I think the -- I don't know, my belief would be that the large big player already MLP. So that movie has been played, and we know what MLP is from a business concept. And then if you start to look at other size, we bought NGLs, good size, $100 million EBITDA. After that, you're really into thousands of $1 million to $25 million EBITDA. There is a small competitor we have, Thompson, which is in the southeast, but they are an equity firm and on other side, I know it's not huge, but there are an equity firm that does buy some propane. They're 1 of our 2 competitor, if you want. We have 2 additional competitors that are mainly in the market position, they're one of them. But big scale, I think it's because there's not really big scale company to acquire beside the MLP and there are MLP. So did I go for them.

Another one from David Newman...

Inder, anything to add to that?

No, Luc, I think you hit it on the head. I mean even [ Imperial ] also another competitor of ours who's also backed with some private equity funding as well or relationships there.

So another one from David Newman. So for the most part, the sensors have been rolled out across Canada, Can you talk about, a, the service levels and retention rate on customers with sensors and the ability to win new customers; and b, the cost savings related to service, logistics, given less frequent bills?

Yes. I'll jump in, Rob. So from a customer value rate perspective or from a efficiency perspective, we've seen a dramatic decrease in the out of gas or ability to serve a customer. And that's really related to 2 things. One, is that ordering capability of sensors, as I described in our presentation, we get that notification, it can plan accordingly. But secondarily to that, we can actually mine data through all the access of information through our sensor network and look for customers that are up for delivery next week, for example, and pull them into our routing software, so that we can make sure that we deliver to them and don't drive any issues to customer service. We know that when customers are utilizing our sensor technology, they are a few times more likely to stay with us long-term as analytics that those types of customers that are digitally enabled are much stickier to us as an organization.

And one from Joel Jackson. Just on Slide 56, it indicates $220 million of EBITDA growth from the U.S. M&A but we indicated $250 million. What is the difference between these 2 numbers? And is the $250 million including synergies? So maybe one for Beth.

Yes. The difference between the 2 numbers, the $250 million includes Canadian M&A as well as any M&A activity out of the Superior Gas Liquids business. So there isn't a lot factored in, but there is M&A activity associated with the Canadian businesses. In addition to that, the question around synergies, yes, it does include the synergies as well.

And then one from Nate Heywood at ATB. When looking at the acquisition pipeline in the U.S. and the assumption of more attractive margins on residential customers, what trajectory do you see for the U.S. margins in the next couple of years? Will they stay flat? Or could there be an increase?

You want to take that, Luc?

I'll start, yes, Andy, you can jump in after. When you acquire a business in propane, there's always a mix of residential, commercial in the state, let's say, not much industrial. In Canada, we have large industrial mine and oilfield in that. So I would not venture to say that the margin in the future on today's business is always going to be good. There's always room for tweaking, improving. But the next mix of our company could end up more commercial mix than always residential more, I believe, but there'll be more commercial as well mix under customer that we acquire. So we have to be careful when you think of margin, because there's a cost to serve a residential customer, one that will tank in your backyard, and there's a cost to serve a big commercial customer. You might make gross margin half the dollar, but net profit after all the costs to serve are pretty equal. So that's how we look at the business. Andy, I'll go to you. You certainly have a point there.

Yes. No. I don't necessarily see any intent to significantly change margins or increase margins on these acquisitions. Typically, margins are pretty stable, pretty good in this business. And as Luc said, where we benefit is kind of managing the margins well, ensuring that we don't have any leaks in the bucket and those types of things, but I don't see any necessarily need or opportunity to raise margin significantly in the short term.

Okay. One for Beth. Could you clarify whether the 3 to 3.5x long-term leverage target refers to gross leverage or net leverage? Historically, we talked about a net debt to adjusted EBITDA target of 3 to 3.5x, but the press release this morning referenced the long-term total debt to adjusted EBITDA leverage target of 3 to 3.5x.

Yes. And I think currently, we'd be looking at net debt, where we have the cash, et cetera, as we're going forward. I think longer term, it's very similar. We don't have a lot of cash, typically, that we'll have on hand. So there isn't a dramatic difference between total debt and net debt.

Question for Luc from Steve Hansen. Thinking back to the Investor Day back in 2015, one of the key components of the organic growth strategy related to enhancing customer service via a new call center and a centralized deployment logistical hub. Do you anticipate the need to invest in similar enhanced capabilities in the U.S.?

If you want me to take that, Luc?

I think so, Andy. Go ahead.

So relative to the logistics practices, basically, Superior Way is our operating platform and what we're looking to do to improve efficiencies. And we have implemented that across the United States and with the new acquisitions that we're doing. So as I talked about earlier, we're using our operating dashboard to help implement the Superior Way across the footprint. But it's not necessarily particularly the way things might have been thought of last year in terms of any large centralized things. There's a lot of ways now to get the best out of those shared services, and we're certainly looking to do that, but I wouldn't necessarily be looking for any centralized building or anything like that in order to do that. We don't necessarily need to do something like that in the States. We would more leverage what we have in Canada.

And one for Andy and Rick, can you talk about the propane demand growth in specific regions, such as the Northeast U.S., Southeast U.S. and California and then as well in Canada with Central Canada, Western Canada and the maritimes?

I think if I take the United States, we continue to see decent growth prospects in the Northeast. We continue to see oil conversion opportunities. The industry continues to project those. We see them internally. In terms of the southeast, we've been seeing decent growth down there the last couple of years. The southeast, over the past 20 years or so, has seen the impact of electric heat pump, which is effective in that area. But kind of thing that might be behind us, and we're seeing decent growth down there right now. In terms of the Western United States, still stable. We're seeing good growth in all locations in California. And there's prospects of regulation and things like that out there, but there's also a lot of things that propane can do that are hard to replicate, particularly with the electric grid they have out on the West Coast.

Yes. On the Canadian side, similar to Andy...

All right. Okay. I didn't know it was your thing.

That's okay. Not a problem at all. Just to piggyback off what Andy said, in Eastern Canada, there's certainly an opportunity to continue to convert all residential and commercial customers. Oil usage is significantly larger than even propane in Canada. So there's a big opportunity to convert that. I think in Western Canada and even in the northern part of the country, there's a tremendous amount of opportunity to convert off diesel. For example, in the mining industry, a typical mine would use 8 to 10x more diesel on a per liter basis, than we would sell to that mine for heating applications. So to convert some of that business to cleaner electricity generation is a massive opportunity for us. And then finally, I would say remote communities themselves by working closely with indigenous communities across the country, we have an opportunity to bring a much cleaner and more available fuel to those communities as well. So definitely lots of areas of opportunity in the Canadian space.

And one for Luc from Nelson Ng. So you've been with Superior for 10 years, and you're in that prime retirement age, can you provide some thoughts about executive transition?

Yes. Well, I think at 79, I'm going to go [Technical Difficulty]

Yes, we will get Luc back to answer that question. Luc, you just kind off for a bit, so maybe just repeat. We'll come back to that one. One for Shawn, do you believe that the wholesale market differentials could increase over time with more export LPG capacity being built on the West Coast, which could drive Edmonton pricing higher versus Conway?

Yes, it's a good question. I don't think there's any doubt that the increasing volume that's going off the West Coast is going to have a change to market dynamics. Traditionally, Western Canada exported a huge amount of propane into the U.S. and as more volume starts to go off the West Coast, that's going to reduce the volumes that have moved into the U.S. traditionally. So that's the first change in what's going on in the marketplace. But even as more things continue to expand with consumption in Western Canada, like the PDH plant, it will eventually have impacts on the local market prices, and we do believe that the Edmonton prices will start to go up over time. So far, it hasn't really had a big impact, but that's our expectation as we look out into the future.

Three year ago, SPB gave targets to get to 100,000 tank sensors by 2020 and hit 80% of volumes. It seems that we've got to 84,000 sensors and 70% of the volume. Please talk about what the challenges have been and how you can resolve them?

You want me to take that, Rob?

Yes.

Okay. Certainly, the 100,000 sensors is definitely in range of our goal, as we talked about in the presentation, 80% plus of the volume that we deliver, our intention is to have underpinned by sensor technology. [Technical Difficulty] the target is definitely attainable over the future. Challenges around sensor is just really keeping up with the ability to get them installed in remote locations. Our -- crux of our business has got good sensor penetration. So looking at creative ways to continue to have our tanks sent out of our plants a SMART Tanks, so they're automatically enabled through a sensor. And then just technology, with the evolution of cellular technology from 2G to 3G to 5G, just making sure that we continue to follow that trend and have all bandwidths covered off in our sensor strategy would be something [Technical Difficulty].

One for Beth. In terms of funding growth, did you imply that the Superior Way Forward can be self-funded with no common equity required? Can you also touch on, one, how much more capital you can deploy for M&A and growth CapEx until you hit your 3 to 3.5x debt-to-EBITDA multiple? And how much M&A can be self-funded going forward to maintain leverage within that range of 3 to 3.5x?

Thanks. Yes, I think maybe the best way to answer this is it's going to depend on the shaping of the acquisitions. So we're committed to our long-term target of about 3 to 3.5x. And the potential equity requirement is linked to the size and the timing of the acquisitions. For instance, based on the plan, which is modeled on an evenly occurring throughout the period of time, our free cash flow generation is sufficient that you wouldn't require any equity. Going to the other complete extreme, if it wasn't a smooth throughout the period and say it will happen and it all occurred, the $1.9 billion, say, in 12 months, then at that point, we would have to look to have that line of sight to get the appropriate amount of leverage. You may recall historically and how I'll often talk about it is we have this 3 to 3.5x as our long-term target, if a larger acquisition or acquisitions come, which makes sense and our -- and we want to move forward with, we'll look at modeling and maybe going as high as 3.75x and then have that line of sight over usually roughly a 24-month period, that would bring us back down to that 3 and 3.5x. In an instance -- there could be an instance when they're grouped together, that we might have to reassess at that time. And I think historically, I mean, with the NGL acquisition, that platform in the U.S. that really kicked off our U.S. growth and accelerated growth, we were as high as 4x. And at that point, still, again, comfortable in our BB rating, which is where we comfortable are, and we want to be a BB rating going forward. So again, depending on the timing, we'd reassess at that time in our requirements to ensure that we have that line of sight. But coming back to the very beginning of your question, if it was all even throughout the period, then yes, we generate enough cash flow that it could be done with no more issuance of equity.

One for Luc and Inder. Of the 1,100 targets, the 10 platform, 20 midsize, how many have you engaged in conversations with? What is the different scale of low, higher, medium probability?

Go ahead, Inder.

Okay. I'll take that one. We certainly engage with potential sellers actively through a combination of our U.S. team. The management team is going to the industry event for 7-plus years and then gotten to know many folks in the industry very, very well. As far as classifications goes, we classify deals in the funnel based on probability of execution. For higher probability [Technical Difficulty] deal execution. And that's really -- the way we think about it is we're aligning on key commercial terms. And [Technical Difficulty] these deals are subjected to satisfactory completion of negotiations, negotiation agreements. In some cases, board approvals, et cetera. For the [Technical Difficulty] that's how we kind of think of how we classify deals. So as far as engagement overall goes, every time we have a successful deal, and word gets out, we tend to get follow-on interest from others on top of outbound activity. We had a lot of inbound activity as well from other operators in those markets and environments that have heard news of us being successful on a certain transaction that might be nearby or close to where they operate as well. Luc, I don't know if you want to add anything to that?

I think we lost him. One more on the digitalization strategy. Is the penetration of the digital tools on the same level in Canada and the U.S.? And is the difference, if any, driven by Superior's focus or the market demand?

I mean I think that, I'd say, really, it's focus. It's our ability to stay ahead of it in the United States. And I think we really have a great opportunity to drive these digital assets. We're ahead of the game based on what was established and what's implemented in. And we're really finding customers are very open to it, but not necessarily familiar with it in our industry in the States. And so as we're doing acquisitions, we're rolling out digital assets, and they're being received very well.

Going back to the EBITDA bridge that we provided on Slide 19. M&A is expected to contribute CAD 250 million in EBITDA and operational efficiencies in the U.S. and Canada are expected to contribute CAD 30 million and CAD 20 million, respectively. This would already put us at an EBITDA result of CAD 700 million in 2026. And this does not even take into account organic growth. Have you formulated the guidance cautiously or which component of the guidance would fail to materialize? So maybe one for Beth.

Yes. I mean, I think taking the last part of the question, our view is it's a realistic forecast or realistic goal that we're looking at. I wouldn't say our view is it's conservative, but we do view it's realistic. I think when you think of the organic growth as well as the operational efficiencies together, think of that in that $50 million to $60 million range as opposed to it all being additive. And I think that should work with your numbers.

And then just a couple more. Do the sensors lend themselves to greater stickiness and pricing power? Can you push through prices more readily for customers with sensors?

I think your customer...

Yes, Rob -- go ahead, Andy.

Yes, I'd say customers are more sticky, but basically from a customer service perspective, right, as Rick talked about earlier, we can drastically reduce any risk of running the customer out, any interruptions to their service. And those types of things make a customer sticky but doesn't give them no reason to shop. In terms of the sensors and driving price increases, I wouldn't look at it that way. It's more about the annual tenure or the average tenure of the customer and driving up that duration that the customer sticks from us that provides the benefit on the gross profit side. And as Rick talked about before, there's also an equal opportunity on the expense side.

Yes. To build off of that, Andy, I'd say sensors gives us a tremendous opportunity to manage operating costs. And that's probably the fruit of data that is given to us as to manage that and be more efficient and effective, which gives us the ability to continue to grow EBITDA.

And perhaps you can discuss how scale and geographic expansion could feed into the wholesale business to accelerate your supply advantage. How meaningful could it be to overall margins as you build a pan North American presence?

Yes, it's a good question. There's a couple things that came to mind when we talk about that. The first being that similar to the retail business, the more we can acquire in a region, the more we build on the synergies within a platform. So we can utilize back office, a lot of similar functions. So it does drive synergy and efficiency when we can increase that way. And secondly, it also provides us with more buying power and diversity of supply, which is also important in the marketplace to make sure we can continue to meet our customers' demand. So the more -- the bigger we get, the more we're buying means the more parties we're dealing with, the more options we have when it comes to supply, and those things are what really help us get through some of those challenging times. In terms of margin, it's like everything, as we become more effective and more efficient, that certainly does help us create a more stable increase to our margin over time.

Yes, Shawn, I would add to your point that those hundreds of customers are also becoming friends of Superior, because they like our quality of supply. And through that relationship, we've already acquired a few companies, and I think we'll get more companies to acquire as we develop a relationship on the wholesale.

Yes. I think it touches on one that David Newman also had, has the growing wholesale division supplying third-parties helped with acquisition intelligence on the other small and midsized players in the market?

Yes, it's been great. It does create those connections and relationships. So it has been very helpful for growing our relationships with the retail side.

On the organic growth target of 2% to 3%, it is less than historical. Why would we be conservative? Or is it a reflection of some other market dynamic?

I could take that, if you can hear me. I think 3% is good. We don't mind 5%. I think what we've been able to do in Canada in retail has helped a lot to get customer. I just got an e-mail from very high level of gentlemen in Canada who said, Luc, like today, 1 hour ago, I'm telling 100 people I know to just get to Superior for all the stuff they bring together, it simplified my life so much. So you might end up with more than 3%. But when you think of U.S. and Canada commercial, residential, industrial, I think it's a good stretch goal, but not crazy to think of 2%, 3% over the market. So let's say, market grows 1%, then 3% becomes 4%. So 2%, 3% over the market growth. It's a good stretch. We know -- you know us for lots of years, all of you, we've never been overly aggressive calling numbers that we don't believe. So it's our style to say, we don't mind overachieving, but we give ourselves some target that we feel mid-, long-term are achievable.

Okay. Another one from Nate Haywood. With Superior now operating as a pure-play energy distribution company and the emphasis on growth, would it make sense to explore markets beyond Canada and the U.S.?

There's probably a discussion that could still not too bad, good growth in other parts of the world. But go back to our discussion earlier about the 4 largest ones owning less than 30% of the market, nobody integrated that market in the States, and we have some room still in Canada. So when you have such an unbelievable growth opportunity, I mean we are planning for years and years and years to come. So why -- and then you -- we've talked earlier about the multiplication of the platform, the synergy, when you have condensed area to do your ruling, so why not just build on what we know is in our backyard. We're good at. We've proven it 15x. Why even think about the [Technical Difficulty] world for the moment, not under radar.

And back to the M&A. In synergizing U.S. propane EBITDA from $82 million on the acquired EBITDA to $150 million on post synergies, your outline of playbook and dashboard, what 2 or 3 specific things have been the most instrumental in achieving the synergies? Presumably, it's kind of like an 80-20 kind of effort?

Yes. So essentially, we're integrating all the data, and then we're working the Superior Way to drive distribution efficiencies, which would be the #1. After that, I'd say it's labor management, right? So in the States, as we said, largely residential, which means largely seasonal business, gives us a lot of opportunity to drive synergy in the off months, which we've done with flexible work programs. And then, finally, I'd say just the ability to manage the margin and the pricing effectively. Not necessarily price increases, but effective margin management, bringing the supply chain together with Superior Gas Liquids and leveraging that opportunity.

For the most part, it looks like your M&A and CapEx will be self-funded. What is your expected aggregate CapEx through 2026? And are you planning any major initiatives that might require significant amounts of capital?

Okay. I'll take that one. So from 2021 to 2026, the best way, and I'll split it up in categories, is for maintenance CapEx that could be in the range of $300 million to $400 million. For the lease repayments, $240 million to $250 million. And then from a growth perspective, growth CapEx from $200 million to $300 million, and that's excluding M&A. So that would be growth CapEx on the business. And just to remind everyone, our growth CapEx is also our nonrecurring CapEx that would occur as well. So if you want to think about any of the larger items in there, certainly, the rollout of the sensors and the technology associated with that as well as some system upgrades and replacement would be major items, and the rest of them would all be small minor items on individually like tanks, et cetera.

Another one for you, Beth. How does the 3-year tail from the sale of Specialty Chemicals fit into the funding plans for CapEx and M&A? Is it factored into the 2026 forecast?

Yes. So on the 3-year tail, that wouldn't be factored in. The assumption right now would be that it would just be within the corridor. This, for everybody on the chat here, is the item associated with the vendor take-back note on the Specialty Chemicals sale. And there's a mechanism where it can increase the purchase price or potentially decrease the purchase price depending on it, staying within a corridor. We've just assumed it's within the corridor, which is our expectation and has been our expectation throughout and then the assumption would be, from a leverage perspective, et cetera, this note, the interest is on a PIK basis. And it's a 5-year -- 5.5-year maturity. And our expectation would be that the cash would come in 5.5 years, and then you would see that in the leverage numbers. Obviously, it doesn't roll through the EBITDA numbers or the free cash flow conversion numbers because it isn't an EBITDA number, but it does factor into the leverage.

And maybe one last one for Rick, and then that's it for the question. So could you discuss the opportunities you are seeing across the commercial end markets for industrial, commercial, oilfield, motor fuels, et cetera, so we can get a sense on how it's recovering.

Sure, Rob. So as I talked about earlier, there's good moment in our commercial and industrial channels, certainly in remote and northern communities as well as industrial customers that we currently already have a footprint with. So I expect that to continue to drive some of our organic growth, for sure. As far as autogas goes and that's a general term for propane-powered vehicles, that would be -- for us, that would be carrier fleets. That would be in bus fleets as well as taxi and other people-moving services. Again, although a little bit of curtailment during COVID, but obviously [Technical Difficulty] to be a growth market for us, and we are a leader in the Canadian space, particularly in bringing that innovation to market with customers. And then lastly, oilfield. Oilfield has been a difficult segment over the last number of years with curtailment of activity based on both COVID and the economic downturn of that segment itself, albeit, that segment is still very important to us. It will continue to lag the rest of the market from a recovery perspective. That said, though, we are positioned with a lot of the prime producers that are going to be active going forward. And certainly, we'll leverage our digital value proposition as ways to continue to capture market share within oil and gas.

Okay. Thanks. That will conclude the question-and-answer period, and maybe I'll hand it back to Luc to wrap it up.

Yes. Thank you, everyone. I think we've -- what we're talking about going forward is something we've already accomplished with acquisition integration, internal growth and all the above. So it's really a continuity. It's not a new game. It's just a step-up because we're now one industry, step up more aggressively to do more of that. So the game plan we're presenting to you, we believe, I think it's achievable. We all think that. Nobody has been [indiscernible] for numbers and EBITDA and profitability and acquisition. We all wanted to do it. And we just have to prove it one more time that we can continue that kind of growth and improve the business. On that, see you all, I suppose, at next quarter, and thank you for your participation. If it was a bit choppy for you, it certainly was for me, sorry about that. I can tell you that we just learned and more than once, if COVID doesn't resolve, there'll be problem working from home. And all of us being spread out is not ideal for business overall. It has its good thing, but it also has its negative thing. And this was probably a proof of that again today. So on that, stay safe. Thank you very much, everyone.

Thank you, Luc, and thank you once again for joining us today. This concludes our presentation, and you may now disconnect. Bye-bye.