GFL Environmental announced its results for the fourth quarter and full year 2023, as well as guidance for full year 2024.
"Our employees delivered another exceptional year of results," said Patrick Dovigi, Founder and Chief Executive Officer of GFL. "In 2023, our continued focus on strong execution drove double-digit, industry-leading organic revenue growth, including Solid Waste core pricing increase of 9.8 percent for the year, the highest in our history. We also grew Adjusted EBITDA for the year by 21.1 percent, excluding the impact of divestitures, and demonstrated significant operating leverage, resulting in Solid Waste Adjusted EBITDA margin expansion of 180 basis points and Environmental Services Adjusted EBITDA margin expansion of 160 basis points, year-over-year."
Mr. Dovigi continued, "In 2023, we continued to optimize our asset base to create long-term sustainable shareholder value, including the divestiture of three non-core U.S. solid waste businesses for $1.6 billion in proceeds, $275.0 million of which we reinvested into higher margin, accretive organic growth initiatives such as RNG and new contract wins related to Extended Producer Responsibility recycling legislation in Canada. Our EPR-related investments are expected to generate an aggregate of $80.0 to $100.0 million of incremental Adjusted EBITDA starting in Q4 2024 and ramping up to the full run-rate by 2026. On RNG, our first contributions from our Arbor Hills facility are expected in Q1 2024 and we remain confident in our ability to achieve $175.0 million of annual Adjusted EBITDA from our RNG-related investments by 2026."
"Additionally, we deployed approximately $900 million into 39 highly accretive acquisitions, which we expect will generate revenue of approximately $355 million on an annualized basis. In 2024, consistent with our capital allocation framework announced in November, we expect to deploy between $600.0 and $650.0 million into densifying tuck-in M&A."
"Inclusive of the impact of our growth capital deployment, we reduced Net Leverage nearly a full turn since the prior year. We also successfully completed several refinancing initiatives, the effects of which were to reduce our cost of borrowing, increase our proportion of fixed interest rate debt from 72 percent to 86 percent and extend our debt maturities to 2031. We remain committed to making disciplined capital allocation decisions while continuing to de-lever the business, with a focus on moving toward an investment grade credit rating in the medium term."
"Our results for the year demonstrate that our commitment to our strategy is working. Over the past 15 years, we have assembled a best-in-class asset base across North America and now it is time to optimize what we have built. The strong pricing momentum exiting 2023 positions us for 9 percent top line growth in 2024, before considering the impact of incremental M&A, and over 100 basis points of organic Adjusted EBITDA margin expansion for 2024."
Mr. Dovigi concluded, "I could not be prouder of our over 20,000 employees who continue to demonstrate their exceptional ability to execute our growth strategy. I continue to be excited about the future and the many opportunities that lie ahead of us."
Fourth quarter results
- Revenue of $1,882.8 million in the fourth quarter of 2023, increase of 9.9 percent excluding the impact of divestitures (3.4 percent including the impact of divestitures), compared to the fourth quarter of 2022.
- Solid Waste revenue of $1,511.6 million, including organic growth of 4.0 percent driven predominantly by core pricing increases.
- Environmental Services revenue of $371.2 million, including organic growth of 1.5 percent. The increase is predominantly due to higher industrial collection and processing activity at our facilities and higher used motor oil selling prices.
- Adjusted EBITDA increased by 19.1 percent excluding the impact of divestitures (11.9 percent including the impact of divestitures) to $492.2 million in the fourth quarter of 2023, compared to the fourth quarter of 2022. Adjusted EBITDA margin was 26.1 percent in the fourth quarter of 2023, compared to 24.1 percent in the fourth quarter of 2022. Solid Waste Adjusted EBITDA margin was 30.7 percent in the fourth quarter of 2023, compared to 28.2 percent in the fourth quarter of 2022. Environmental Services Adjusted EBITDA margin was 24.0 percent in the fourth quarter of 2023, inclusive of the 165 basis point impact of a facility fire late in the quarter, compared to 22.2 percent in the fourth quarter of 2022.
- Net loss from continuing operations was $62.1 million in the fourth quarter of 2023, compared to $219.1 million in the fourth quarter of 2022.
- Adjusted Free Cash Flow was $471.6 million in the fourth quarter of 2023, compared to $221.1 million in the fourth quarter of 2022. The increase of $250.5 million was exclusive of $141.5 million of incremental cash taxes related to divestitures and $145.0 million of incremental growth capex.
Year to date results
- Revenue of $7,515.5 million for the year ended December 31, 2023, increase of 15.7 percent excluding the impact of divestitures (11.2 percent including the impact of divestitures), compared to the year ended December 31, 2022.
- Solid Waste revenue of $6,052.6 million, including organic growth of 6.0 percent driven predominantly by core pricing increases.
- Environmental Services revenue of $1,462.9 million, including organic growth of 7.2 percent. The increase is predominantly due to higher industrial collection and processing activity at our facilities and an increased level of emergency response activity.
- Adjusted EBITDA increased by 21.1 percent excluding the impact of divestitures (16.4 percent including the impact of divestitures) to $2,003.7 million for the year ended December 31, 2023, compared to the year ended December 31, 2022. Adjusted EBITDA margin1 was 26.7 percent for the year ended December 31, 2023, compared to 25.5 percent for the year ended December 31, 2022. Solid Waste Adjusted EBITDA margin was 30.8 percent for the year ended December 31, 2023, compared to 29.0 percent for the year ended December 31, 2022. Environmental Services Adjusted EBITDA margin was 26.2 percent for the year ended December 31, 2023, inclusive of the 40 basis point impact of a facility fire late in the quarter, compared to 24.6 percent for the year ended December 31, 2022.
- Net income from continuing operations was $32.2 million for the year ended December 31, 2023, compared to net loss from continuing operations of $183.2 million for the year ended December 31, 2022.
- Adjusted Free Cash Flow was $701.2 million for the year ended December 31, 2023, compared to $691.3 million for the year ended December 31, 2022. The increase of $9.9 million was exclusive of $390.1 million of incremental cash taxes related to divestitures and $275.0 million of incremental growth capex.
Full year 2024 guidance
GFL also provided its guidance for 2024.
- Revenue is estimated to be approximately $8,000 million.
- Full year Solid Waste core pricing of 6.0 percent to 6.5 percent, surcharges of (0.4 percent), volume of (1.25 percent) to (1.0 percent), as a result of the rollover impact of intentional shedding of low margin business, and commodity price impact of 0.2 percent.
- Environmental Services organic growth of 5.0 percent to 5.5 percent.
- Revenue from M&A contribution of 4.0 percent.
- Assumes no foreign exchange impact (2024 guidance based on USD/CAD exchange rate of 1.35 versus the average 2023 exchange rate of 1.35).
- Adjusted EBITDA is estimated to be approximately $2,215 million.
- Full year Adjusted EBITDA margin is expected to be approximately 27.7 percent, increase of 100 basis points.
- Adjusted Free Cash Flow is estimated to be approximately $800 million.
- Full year net capex is expected to be between $850.0 million and $900.0 million, excluding approximately $250 million to $300 million of incremental growth capital expected to be deployed in 2024 related to renewable natural gas projects, material recycling facilities and other infrastructure primarily related to opportunities arising under extended producer responsibility legislation.
- Excluding the impact of anticipated incremental growth capital opportunities described above and anticipated M&A, Net Leverage is estimated to be mid 3's by the end of 2024, resulting from growth in Adjusted EBITDA and Adjusted Free Cash Flow. Including the aggregate impact of $900.0 million in these anticipated growth capital opportunities and M&A, Net Leverage at year end is estimated to be between 3.65x and 3.85x.
The 2024 guidance excludes any impact from acquisitions not yet completed, refinancing opportunities and any redeployment of capital. Implicit in forward-looking information in respect of our expectations for 2024 are certain current assumptions, including, among others, no changes to the current economic environment, including fuel and commodities. The 2024 guidance assumes GFL will continue to execute on our strategy of organically growing our business, leveraging our scalable network to attract and retain customers across multiple service lines, realizing operational efficiencies and extracting procurement and cost synergies. See "Forward-Looking Information".
