Unaudited Interim Condensed Consolidated Financial Statements Statements of Operations and Comprehensive Income (Loss) Revenue grew over 32% in Q3 and the first nine months of 2022, narrowing the net loss despite increased costs and foreign exchange losses Key Performance Indicators (Q3 & 9M 2022 vs 2021) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,831.2 M | $1,381.3 M | $4,940.1 M | $3,697.0 M | | Net Loss | $(183.7) M | $(309.9) M | $(92.0) M | $(529.4) M | | Net Loss from Continuing Operations | $(183.7) M | $(316.1) M | $35.9 M | $(545.3) M | | Total Basic & Diluted EPS | $(0.55) | $(0.89) | $(0.42) | $(1.58) | - A significant factor in the quarterly results was a foreign exchange loss of $195.3 million in Q3 2022, compared to $111.6 million in Q3 20213 - The company recorded a mark-to-market gain on Purchase Contracts of $10.3 million in Q3 2022, a sharp reversal from a $208.6 million loss in Q3 20213 Statements of Financial Position Total assets grew to $20.01 billion driven by acquisitions, while increased debt raised total liabilities to $13.69 billion Financial Position Summary (in millions) | Account | Sep 30, 2022 | Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $20,014.4 | $18,373.7 | +$1,640.7 | | Goodwill | $8,184.9 | $7,501.1 | +$683.8 | | Property and equipment, net | $6,538.8 | $6,010.6 | +$528.2 | | Total Liabilities | $13,692.8 | $12,597.6 | +$1,095.2 | | Long-term debt (current & non-current) | $9,376.7 | $7,979.0 | +$1,397.7 | | Total Shareholders' Equity | $6,321.6 | $5,776.1 | +$545.5 | Statements of Changes in Shareholders' Equity Shareholders' equity increased to $6.32 billion, driven by comprehensive income and share issuances for acquisitions - Total shareholders' equity attributable to GFL Environmental Inc. grew from $5,776.1 million to $6,315.6 million during the first nine months of 20228 - Key changes in equity for the nine months ended September 30, 2022 include: a net loss of $91.8 million, a positive currency translation adjustment of $526.1 million, share capital issuance of $154.5 million for acquisitions, and dividend payments of $15.1 million8 Statements of Cash Flows Operating cash flow increased to $693.3 million, while financing activities provided $719.5 million to fund acquisitions Cash Flow Summary (Nine Months Ended Sep 30) | Cash Flow Activity | 2022 (in millions) | 2021 (in millions) | | :--- | :--- | :--- | | Net cash from operating activities | $693.3 | $614.1 | | Net cash used in investing activities | $(1,329.9) | $(1,550.6) | | - Business acquisitions, net of cash | $(1,072.7) | $(1,303.2) | | - Purchase of property and equipment | $(542.8) | $(417.8) | | Net cash from financing activities | $719.5 | $2,065.4 | | - Issuance of long-term debt | $1,446.1 | $3,610.1 | | - Repayment of long-term debt | $(588.2) | $(1,371.6) | | Cash, end of period | $237.4 | $1,149.5 | Notes to the Unaudited Interim Condensed Consolidated Financial Statements Note 1: Description of the Business GFL Environmental Inc is a publicly traded provider of non-hazardous solid waste and environmental services in North America - GFL provides non-hazardous solid waste management and environmental services through a network of facilities in Canada and the United States15 - The company's subordinate voting shares trade on the NYSE and TSX under the symbol 'GFL', and its tangible equity units (TEUs) trade on the NYSE under 'GFLU'14 Note 2: Summary of Significant Accounting Policies Financials follow IAS 34, with the GFL Infrastructure division reclassified to discontinued operations - The financial statements are prepared in accordance with IAS 34, Interim Financial Reporting, and should be read with the 2021 Annual Financial Statements1819 - The GFL Infrastructure services division has been reclassified and presented as discontinued operations31 - The Liquid Waste segment and the soil remediation division have been combined into a new segment named 'Environmental Services'31 Note 3: Business Combinations The company completed 34 acquisitions for $1.27 billion, contributing $178.0 million in revenue - GFL completed 34 acquisitions in the first nine months of 2022, of which 29 were solid waste management businesses32 Acquisition Summary (Nine Months Ended Sep 30, 2022) | Item | Amount (in millions) | | :--- | :--- | | Total Consideration | $1,273.1 | | - Cash Paid | $1,118.6 | | - Share Capital Issued | $154.5 | | Net Assets Acquired | $1,273.1 | | - Goodwill | $463.9 | | - Property and equipment | $569.4 | | - Intangible assets | $364.2 | - Since their acquisition dates, the 2022 acquisitions have contributed approximately $178.0 million in revenue and $21.0 million in income before taxes35 Note 4: Property and Equipment Property and equipment increased to $6.54 billion, driven by additions and acquisitions, with a $12.5 million impairment charge Property and Equipment, Net (in millions) | Category | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Landfills | $1,959.8 | $1,782.1 | | Vehicles | $1,568.9 | $1,403.0 | | Land, buildings and improvements | $1,504.5 | $1,375.6 | | Total Carrying Amount | $6,538.8 | $6,010.6 | - For the nine months ended September 30, 2022, GFL recognized $12.5 million of impairment charges related to assets destroyed in fires39 Note 5: Goodwill and Intangible Assets Goodwill increased to $8.18 billion from acquisitions, and the GFL Infrastructure division was divested Goodwill and Intangible Assets Carrying Amounts (in millions) | Asset | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Goodwill | $8,184.9 | $7,501.1 | | Indefinite life C of A | $829.3 | $811.9 | | Customer lists and municipal contracts | $2,037.3 | $2,118.3 | | Total | $11,475.5 | $10,831.1 | - GFL completed the GFL Infrastructure divestiture for cash consideration of $224.0 million and an approximate 45% non-controlling equity interest in Green Infrastructure Partners Inc. (GIP)42 Note 6: Landfill Closure and Post-Closure Obligations Landfill closure obligations decreased to $836.9 million, primarily due to adjustments for discount rates Landfill Closure and Post-Closure Obligations (in millions) | Description | Amount | | :--- | :--- | | Balance, December 31, 2021 | $880.6 | | Adjustment for discount rates | $(171.4) | | Provisions | $59.6 | | Acquisitions via business combinations | $31.9 | | Expenditures | $(19.1) | | Balance, September 30, 2022 | $836.9 | Note 7: Long-Term Debt Total long-term debt rose to $9.38 billion due to drawings on the revolving credit facility, while remaining in covenant compliance Long-Term Debt Composition (in millions) | Debt Instrument | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Revolving credit facility | $874.0 | $— | | Term Loan B Facility | $1,768.2 | $1,647.9 | | Notes (various) | $6,230.9 | $5,764.0 | | Total long-term debt | $9,376.7 | $7,979.0 | - As of September 30, 2022, GFL was in compliance with its financial maintenance covenants, including the Total Net Funded Debt to Adjusted EBITDA ratio and the Interest Coverage Ratio50 Note 8: Interest and Other Finance Costs Interest and finance costs rose to $340.7 million for the nine-month period, driven by higher interest expense on debt Interest and Other Finance Costs (in millions) | Component | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Interest | $295.3 | $231.9 | | Prepayment penalties | $— | $49.3 | | Accretion of landfill obligations | $15.1 | $11.0 | | Total | $340.7 | $327.6 | Note 9: Tangible Equity Units (TEUs) The entire $926.6 million carrying value of TEUs was reclassified as a current liability ahead of its 2023 maturity - 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, 202353 TEU Components (in millions) | Component | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Amortizing Notes | $31.2 | $70.4 | | Purchase Contracts | $895.4 | $1,218.1 | | Total | $926.6 | $1,288.5 | | Current Portion | $(926.6) | $(56.9) | Note 10: Loss Per Share The total loss per share improved to $0.42 for the nine-month period from $1.58 in the prior year Basic and Diluted (Loss) Earnings Per Share | Category | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Continuing operations | $(0.07) | $(1.62) | | Discontinued operations | $(0.35) | $0.04 | | Total operations | $(0.42) | $(1.58) | Note 11: Revenue Total revenue for the nine-month period grew 33.6% to $4.94 billion, led by strong performance in both major segments Revenue by Service Type (Nine Months Ended Sep 30, in millions) | Service Type | 2022 | 2021 | | :--- | :--- | :--- | | Solid Waste | $4,544.3 | $3,648.2 | | - Total collection | $2,869.3 | $2,271.8 | | - Landfill | $614.6 | $485.5 | | Environmental Services | $990.3 | $540.5 | | Intercompany revenue | $(594.5) | $(491.7) | | Total Revenue | $4,940.1 | $3,697.0 | Note 12: Operating Segments The Solid Waste and Environmental Services segments drove total Adjusted EBITDA to $1.28 billion for the nine-month period Segment Performance (Nine Months Ended Sep 30, 2022, in millions) | Segment | Revenue | Adjusted EBITDA | | :--- | :--- | :--- | | Solid Waste | $4,019.7 | $1,179.6 | | Environmental Services | $920.4 | $234.4 | | Corporate | — | $(133.0) | | Total | $4,940.1 | $1,281.0 | - Goodwill and indefinite life intangible assets are primarily allocated to the Solid Waste segment, with $8.1 billion of the $9.0 billion total as of September 30, 202268 - Adjusted EBITDA is reconciled to net income from continuing operations, with major deductions including depreciation ($732.1M), amortization ($382.1M), and interest costs ($340.7M) for the nine-month period67 Note 13: Shareholders' Equity This note details the company's capital structure, share repurchase program, and share-based compensation plans Share Issuances and Normal Course Issuer Bid Total shares outstanding increased to 380.2 million, and no shares were repurchased under the active NCIB - The total number of shares outstanding increased to 380,172,222 as of September 30, 2022, primarily due to 3,976,434 shares issued as partial consideration for an acquisition73 - GFL implemented a normal course issuer bid (NCIB) in May 2022, allowing for the repurchase of up to 16,510,694 subordinate voting shares, but no shares were repurchased under the plan in Q3 202272 Share-based Compensation Share-based compensation expense totaled $37.4 million for the nine-month period for outstanding options and RSUs Outstanding Share-Based Awards (as of Sep 30, 2022) | Award Type | Number Outstanding | Weighted Avg. Price (US$) | | :--- | :--- | :--- | | Share Options | 22,128,582 | $32.59 (Exercise Price) | | RSUs | 1,947,185 | $28.10 (Grant Date Fair Value) | - Total compensation expense for the nine months ended September 30, 2022 was $15.8 million for share options and $21.6 million for RSUs7577 Note 14: Supplemental Cash Flow Information A net change in non-cash working capital resulted in a $201.2 million cash outflow, driven by increased receivables Changes in Non-Cash Working Capital (Nine Months Ended Sep 30, in millions) | Item | 2022 | 2021 | | :--- | :--- | :--- | | Accounts payable and accrued liabilities | $165.1 | $31.7 | | Trade and other receivables, net | $(329.9) | $(133.0) | | Prepaid expenses and other assets | $(36.4) | $(16.7) | | Total Change | $(201.2) | $(118.0) | Note 15: Financial Instruments and Risk Management The fair value of the company's USD notes was $5.46 billion, significantly below their $6.23 billion carrying value Fair Value of Notes (in millions) | Date | Carrying Value | Fair Value (Level 2) | | :--- | :--- | :--- | | Sep 30, 2022 | $6,230.9 | $5,461.3 | | Dec 31, 2021 | $5,764.0 | $5,808.3 | - Purchase Contracts and net derivative instruments are recorded at fair value and are classified within Level 1 and Level 2 of the fair value hierarchy, respectively81 Note 16: Commitments The company held significant off-balance-sheet commitments, including $238.3 million in letters of credit and $1.49 billion in performance bonds - As of September 30, 2022, GFL had outstanding letters of credit totaling approximately $238.3 million83 - As of September 30, 2022, GFL had issued performance bonds totaling $1,492.2 million84 Note 17: Related Party Transactions GFL has ongoing financial relationships with entities controlled by its CEO and recognized $13.9 million in revenue from GIP - GFL has notes payable to Josaud Holdings Inc. and Sejosa Holdings Inc., both controlled by CEO Patrick Dovigi, with remaining principal balances of $3.5 million and $14.5 million, respectively, as of September 30, 20228687 - For the nine months ended September 30, 2022, GFL recognized revenue of $13.9 million from transactions with Green Infrastructure Partners Inc. (GIP)88 Note 18: Discontinued Operations The divested GFL Infrastructure division is reported as discontinued operations, recording a net loss of $127.9 million - The divestiture of GFL Infrastructure was completed on April 25, 2022, for cash consideration of $224.0 million and an approximate 45% non-controlling equity interest in GIP89 Results of Discontinued Operations (in millions) | Metric | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Revenue | $96.8 | $289.0 | | Earnings (loss) before income taxes | $(1.6) | $18.7 | | Impairment | $(128.1) | $— | | Net income (loss) | $(127.9) | $15.9 |
GFL(GFL) - 2022 Q3 - Quarterly Report