"Our exceptional start to the year continued into the second quarter, thanks to the hard work and commitment of our over 19,000 employees," said Patrick Dovigi, founder and chief executive officer at GFL. "Solid Waste pricing of 7.3 percent was significantly above our original plan and a testament to our ability to respond to changing market conditions in real time. The strength of this pricing, together with continued positive trends in volume and contribution from M&A drove nearly 30 percent revenue growth in our Solid Waste segment, a result that was ahead of our expectations. The outperformance that we saw in our Environmental Services segment in the beginning of the year continued to accelerate in the second quarter, resulting in over 20 percent organic revenue growth and validating our rationale for bringing together the components of this segment late last year. Adjusted EBITDA grew by $115.5 million or 34.2 percent in the second quarter. We achieved these extraordinary results despite the current inflationary environment that has been more severe and persisted longer than expected, as well as the continuing impact of tight labour markets and supply chain constraints. Although current year margins will be impacted by labour shortages and the rapid rate of cost escalation, we believe that our disciplined pricing initiatives, together with the delayed impact of recent CPI pricing adjustments, will set up a highly favourable launch off point for 2023 and provide additional scope for margin expansion as inflationary pressures, labour markets and supply chain constraints begin to moderate."
Mr. Dovigi added, "We remain focused on executing on our strategy to create long-term value for all stakeholders. We have completed 28 acquisitions year-to-date, the majority of which were smaller tuck-in acquisitions, which have meaningfully densified our Solid Waste footprint within the markets we serve. Our outsized M&A activity during the first part of this year is expected to contribute annualized revenue of approximately $360.0 million and puts us on track to exceed the upside opportunity from M&A that we identified at the beginning of the year. We also continued to make progress on RNG projects at the five landfills, where we have agreements in place, with an additional seven sites under active negotiation and nine other projects in the request for proposal stage."
Mr. Dovigi concluded, "Our strong performance for the first half of the year, coupled with our expectation for the balance of the year, the resilience of our business model and the effectiveness of our growth strategies, are leading us to increase our 2022 full year guidance for the second time this year. We are increasing our guidance for revenue by $375 million, as well as Adjusted EBITDA and Adjusted Free Cash Flow, despite the current inflationary environment and rising interest rates. We continue to see upside opportunities ahead of us as result of our robust M&A pipeline and the contribution from any incremental M&A completed in the second half of the year would be additive to our updated guidance."
Second quarter results
- Revenue increased by 40.4 percent to $1,707.5 million in the second quarter of 2022, compared to the second quarter of 2021. Solid Waste organic growth of 12.4 percent, including 7.3 percent from core pricing, 1.9 percent from surcharges and 2.4 percent from positive volume. In the second quarter of 2021, Solid Waste core pricing and surcharges was 4.1 percent and volume was positive 6.3 percent.
- Environmental Services revenue of $324.3 million, including organic growth of 21.6 percent driven by the strength of industrial collection and processing revenue, as well as the impact of higher used motor oil selling prices.
- Adjusted EBITDA increased by 34.2 percent to $453.3 million in the second quarter of 2022, compared to the second quarter of 2021. Adjusted EBITDA margin was 26.5 percent in the second quarter of 2022, compared to 26.9 percent in the second quarter of 2021 (27.8 percent as adjusted for the divestiture of GFL Infrastructure). Solid Waste Adjusted EBITDA margin was 29.4 percent in the second quarter of 2022, compared to 30.9 percent in the second quarter of 2021.
- Fuel costs resulted in a 125 basis point headwind to Solid Waste Adjusted EBITDA margin, compared to the second quarter of 2021.
- Net income from continuing operations increased to $82.6 million in the second quarter of 2022, compared to $54.5 million in the second quarter of 2021.
- Adjusted Free Cash Flow was $102.2 million in the second quarter of 2022, compared to $162.2 million in the second quarter of 2021.
- Investment in non-cash working capital was $90.8 million in the second quarter of 2022, compared to $5.9 million (as adjusted) in the second quarter of 2021. The $84.9 million incremental investment is attributable to the revenue growth and change in business mix realized throughout the quarter.
- Capital expenditures were approximately $150.0 million in the second quarter of 2022, inclusive of $19.6 million for the development and construction of RNG projects and proceeds from asset disposals of $0.3 million, excluding $224.0 million from our divestiture of GFL Infrastructure to Green Infrastructure Partners Inc., compared to $75.1 million in the second quarter of 2021, inclusive of proceeds from asset disposals of $65.4 million.
Year to date results
- Revenue increased by 34.3 percent to $3,108.9 million for the six months ended June 30, 2022, compared to the six months ended June 30, 2021. Solid Waste organic growth of 11.3 percent, including:
- 7.0 percent from core pricing, compared to 4.0 percent for the six months ended June 30, 2021.
- 1.3 percent from surcharges.
- 2.1 percent from positive volume (2.6 percent excluding non-recurring MRF volumes), compared to 3.5 percent for the six months ended June 30, 2021 (1.1 percent excluding non-recurring MRF volumes).
- Environmental Services revenue of $556.0 million, including organic growth of 20.6 percent driven by the strength of industrial collection and processing revenue, as well as the impact of higher used motor oil selling prices.
- Adjusted EBITDA increased by 27.1 percent to $807.7 million for the six months ended June 30, 2022, compared to the six months ended June 30, 2021. Adjusted EBITDA margin was 26.0 percent for the six months ended June 30, 2022, compared to 27.4 percent for the six months ended June 30, 2021. Solid Waste Adjusted EBITDA margin was 29.6 percent for the six months ended June 30, 2022, compared to 30.9 percent for the six months ended June 30, 2021.
- Net income from continuing operations increased to $219.6 million for the six months ended June 30, 2022, compared to a net loss of $229.2 million for the six months ended June 30, 2021.
- Adjusted Free Cash Flow was $220.8 million for the six months ended June 30, 2022, compared to $279.1 million for the six months ended June 30, 2021.
Updated full year 2022 guidance
GFL also provided its updated guidance for 2022 assuming a CAD/US exchange rate of 1.28 for the remainder of the year (compared to 1.26 provided in our original guidance on February 9, 2022):
- Revenue is estimated to be between $6,425 million and $6,475 million (previously between $6,000 million and $6,100 million).
- Full year Solid Waste core pricing of 7.0 percent, surcharges of 1.9 percent and volume of 1.75 percent and Environmental Services organic growth of 9.0 percent. Changes in foreign exchange resulting in 1.3 percent revenue growth and revenue from M&A contribution of 14.6 percent.
- Adjusted EBITDA3 is estimated to be between $1,710 million and $1,730 million (previously between $1,680 million and $1,720 million).
- Full year Adjusted EBITDA margin is expected to be approximately 26.7 percent, inclusive of an estimated 110 basis point headwind from higher fuel costs.
- Adjusted Free Cash Flow3 is estimated to be between $650 million and $680 million (previously between $645 million and $675 million).
- Full year cash interest is expected to be approximately $400 million, inclusive of approximately $40 million of incremental cash interest to the original guide based on higher interest rates.
The 2022 updated guidance includes the expected contribution of acquisitions already completed in 2022, net of divestitures completed to date, but excludes any impact from additional acquisitions not yet completed, refinancing opportunities and any potential redeployment of capital. Implicit in forward-looking information in respect of our expectations for 2022 are certain current assumptions, including, among others, no changes to the current economic environment and that none of the jurisdictions in which GFL operates institute additional COVID-19 emergency measures including shelter-in-place or similar orders. The updated 2022 guidance assumes GFL will continue to execute on its strategy of organically growing our business, leverage our scalable network to attract and retain customers across multiple service lines, realize operational efficiencies, and extract procurement and cost synergies. See "Forward-Looking Information".
