• Adjusted EBITDA Growth: Nearly 20% growth in the third quarter.
• Adjusted EBITDA Margin: Highest in GFL's history at 31.1%, a 300 basis point expansion over the prior year.
• Revenue: Consolidated revenue for the quarter was $2.015 billion, with 11.3% growth in solid waste.
• Solid Waste Pricing: Stronger than expected at 6%.
• Net Leverage: Ended the quarter at 4.05, the lowest in GFL's history.
• Adjusted Free Cash Flow: $225 million for the quarter.
• Adjusted Net Income: $126 million for the quarter.
• Environmental Services Revenue: Up 3% compared to the prior year.
• Capital Deployment: $96 million in incremental growth investments and $47 million in three tuck-in acquisitions during the third quarter.
• Revenue Guidance for 2024: Expected to be approximately $7.82 to $7.85 billion.
• Adjusted EBITDA Margin Guidance for 2024: Expected to increase to approximately 28.6%.
• Fourth Quarter Revenue Expectation: Approximately $1.94 to $1.97 billion.
• Fourth Quarter Adjusted EBITDA Margin Expectation: Just over 29%.
• Fourth Quarter Adjusted Free Cash Flow Expectation: Approximately $350 million.
• Fourth Quarter Adjusted Net Income Expectation: $75 to $80 million.

• Warning! GuruFocus has detected 8 Warning Signs with GFL.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• GFL Environmental Inc (NYSE:GFL) reported nearly 20% adjusted EBITDA growth, showcasing strong operational and financial performance.
• The company achieved the highest adjusted EBITDA margin in its history at 31.1%, a 300 basis point expansion over the prior year.
• GFL successfully executed its capital allocation strategy, deploying $96 million in incremental growth investments primarily in recycling and R&G infrastructure.
• The company ended the quarter with net leverage of 4.05, the lowest in its history, demonstrating commitment to deleveraging targets.
• GFL has a robust pipeline of M&A opportunities and expects to deploy approximately $900 million on M&A and growth investments this year.

Negative Points

• GFL faced decreases in commodity and energy prices, which reduced third-quarter revenues derived from the sale of commodities and fuel surcharges.
• The environmental services segment experienced headwinds from used motor oil pricing and increased cost of risk.
• The company is dealing with a security incident that is under investigation, which could potentially impact operations.
• There is uncertainty regarding the potential sale of the environmental services segment, with tax implications affecting the net proceeds.
• GFL's working capital seasonality remains a challenge, with significant unwinding expected in the fourth quarter.

Q & A Highlights

Q: Can you clarify if the $6 billion from the ESL sale is net of taxes and if the implied multiple is consistent with previous discussions? A: Yes, the $6 billion is net of taxes. We have a high degree of confidence in delivering this amount in cash proceeds. The implied multiple remains attractive and consistent with what we discussed last quarter.

Q: What is the expected incremental EBITDA from EPR and R&G in 2025? A: For EPR, we expect an incremental EBITDA of $35 to $45 million, increasing from $5 to $10 million this year. For R&G, we anticipate an incremental EBITDA of $25 to $30 million, with the potential for more depending on RIN pricing.

Q: How should we think about the margin journey for the solid waste business over the next few years? A: We expect ongoing margin expansion driven by price/cost spread, ancillary pricing charges, and contributions from EPR and R&G. We anticipate industry-leading margin expansion, bringing us close to best-in-class solid waste margins.

Q: Will the sale of the environmental services segment impact your leverage targets? A: Yes, we plan to repay at least $3.5 billion of debt, which will bring our leverage to a low three times range. This aligns with our goal of achieving an investment-grade credit rating.

Q: How does the potential sale of the environmental services segment affect your M&A strategy? A: The sale will provide us with proceeds to pursue M&A opportunities, particularly in the solid waste sector. We have a robust pipeline and expect to execute on attractive opportunities while maintaining our leverage targets.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.