GFL Environmental sees revenue increase by 11.1 percent in second quarter of 2024

By
Recycling Product News Staff
August 06, 2024

A collection vehicle puts recyclables into its truck body

GFL Environmental Inc. has released its results for the second quarter of 2024. GFL Environmental

GFL Environmental Inc. has released its results for the second quarter of 2024.

"Our exceptional start to this year can be attributed to the commitment of our over 20,000 employees who deliver consistent high-quality results and strive to make our business better every day," said Patrick Dovigi, founder and chief executive officer of GFL. "Our focus on strong execution generated better than anticipated financial metrics across the board, including volumes which saw a sequential improvement of 130 basis points. Price-led organic growth, together with our operating efficiencies and the positive margin impact of shedding low-margin work, resulted in adjusted EBITDA margin expansion of 90 basis points compared to the prior year period. As part of our deliberate volume strategies, we also accelerated our exit from a portfolio of residential collection contracts in Michigan that no longer met our return thresholds, in a sale that was completed at the end of Q2.

"The success of our first half results sets us up to increase our 2024 full year guidance for the second consecutive quarter. In particular, we are increasing our guidance for adjusted EBITDA to between $2.24 billion and $2.25 billion and adjusted EBITDA margin1 to 28.4 percent, a 70 basis point increase over our original guidance and a 170 basis point increase over last year. The highly predictable and recurring nature of our business model also gives us confidence to reaffirm our year end Net Leverage target of between 3.65x to 3.85x.

"Considering our organic growth opportunities over the next two years, including RNG and EPR, we do not believe that taking GFL private at this time is in the best long-term interest of our shareholders. At its current disconnected market valuation, we are a buyer of GFL, not a seller. However, our management team is always exploring ways to create long-term value for our shareholders, and has a track record of selling assets at valuations that are more in line with our current value expectations. We believe that a sale of certain of our high-quality assets, such as our Environmental Services business, could attract a mid-teen multiple and that the proceeds from such a transaction could be used to accelerate the deleveraging of our balance sheet and provide an opportunity to buy back a portion of our stock at an attractive valuation. We have received current preliminary expressions of interest in a transaction that supports our valuation perspective and are actively engaged in implementing preparatory steps required to potentially complete such a transaction. To ensure we are maximizing value for all our shareholders, we also believe that the undertaking of a full auction process will be required, although there can be no assurance that a transaction will be completed."

GFL's second-quarter results

Revenue of $2,060.0 million in the second quarter of 2024, an increase of 11.1 percent excluding the impact of divestitures (6.0 percent including the impact of divestitures), compared to the second quarter of 2023.
- Solid waste revenue of $1,581.6 million, including 6.5 percent from core pricing partially offset by volume decreases of 1.7 percent.
- Environmental services revenue of $478.4 million, compared to $442.9 million in the prior year period.
Adjusted EBITDA increased by 13.9 percent excluding the impact of divestitures (9.3 percent including the impact of divestitures) to $591.1 million in the second quarter of 2024, compared to $540.7 million in the second quarter of 2023. adjusted EBITDA margin was 28.7 percent in the second quarter of 2024, compared to 27.8 percent in the second quarter of 2023. Solid waste adjusted EBITDA margin was 32.5 percent in the second quarter of 2024, compared to 31.6 percent in the second quarter of 2023. Environmental services adjusted EBITDA margin was 29.6 percent in the second quarter of 2024, compared to 29.6 percent in the second quarter of 2023.
Net loss was $472.3 million in the second quarter of 2024, compared to net income of $293.8 million in the second quarter of 2023. Net loss includes a non-cash loss resulting from the divestiture of certain U.S. assets completed in the current quarter.
Adjusted free cash flow was $185.7 million in the second quarter of 2024, compared to $8.5 million in the second quarter of 2023. The increase of $177.2 million was predominantly due to an increase in cash flows from operating activities from improved working capital and a reduction in cash interest paid, as well as the timing of capex payments.

Year to date results

Revenue of $3,861.4 million for the six months ended June 30, 2024, an increase of 8.9 percent excluding the impact of divestitures (3.2 percent including the impact of divestitures), compared to the six months ended June 30, 2023.
- Solid waste revenue of $3,013.4 million, including 7.1 percent from core pricing, partially offset by volume decreases of 2.3 percent.
- Environmental services revenue of $848.0 million, compared to $818.8 million in the prior year period which included approximately $40.0 million of revenue associated with an unseasonably high level of industrial collection, processing and emergency response activity. Excluding the impact of this outsized prior-year activity, revenue increased by 8.9 percent.
Adjusted EBITDA increased by 12.2 percent excluding the impact of divestitures (6.7 percent including the impact of divestitures) to $1,046.8 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. Adjusted EBITDA margin was 27.1 percent for the six months ended June 30, 2024, compared to 26.2 percent for the six months ended June 30, 2023. Solid waste adjusted EBITDA margin was 31.7 percent for the six months ended June 30, 2024, compared to 30.4 percent for the six months ended June 30, 2023. Environmental services adjusted EBITDA margin was 26.3 percent for the six months ended June 30, 2024, compared to 26.1 percent for the six months ended June 30, 2023.
Net loss was $648.8 million for the six months ended June 30, 2024, compared to net income of $76.0 million for the six months ended June 30, 2023. Net loss includes a non-cash loss resulting from the divestiture of certain U.S. assets completed in the current period.
Adjusted free cash flow was $234.8 million for the six months ended June 30, 2024, compared to $(46.3) million for the six months ended June 30, 2023. The increase of $281.1 million was predominantly due to an increase in cash flows from operating activities from improved working capital and a reduction in cash interest paid, as well as the timing of capex payments.

Updated full year 2024 guidance

GFL also provided its updated guidance for 2024 assuming a CAD/US exchange rate of 1.38 for the remainder of the year (compared to 1.35 provided in our original guidance on February 20, 2024).

Revenue is estimated to be between $7,900.0 million and $7,925.0 million, up compared to original guidance considering the impact of the recent divestiture.
Adjusted EBITDA is estimated to be between $2,240.0 million and $2,250.0 million, up approximately $30 million at the midpoint compared to original guidance.
- Full-year Adjusted EBITDA margin is expected to be approximately 28.4 percent, an increase of 70 basis points compared to original guidance and up 170 basis points compared to the prior year.
Adjusted free cash flow is estimated to be approximately $810.0 million, up compared to the original guidance.
Reaffirming net levearge at year-end is estimated to be between 3.65x and 3.85x.