GFL Environmental posts highest adjusted EBITDA margin in company history

GFL Environmental has released third quarter financial 2024 results and they include the highest EBITDA margin in the company's history. Adjusted EBITDA increased by 18.0 percent to $625.9 million in the third quarter of 2024, compared to $530.3 million in the third quarter of 2023. Net income was $110.6 million in the third quarter of 2024, compared to net income of $18.3 million in the third quarter of 2023.

"Once again, the dedication of our over 20,000 employees delivered consistent high-quality results across all our financial metrics," said Patrick Dovigi, founder and CEO of GFL. "Our continued focus on strong execution generated industry leading Adjusted EBITDA margin expansion of 300 basis points over the prior year quarter, the highest in GFL's history. Consistent with our capital allocation plan for the year, we deployed $96.4 million in incremental growth initiatives during the quarter, primarily related to extended producer responsibility and RNG opportunities, and $47.4 million in tuck-in acquisitions. Inclusive of the impact of these investments and acquisitions, we achieved Net Leverage of 4.05, the lowest in our company's history."

Confidence in continued margin expansion

"We are also tracking in line to achieve our 2024 capital allocation targets, including the deployment of approximately $900 million into M&A and incremental growth investments." Mr. Dovigi added, "Given our strong results year to date, we are confident in our ability to deliver on our 2024 key guidance metrics and are well positioned for another year of outsized margin expansion and growth in 2025."

In August the company announced plans to further evaluate the potential sale of its environmental services business. Since September GFL has received several expressions of interest from highly reputable potential buyers at valuations that should net a minimum of $6 billion in after tax proceeds, says the company. GFL expects to repay at least $3.5 billion of debt, with the remainder available to be used for share buybacks and general corporate purposes. 

Changes to to the company's leadership team

Mr. Dovigi concluded, "Today we are also announcing a change to our leadership team. As part of our long-planned succession process, effective January 1, 2025, Greg Yorston will transition the role of Chief Operating Officer to Billy Soffera, our current EVP of Solid Waste Operations and will continue in an advisory role until the end of 2025 to ensure an orderly and seamless transition. Over the past six years, Greg has been instrumental in executing our growth strategy and instilling operational discipline across the enterprise. We are fortunate that we will continue to benefit from his leadership during this transitional period. Billy has decades of industry experience and has been a critical member of our operational leadership team since joining GFL in 2021. Billy's depth and breadth of experience, combined with his institutional knowledge of our business, make him uniquely positioned to advance our operational and growth strategy."

Third Quarter Results

• Revenue of $2,014.7 million in the third quarter of 2024, an increase of 9.3 percent excluding the impact of divestitures (6.6 percent including the impact of divestitures), compared to the third quarter of 2023.
• Solid waste revenue of $1,554.2 million, including 6.0 percent from core pricing partially offset by volume decreases of 0.8 percent
• Environmental services revenue of $460.5 million, compared to $447.0 million in the prior year period which included approximately $20.6 million of revenue associated with an unseasonably high level of large event driven business. Excluding the impact of this outsized activity in the prior year period, revenue increased by 7.9 percent.
• Adjusted EBITDA increased by 18.0 percent to $625.9 million in the third quarter of 2024, compared to $530.3 million in the third quarter of 2023. Adjusted EBITDA margin was 31.1 percent in the third quarter of 2024, compared to 28.1 percent in the third quarter of 2023. Solid waste adjusted EBITDA margin was 34.8 percent in the third quarter of 2024, compared to 31.4 percent in the third quarter of 2023. Environmental Services Adjusted EBITDA margin was 32.2 percent in the third quarter of 2024, compared to 31.1 percent in the third quarter of 2023.
• Net income was $110.6 million in the third quarter of 2024, compared to net income of $18.3 million in the third quarter of 2023.
• Adjusted free cash flow was $225.4 million in the third quarter of 2024, compared to $276.0 million in the third quarter of 2023. The decrease of $50.6 million was predominantly due to the timing of cash taxes related to divestitures and incremental growth investments, offset by an increase in cash flows from operating activities.

Year to Date Results

• Revenue of $5,876.1 million for the nine months ended September 30, 2024, an increase of 9.0 percent excluding the impact of divestitures (4.3 percent including the impact of divestitures), compared to the nine months ended September 30, 2023.
• Solid waste revenue of $4,567.6 million, including 6.7 percent from core pricing, partially offset by volume decreases of 1.8 percent.
• Environmental services revenue of $1,308.5 million, compared to $1,265.8 million in the prior year period which included approximately $81.8 million of revenue associated with an unseasonably high level of large event driven business. Excluding the impact of this outsized activity in the prior year period, revenue increased by 10.5 percent.
• Adjusted EBITDA increased by 14.3 percent excluding the impact of divestitures (10.7 percent including the impact of divestitures) to $1,672.7 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. Adjusted EBITDA margin was 28.5 percent for the nine months ended September 30, 2024, compared to 26.8 percent for the nine months ended September 30, 2023. Solid Waste adjusted EBITDA margin was 32.8 percent for the nine months ended September 30, 2024, compared to 30.7 percent for the nine months ended September 30, 2023. Environmental services Adjusted EBITDA margin was 28.4 percent for the nine months ended September 30, 2024, compared to 27.9 percent for the nine months ended September 30, 2023.
• Net loss was $538.2 million for the nine months ended September 30, 2024, compared to net income of $94.3 million for the nine months ended September 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 $460.2 million for the nine months ended September 30, 2024, compared to $235.8 million for the nine months ended September 30, 2023. The increase of $224.4 million was predominantly due to an increase in cash flows from operating activities from a reduction in cash interest paid, as well as timing of capex payments.