GFL(GFL) - 2023 Q3 - Quarterly Report

GFL Environmental Reports Third Quarter 2023 Results Management Commentary Management highlights strong Q3 results, a strategic shift to organic growth and deleveraging, and a positive 2024 outlook - Total revenue for Q3, excluding non-core asset divestitures, increased 10.3% year-over-year, primarily driven by a Solid Waste core pricing increase of 8.8%[3] - Significant year-over-year margin improvement was observed, with Solid Waste Adjusted EBITDA margin up 250 bps and Environmental Services Adjusted EBITDA margin up 440 bps[3] - The company is shifting its growth strategy, prioritizing organic growth and tuck-in acquisitions over large-scale M&A[3] - GFL is committed to deleveraging and aims to achieve an investment grade rating before the majority of its fixed-rate debt matures in 2028[3] - Preliminary 2024 outlook anticipates high single-digit top-line growth and low teens Adjusted EBITDA growth (or at least 10% considering divestitures)[3] Financial Highlights Third Quarter 2023 Results The company reported strong Q3 revenue and Adjusted EBITDA growth, margin expansion, and a significant turnaround in net income Q3 2023 Key Financial Metrics | Metric | Q3 2023 | Q3 2022 | Change | | :--- | :--- | :--- | :--- | | Revenue | $1,890.0M | $1,831.2M | +3.2% | | Revenue (ex-divestitures) | - | - | +10.3% | | Adjusted EBITDA | $530.3M | $473.3M | +12.0% | | Adjusted EBITDA Margin | 28.1% | 25.8% | +230 bps | | Net Income (from cont. ops) | $18.3M | ($183.7M) | Turnaround | | Adjusted Net Income (from cont. ops) | $116.8M | $74.0M | +57.8% | | Adjusted Free Cash Flow | $276.0M | $97.0M | +184.5% | - Solid Waste revenue was $1,502.5 million, with 4.2% organic growth driven by 8.8% core pricing increases[5][6] - Environmental Services revenue was $387.5 million, with organic growth of 6.9% when excluding the impact of a large sub-contracting job in Q3 2022[8] Year to Date 2023 Results Year-to-date results show strong revenue and EBITDA growth, though Adjusted Free Cash Flow declined due to divestiture taxes and capex Nine Months Ended Sep 30, 2023 Key Financial Metrics | Metric | YTD 2023 | YTD 2022 | Change | | :--- | :--- | :--- | :--- | | Revenue | $5,632.7M | $4,940.1M | +14.0% | | Revenue (ex-divestitures) | - | - | +17.8% | | Adjusted EBITDA | $1,511.5M | $1,281.0M | +18.0% | | Adjusted EBITDA Margin | 26.8% | 25.9% | +90 bps | | Net Income (from cont. ops) | $94.3M | $35.9M | +162.7% | | Adjusted Free Cash Flow | $235.8M | $317.8M | -25.8% | - The decrease in YTD Adjusted Free Cash Flow was driven by $248.6 million in cash taxes from divestitures, $195.9 million in incremental net capex, and $114.6 million in incremental cash interest paid[11] Consolidated Financial Statements Statements of Operations (Income Statement) The company's Q3 net income improved significantly due to lower foreign exchange losses and the absence of prior-year contract losses Q3 2023 vs Q3 2022 Income Statement Highlights (in millions) | Line Item | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Revenue | $1,890.0 | $1,831.2 | | Cost of sales | $1,526.8 | $1,591.9 | | Loss (gain) on foreign exchange | $46.9 | $195.3 | | Loss (gain) on divestiture | $0.0 | $1.6 | | Net income (loss) from continuing ops | $18.3 | ($183.7) | YTD 2023 vs YTD 2022 Income Statement Highlights (in millions) | Line Item | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | | Revenue | $5,632.7 | $4,940.1 | | Loss (gain) on divestiture | ($580.5) | ($4.9) | | Net income from continuing ops | $94.3 | $35.9 | Statements of Financial Position (Balance Sheet) The balance sheet strengthened as total liabilities decreased significantly while shareholders' equity increased Balance Sheet Highlights (in millions) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $19,890.4 | $19,767.6 | | Total Liabilities | $12,377.2 | $13,723.5 | | Long-term debt | $8,848.9 | $9,248.9 | | Total Shareholders' Equity | $7,513.2 | $6,044.1 | Statements of Cash Flows Year-to-date cash from operations decreased, while divestiture proceeds drove a net cash inflow from investing activities Nine Months Ended Sep 30, 2023 Cash Flow Summary (in millions) | Activity | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | | Cash from Operating Activities | $579.0 | $693.3 | | Cash from Investing Activities | $198.6 | ($1,329.9) | | Cash from Financing Activities | ($683.3) | $719.5 | | Increase in Cash | $94.3 | $82.9 | - Key investing activities included $1.65 billion in proceeds from divestitures and $823.6 million in property and equipment purchases[36] - Key financing activities included $3.03 billion in issuance of long-term debt and $3.60 billion in repayment of long-term debt[36] Supplemental Data Revenue Growth Analysis Revenue growth was driven by strong organic performance, particularly core pricing in the Solid Waste segment Q3 2023 Revenue Growth Breakdown | Segment | Contribution from Acquisitions | Organic Growth | Foreign Exchange | Total Growth | | :--- | :--- | :--- | :--- | :--- | | Solid Waste | (3.6)% | 4.2% | 1.9% | 2.5% | | Environmental Services | 7.8% | (1.9)% | 0.5% | 6.3% | | Total | (1.3)% | 3.0% | 1.6% | 3.2% | Solid Waste Organic Growth Components | Component | Q3 2023 | YTD 2023 | | :--- | :--- | :--- | | Price | 8.8% | 10.5% | | Surcharges | (1.6)% | (0.8)% | | Volume | (2.4)% | (1.9)% | | Commodity price | (0.6)% | (1.0)% | | Total | 4.2% | 6.8% | Operating Segment Results Both the Solid Waste and Environmental Services segments demonstrated significant year-over-year Adjusted EBITDA margin expansion in Q3 Q3 2023 Segment Performance (in millions) | Segment | Revenue | Adjusted EBITDA | Adjusted EBITDA Margin | YoY Margin Change | | :--- | :--- | :--- | :--- | :--- | | Solid Waste | $1,502.5 | $471.8 | 31.4% | +250 bps | | Environmental Services | $387.5 | $119.9 | 30.9% | +440 bps | | Total | $1,890.0 | $530.3 | 28.1% | +230 bps | Net Leverage and Shares Outstanding The company significantly reduced its Net Leverage ratio through a combination of debt reduction and increased Run-Rate EBITDA - Net Leverage was reduced to 4.30x at the end of Q3 2023, compared to 5.02x at year-end 2022[44] Net Leverage Calculation (in millions) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total long-term debt (adjusted) | $8,856.0 | $9,252.0 | | Less: cash | ($174.2) | ($82.1) | | Net Debt | $8,681.8 | $9,169.9 | | Run-Rate EBITDA | $2,018.7 | $1,826.8 | | Net Leverage | 4.30x | 5.02x | - As of September 30, 2023, there were 369,984,983 basic shares outstanding and 412,148,383 diluted shares outstanding[46] Non-IFRS Measures and Reconciliations Definitions of Non-IFRS Measures This section defines non-IFRS measures used to provide supplemental insight into core business performance trends - Adjusted EBITDA excludes items like foreign exchange gains/losses, M&A transaction costs, and divestiture gains to better reflect underlying business performance[18] - Adjusted Free Cash Flow is calculated from operating cash flows, adjusted for asset disposals, capital expenditures, and certain other items[23] - Net Leverage is defined as total long-term debt (net of cash) divided by Run-Rate EBITDA, which is adjusted for the full-year impact of acquisitions[25][26] Non-IFRS Reconciliation Schedules This section provides detailed reconciliations of non-IFRS measures to their most directly comparable IFRS figures Q3 2023 Reconciliation Summary (in millions) | IFRS Measure | Value | Non-IFRS Measure | Value | Key Adjustments | | :--- | :--- | :--- | :--- | :--- | | Net Income (cont. ops) | $18.3 | Adjusted EBITDA | $530.3 | +$137.2 Interest, +$349.2 D&A, +$46.9 FX Loss | | Net Income (cont. ops) | $18.3 | Adjusted Net Income | $116.8 | +$106.9 Amortization, +$46.9 FX Loss, -$41.3 Tax Effect | | Cash from Ops | $125.8 | Adjusted FCF | $276.0 | +$248.6 Divestiture Taxes, -$276.3 Capex | Corporate Information and Disclaimers About GFL and Conference Call GFL is a leading North American environmental services company that scheduled a conference call to discuss its Q3 results - GFL is the fourth largest diversified environmental services company in North America, operating throughout Canada and in more than half of the U.S. states[12] - A conference call to discuss Q3 2023 earnings was scheduled for November 2, 2023, at 8:30 am Eastern Time[10] Forward-Looking Information The report contains forward-looking statements subject to various risks and uncertainties that could cause actual results to differ - The report contains forward-looking information concerning future outlook, financial guidance, and business strategy[14] - Actual results may differ materially due to known and unknown risks, including currency exchange, interest rates, and economic trends[15]