GFL(GFL) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2025, revenues grew by 7.3%, driven by better-than-expected contributions from pricing, volume, and M&A, despite headwinds from foreign exchange [13] - Adjusted EBITDA for the full year reached $1.985 billion, with a 30% Adjusted EBITDA margin, marking a 130 basis point increase over 2024 [7][9] - Adjusted Free Cash Flow for Q4 was $425 million, totaling $756 million for 2025, ahead of plan due to EBITDA outperformance [16] Business Line Data and Key Metrics Changes - Q4 pricing was 6.4% for the quarter and 6.1% for the year, exceeding original plans by 70 basis points [13] - Adjusted EBITDA margins in the Canadian segment increased by 175 basis points, while U.S. margins were up 10 basis points, excluding prior year hurricane volumes [15] Market Data and Key Metrics Changes - Q4 volumes were 70 basis points ahead of plan, attributed to unanticipated special waste activity [14] - C&D-related volume remained soft, but the company is positioned for recovery when the economy improves [15] Company Strategy and Development Direction - The company aims to achieve low- to mid-30s margins by 2028, with a focus on operational efficiency and capital allocation strategy [9][11] - The relocation of the executive headquarters to the U.S. is expected to enhance visibility with investors and broaden eligibility for U.S. equity indices [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the pricing environment and the ability to maintain pricing above internal cost inflation [8] - The company anticipates multiple avenues of upside to the 2026 guidance, with expected revenue of approximately $7 billion, an 8% increase over 2025 [18] Other Important Information - The company completed nearly $1 billion in M&A and bought back over 10% of its own stock, resulting in the lowest year-end net leverage in its history at 3.4x [10][11] - Adjusted Free Cash Flow for 2026 is expected to increase to $835 million, reflecting a 14% growth [20] Q&A Session Summary Question: Does the leverage guidance assume no incremental M&A and buyback? - Management confirmed that the leverage guidance is committed to low to mid threes, and any incremental M&A or buybacks would increase that number [24] Question: Can you break down the EBITDA bridge for 2026? - Management acknowledged the components affecting EBITDA, including M&A rollover benefits and FX impacts, indicating organic EBITDA growth in the mid- to high single digits is achievable [25][27] Question: What is the expected contribution from EPR and R&G investments? - Management indicated that EPR contributions are expected to ramp up significantly in 2026, while R&G contributions are more muted and will ramp up into 2027 [33][34] Question: How do you balance M&A and share buybacks? - Management stated that while the stock is undervalued, they will continue to evaluate both M&A opportunities and share buybacks based on market conditions [40][41] Question: How is the M&A pipeline looking for 2026? - Management reported a healthy M&A pipeline focused on businesses in existing markets, with expectations of deploying $750 million to $1 billion in acquisitions [65] Question: Will there be incremental disclosure on GIP and ES performance? - Management committed to providing more detailed disclosures on GIP and ES performance in future quarterly releases [82]