GFL Environmental Inc. has released its results for the first quarter of 2022.
"I am extremely proud of the hard work and commitment of our over 18,000 employees as we had yet another exceptional start to the year," said Patrick Dovigi, Founder and Chief Executive Officer of GFL. "The 27.4 percent revenue growth over the first quarter of 2021 was driven by the quality of our pricing strategies, meaningful volume improvements and outperformance from the M&A we completed in 2021. Normalizing for the non-recurring margin benefits we realized in the first quarter of 2021, our record Solid Waste pricing drove underlying margin expansion. We achieved these extraordinary results despite the impact from severe winter weather conditions, acute labour pressures early in the year from Omicron and increased inflationary costs, demonstrating the resilience of our business model and the effectiveness of our growth strategies."
"We remain focused on executing on our strategy to create long-term value for all stakeholders," continued Mr. Dovigi. "We completed nine acquisitions during this quarter and an additional 12 acquisitions after the quarter-end, including the acquisition of Sprint Waste Services. These acquisitions, the majority of which were small tuck-in acquisitions, have meaningfully densified our solid waste footprint within the markets we serve. Our outsized M&A activity during the first part of this year is expected to contribute annualized revenue of approximately $300 million. We also continued to make good progress on the RNG projects at four landfills, for which we have agreements in place, with an additional eight sites under varying stages of negotiation and development.
"In addition to the acquisitions completed year-to-date, we have received cash consideration of approximately $91.9 million from the sale of non-core assets and $224.0 million from the spin-off of GFL Infrastructure Group to Green Infrastructure Partners, the proceeds of which are being redeployed in our organic and inorganic growth strategies. The spin-off provides us the opportunity to leverage the greater weighting in our solid waste segment both organically and through accretive acquisitions. We also believe that our approximately 45 percent equity investment in Green Infrastructure Partners, which combines GFL Infrastructure Group with the business of Coco Paving to form a leading Canadian provider of vertically integrated infrastructure services with $1.1 billion in annualized revenues, will result in significant value creation for our shareholders over the long-term."
"Our success in the first quarter sets us up for a strong 2022," Mr. Dovigi concluded. "We continue to see upside opportunities ahead of us this year, driven by our organic initiatives and our robust M&A pipeline. With the strength of our first-quarter results, we are well on track to exceed the high end of our full-year guidance range and expect to provide a guidance update for our base business when we report our second-quarter results. However, based on the success of our M&A strategy in the first quarter, we are increasing our guidance at this time to reflect the incremental contribution from acquisitions completed so far this year."
First quarter 2022 results
- Revenue increased by 27.4 percent to $1,401.4 million in the first quarter of 2022 compared to the first quarter of 2021. Solid Waste revenue organic growth of 10.3 percent, including:
- 6.4 percent from core pricing and 0.2 percent from surcharges, compared to a combined 4.0 percent in the first quarter of 2021.
- 2.6 percent from positive volume (3.1 percent excluding non-recurring MRF volumes), compared to 0.4 percent in the first quarter of 2021 (negative 3.2 percent excluding non-recurring MRF volumes).
- Environmental Services revenue of $231.7 million, including organic growth of 19.3 percent driven by the strength of industrial collection and processing revenue.
- Adjusted EBITDA increased by 19.0 percent to $354.4 million in the first quarter of 2022 compared to the first quarter of 2021. The adjusted EBITDA margin was 25.3 percent in the first quarter of 2022 compared to 27.1 percent in the first quarter of 2021. solid waste adjusted EBITDA margin was 29.9 percent in the first quarter of 2022 compared to 31.0 percent in the first quarter of 2021.
- Underlying solid waste adjusted EBITDA margin expansion when normalizing the first quarter of 2021 for a typical seasonality profile.
- Fuel costs and the impact of M&A resulted in a combined 135 basis point headwind to solid waste adjusted EBITDA margin, compared to the first quarter of 2021.
- Overall and solid waste adjusted EBITDA margins were ahead of expectations when excluding the impact of fuel costs and segment mix.
- Net income from continuing operations increased to $137.0 million in the first quarter of 2022 compared to a net loss of $283.7 million in the first quarter of 2021.
- Adjusted Free Cash Flow increased to $118.6 million in the first quarter of 2022 compared to $116.9 million in the first quarter of 2021.
- Interest paid in cash was $96.9 million in the first quarter of 2022 compared to $42.0 million in the first quarter of 2021, an increase primarily attributable to a non-linear cadence of cash interest payments in 2021.
- $12.2 million of initial capital investment was incurred in the first quarter of 2022 for the development and construction of renewable natural gas facilities operated as joint ventures.
- Capital expenditures were $203.2 million in the first quarter of 2022 compared to $131.3 million in the first quarter of 2021. Offsetting the increase was $91.9 million of proceeds from asset disposals realized in the first quarter of 2022.
Guidance update
Based solely on the expected contribution of the acquisitions completed so far this year, net of divestitures completed during the quarter, the previously provided guidance for 2022 is being increased as follows:
- Revenue is estimated to be between $6,000 million and $6,100 million (previously between $5,825 million and $5,925 million).
- Adjusted EBITDA is estimated to be between $1,680 million and $1,720 million (previously between $1,625 million and $1,665 million).
- Adjusted Free Cash Flow3 is estimated to be between $645 million and $675 million (previously between $625 million and $655 million).
Any non-M&A-related guidance updates are expected to be provided together with the reporting of the company's results for the second quarter of 2022. Implicit in forward-looking information in respect of our expectations for 2022 are certain current assumptions, including, among others, no changes to the current economic environment and that none of the jurisdictions in which GFL operates institute additional COVID-19 emergency measures including shelter-in-place or similar orders. The updated 2022 guidance assumes GFL will continue to execute on its strategy of organically growing our business, leveraging our scalable network to attract and retain customers across multiple service lines, realize operational efficiencies, and extract procurement and cost synergies.
