GFL Environmental (GFL) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue reached $2.06 billion, exceeding expectations, with strong solid waste pricing, volume, and moderating cost inflation driving margin expansion.

• Adjusted EBITDA rose 13.9% year-over-year excluding divestitures, with margin up 90 basis points to 28.7%.

• Shedding low-quality revenue and exiting non-core services improved margins; $89 million was invested in recycling and RNG infrastructure, with a full-year target of $250-$300 million.

• Net loss of $472.3 million in Q2, driven by a non-cash loss from U.S. asset divestitures; Adjusted Net Income was $108.7 million.

• EPR contract wins in Ontario and Quebec are expected to generate $130 million incremental adjusted EBITDA, ramping through 2025 and fully contributing by 2026.

Financial highlights

• Q2 revenue was $2.06 billion, up 11.1% year-over-year excluding divestitures; solid waste pricing rose 6.5% and volume was -1.7%.

• Adjusted EBITDA for Q2 was $591.1 million, up from $540.7 million last year; margin improved to 28.7%.

• Adjusted free cash flow was $185.7 million, a significant increase from $8.5 million in Q2 2023.

• Net leverage at quarter-end was 4.29, ahead of expectations.

• Year-to-date revenue was $3.86 billion, up 8.9% excluding divestitures.

Outlook and guidance

• Adjusted EBITDA guidance raised to $2.24-$2.25 billion, with margin guidance up to 28.4%, a 170 basis point increase over prior year.

• Revenue guidance increased to $7.9-$7.925 billion, with solid waste pricing of 6.25%-6.5% and volume of -1.25%.

• Adjusted free cash flow guidance increased to $810 million, with $500 million in expected interest costs.

• Q3 revenue expected at $2.055-$2.06 billion, adjusted EBITDA margin at 30.25%, and adjusted free cash flow at $225 million.

• Net leverage expected to reduce to just above 4.1 in Q3 and end the year in the 3.65-3.85 range.