GFL(GFL) - 2022 Q2 - Quarterly Report

Financial Statements Statements of Operations and Comprehensive Income (Loss) GFL Environmental Inc. reported significant revenue growth and improved net income from continuing operations for Q2 and H1 2022 Q2 & H1 2022 vs 2021 Performance Highlights (in millions) | Metric | Q2 2022 | Q2 2021 | YoY Change | H1 2022 | H1 2021 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,707.5 | $1,216.1 | +40.4% | $3,108.9 | $2,315.7 | +34.2% | | Net Income (Loss) from Continuing Operations | $82.6 | $54.5 | +51.6% | $219.6 | $(229.2) | N/A | | Net Income (Loss) | $64.3 | $62.5 | +2.9% | $91.7 | $(219.5) | N/A | | Total Comprehensive Income (Loss) | $283.6 | $(25.8) | N/A | $197.2 | $(390.4) | N/A | Basic and Diluted Earnings (Loss) Per Share | Per Share Data | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Continuing Operations | $0.17 | $0.12 | $0.49 | $(0.71) | | Discontinued Operations | $(0.05) | $0.02 | $(0.35) | $0.03 | | Total Operations | $0.12 | $0.14 | $0.14 | $(0.68) | Statements of Financial Position GFL's financial position as of June 30, 2022, shows an increase in total assets and liabilities, with a corresponding improvement in shareholders' equity Balance Sheet Summary (in millions) | Account | June 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $19,112.0 | $18,373.7 | |     Goodwill | $7,814.1 | $7,501.1 | |     Property and equipment, net | $6,047.1 | $6,010.6 | | Total Liabilities | $12,967.8 | $12,597.6 | |     Long-term debt (non-current) | $8,773.0 | $7,961.8 | | Total Shareholders' Equity | $6,144.2 | $5,776.1 | Statements of Changes in Shareholders' Equity Total shareholders' equity increased during the first half of 2022, driven by net income, share capital issuance for acquisitions, and positive currency translation adjustments - Total shareholders' equity increased from $5,776.1 million at Dec 31, 2021, to $6,144.2 million at June 30, 2022[9] - Key changes in equity for H1 2022 include: net income of $91.7 million, share capital issuance for acquisitions of $154.5 million, and share-based payments of $26.1 million, offset by $9.7 million in dividends[9] Statements of Cash Flows Cash flow analysis for H1 2022 shows positive operating cash flow, significant outflows for investing activities primarily due to acquisitions, and substantial inflows from financing activities Cash Flow Summary for Six Months Ended June 30 (in millions) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash from operating activities | $407.2 | $390.2 | | Net cash used in investing activities | $(995.2) | $(417.2) | |     Business acquisitions, net of cash | $(947.4) | $(203.3) | | Net cash from financing activities | $651.8 | $330.8 | | Increase in cash | $63.8 | $303.8 | | Cash, end of period | $230.6 | $310.4 | Notes to the Financial Statements Note 1: Description of the Business GFL Environmental Inc. provides non-hazardous solid waste management and environmental services across North America, with its shares listed on major stock exchanges - GFL provides non-hazardous solid waste management and environmental services through a network of facilities in Canada and the United States[16] - The company's shares trade on the NYSE and TSX under the symbol 'GFL', and its tangible equity units (TEUs) trade on the NYSE under 'GFLU'[15] Note 2: Summary of Significant Accounting Policies The interim financial statements adhere to IAS 34, with key policy updates including the reclassification of the GFL Infrastructure division as discontinued operations and the renaming of the Liquid Waste segment to 'Environmental Services' - The financial statements are prepared in accordance with IAS 34, Interim Financial Reporting[19] - The GFL Infrastructure services division has been reclassified and presented as a discontinued operation[33] - The soil remediation division was combined with the Liquid Waste segment, which has been renamed 'Environmental Services'[33] Note 3: Business Combinations GFL completed 25 acquisitions in H1 2022, primarily in solid waste management, significantly contributing to goodwill, revenue, and pre-tax income - GFL completed 25 acquisitions in the first six months of 2022, of which 21 were solid waste management businesses[34] Purchase Price Allocation for H1 2022 Acquisitions (in millions) | Asset/Liability Acquired | Amount | | :--- | :--- | | Property and equipment | $441.6 | | Intangible assets | $319.8 | | Goodwill | $408.2 | | Net assets acquired / Total consideration | $1,146.3 | - Since their acquisition dates, the 2022 acquisitions have contributed approximately $72.3 million in revenue and $10.2 million in income before taxes[36] Note 4: Property and Equipment GFL's net property and equipment increased as of June 30, 2022, reflecting additions and acquisitions, alongside significant depreciation and an impairment charge - The carrying amount of Property and Equipment, net, increased from $6,010.6 million at year-end 2021 to $6,047.1 million at June 30, 2022[38] - Depreciation of property and equipment for the six months ended June 30, 2022, was $468.1 million, compared to $415.6 million in the prior year period[38] - A $9.1 million impairment charge was recognized in H1 2022 related to assets destroyed in a fire[40] Note 5: Goodwill and Intangible Assets GFL's goodwill and intangible assets increased as of June 30, 2022, primarily due to acquisitions, alongside significant amortization and the completion of the GFL Infrastructure divestiture Goodwill and Intangible Assets (in millions) | Account | June 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Goodwill | $7,814.1 | $7,501.1 | | Intangible Assets, net | $3,395.3 | $3,330.0 | - Amortization of intangible assets for the six months ended June 30, 2022, totaled $259.1 million[41] - In H1 2022, GFL completed the GFL Infrastructure divestiture for $224.0 million cash and a 45% equity interest in Green Infrastructure Partners Inc. (GIP)[42] Note 6: Landfill Closure and Post-Closure Obligations GFL's total landfill closure and post-closure obligations decreased as of June 30, 2022, primarily due to adjustments for discount rates, partially offset by new provisions - Total landfill closure and post-closure obligations were $834.1 million as of June 30, 2022, down from $880.6 million at December 31, 2021[44] - The decrease was primarily driven by a $97.6 million adjustment for discount rates[44] Note 7: Long-Term Debt GFL's total long-term debt increased as of June 30, 2022, primarily due to a draw on its revolving credit facility, while remaining in compliance with all financial covenants Long-Term Debt Breakdown (in millions) | Debt Instrument | June 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Revolving credit facility | $755.0 | $— | | Term Loan B Facility | $1,666.5 | $1,647.9 | | Notes (various) | $5,859.0 | $5,764.0 | | Total long-term debt | $8,790.1 | $7,979.0 | - On May 27, 2022, GFL exercised a $300.0 million accordion option, increasing its revolving credit facility[49] - As of June 30, 2022, GFL was in compliance with all financial maintenance covenants[51] Note 8: Interest and Other Finance Costs Interest and other finance costs decreased in Q2 and H1 2022, primarily due to the non-recurrence of prepayment penalties incurred in the prior year Interest and Other Finance Costs (in millions) | Period | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Costs | $104.8 | $139.8 | $204.5 | $231.0 | - The six months ended June 30, 2021 included $49.3 million in prepayment penalties for early note redemption, which did not recur in 2022[54] Note 9: Tangible Equity Units (TEUs) As of June 30, 2022, GFL's Tangible Equity Units (TEUs) were classified as a current liability due to their upcoming maturity, with a total carrying value of $895.1 million - Each TEU has a stated amount of US$50.00 and is comprised of a prepaid stock purchase contract and a senior amortizing note due March 15, 2023[55] TEU Components (in millions) | Component | June 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Amortizing Notes | $43.6 | $70.4 | | Purchase Contracts | $851.5 | $1,218.1 | | Total TEUs | $895.1 | $1,288.5 | Note 10: Earnings (Loss) Per Share Basic and diluted earnings per share from continuing operations significantly improved in Q2 and H1 2022, reflecting a positive shift from a prior-year loss Earnings Per Share (EPS) Summary | EPS from Continuing Operations | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | | Basic and Diluted | $0.17 | $0.12 | $0.49 | $(0.71) | - The weighted average number of shares outstanding (basic) for H1 2022 was 365.4 million, up from 360.6 million in H1 2021[57] Note 11: Revenue GFL's revenue for H1 2022 significantly grew, driven by strong performance in both the Solid Waste and Environmental Services segments Revenue by Service Type for Six Months Ended June 30 (in millions) | Service Type | 2022 | 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Solid Waste | $2,886.0 | $2,336.7 | +23.5% | |     Total collection | $1,824.0 | $1,469.1 | +24.2% | |     Landfill | $385.3 | $300.9 | +28.0% | | Environmental Services | $599.4 | $286.0 | +109.6% | | Total Revenue (after intercompany elim.) | $3,108.9 | $2,315.7 | +34.2% | Note 12: Operating Segments Total Adjusted EBITDA increased significantly in H1 2022, driven by strong performance across both Solid Waste and Environmental Services segments, with goodwill primarily allocated to Solid Waste USA Adjusted EBITDA by Segment for Six Months Ended June 30 (in millions) | Segment | 2022 | 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Solid Waste | $756.4 | $635.5 | +19.0% | |     Canada | $211.5 | $188.0 | +12.5% | |     USA | $544.9 | $447.5 | +21.8% | | Environmental Services | $137.9 | $63.9 | +115.8% | | Corporate | $(86.6) | $(63.9) | -35.5% | | Total Adjusted EBITDA | $807.7 | $635.5 | +27.1% | - Adjusted EBITDA is reconciled to net income from continuing operations, which was $219.6 million for H1 2022, compared to a loss of $(229.2) million in H1 2021[71] - As of June 30, 2022, the Solid Waste USA segment held the largest portion of goodwill and indefinite life intangible assets at $5.74 billion[72] Note 13: Shareholders' Equity As of June 30, 2022, GFL had 379.6 million shares outstanding, initiated a normal course issuer bid, and recognized share-based compensation expense - In May 2022, GFL initiated a normal course issuer bid (NCIB) to repurchase up to 16,510,694 subordinate voting shares; no shares were repurchased by June 30, 2022[76] - During H1 2022, GFL issued 3,976,434 subordinate voting shares as partial consideration for an acquisition[77] - As of June 30, 2022, there were 22.1 million share options outstanding with a weighted average exercise price of US$32.59[78] Note 14: Supplemental Cash Flow Information The net change in non-cash working capital for H1 2022 resulted in a cash outflow, primarily due to increased receivables partially offset by higher accounts payable Changes in Non-Cash Working Capital for H1 2022 (in millions) | Item | H1 2022 | H1 2021 | | :--- | :--- | :--- | | Accounts payable and accrued liabilities | $99.7 | $(28.9) | | Trade and other receivables, net | $(218.4) | $6.0 | | Prepaid expenses and other assets | $(41.7) | $(21.1) | | Total Change | $(160.4) | $(44.0) | Note 15: Financial Instruments and Risk Management GFL's financial instruments generally approximate fair value, though the fair value of outstanding Notes was below their carrying value as of June 30, 2022, with risk management policies remaining consistent Fair Value of Notes (in millions) | Date | Carrying Value | Fair Value | | :--- | :--- | :--- | | June 30, 2022 | $5,859.0 | $5,150.8 | | Dec 31, 2021 | $5,764.0 | $5,808.3 | - The fair value of the Notes is estimated using a discounted cash flow model (Level 2 hierarchy)[85] Note 16: Commitments As of June 30, 2022, GFL had significant outstanding commitments in letters of credit and performance bonds, which are not recognized on the balance sheet - Outstanding letters of credit totaled approximately $221.6 million as of June 30, 2022[88] - Issued performance bonds totaled $1,328.2 million as of June 30, 2022[89] Note 17: Related Party Transactions GFL has ongoing related party transactions, including notes payable to CEO-controlled entities and revenue from Green Infrastructure Partners Inc. following a divestiture - As of June 30, 2022, the remaining principal on notes payable to entities controlled by Patrick Dovigi was $24.4 million[90][91] - In Q2 2022, GFL recognized $3.7 million in revenue from transactions with Green Infrastructure Partners Inc. (GIP), an entity in which an affiliate controlled by Patrick Dovigi holds a minority interest[92][93] Note 18: Discontinued Operations GFL completed the divestiture of its Infrastructure division in April 2022, resulting in the reclassification of its results as discontinued operations, which recorded a significant net loss including an impairment charge - The divestiture of GFL Infrastructure was completed on April 25, 2022, for $224.0 million cash and a ~45% equity interest in GIP[93] Results of Discontinued Operations for Six Months Ended June 30 (in millions) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Revenue | $96.8 | $185.2 | | Earnings (loss) before income taxes | $(1.6) | $10.1 | | Impairment | $(128.1) | $— | | Net (loss) income | $(127.9) | $9.7 | - Operating cash flows from discontinued operations were an outflow of $35.4 million in H1 2022, compared to an inflow of $4.7 million in H1 2021[96]