GFL announces 31.6 percent revenue increase for 2022

GFL Environmental Inc. ended 2022 with a 26.5 percent year-over-year increase in revenue for the final quarter and a 31.6 percent increase in 2022 compared with 2021.

The Vaughn, Ontario-based company finished the year with about $1.82 billion in revenue, which it attributes to the strength of its acquisitions since October 2021 and pricing, according to its management discussion in its Q4 2022 Securities & Exchange Commission filing.

During 2022, GFL says it experienced organic growth of 13.6 percent, resulting in $6.76 billion in revenue for the year, an increase of 31.6 percent over 2021’s revenue.

“Our employees delivered another exceptional year of results, outperforming our previously increased full-year 2022 guidance,” GFL founder and CEO Patrick Dovigi says. “In 2022, strong execution drove our achievement of double-digit, industry-leading revenue growth, including our highest-to-date solid waste core pricing increase of 9.9 percent for the fourth quarter, continued volume growth and acquisitions that outperformed expectations.”

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For the fourth quarter, GFL reports its adjusted earnings before income tax, depreciation and amortization (EBITDA) was $439.8 million (17 percent higher than the fourth quarter of 2021) with an adjusted net loss of $7.9 million for the final period of 2022. The company’s adjusted EBITDA has been increasing steadily for the last several quarters.

The firm also reports organic growth within its environmental services of 27.9 percent “driven by higher industrial collection and processing activity” among other factors.

Dovigi says 2022 was a strong year for mergers and acquisitions (M&A), but that 2023 could be scaled back. The company also says those acquisitions performed better than expected in 2022, generating $480 million in revenue for the year.

Although it may not be as big a year as 2022 in M&A, Dovigi says the company still plans deploy $300 million to $500 million, prioritizing tuck-in deals to densify the company’s network.

“We have a pipeline as robust as ever and anticipate 2024 returning to more historical levels of M&A, but in 2023, we expect a more moderate level of M&A activity while we focus on other value creation initiatives,” he said in the company’s earnings call. “We think there’s clear path to achieving our best-in-class EBITDA margins and driving materially higher free cash flow and generating free cash flow of over $1.1 billion by 2025.”

Dovigi says he plans to slow the pace of M&A in 2023 to give the company time to focus on organic growth and assimilate the company’s acquisitions, noting the plan when the company went public in 2020 was to double its size in five or six years.

“The reality is, we’ve doubled the size of the business in just over two-and-a-half years,” he says.

Although the company does have more debt in 2022 compared with 2021, about 30 percent of that debt is subject to interest rate changes. The company reports total long-term debt of about $9.2 billion at the end of 2022 with about $3 billion of it exposed to interest rate changes.

2023 expectations

Dovigi says strong pricing helped the company in 2022, and he expects that to remain the case in 2023.

“The better-than-expected pricing momentum exiting 2022 allows us to begin 2023 with double-digit pricing and positions us for over 100 basis points of adjusted EBITDA margin expansion in the year, despite over 70 basis points of headwinds from commodity prices and the dilutive rollover impact of acquisitions,” he says.

Some highlights from the company’s full-year guidance for 2023 include:

• Expected revenue between $7.55 billion and $7.65 billion, representing year-over-year growth of 12 percent to 13 percent;
• Adjusted EBITDA of $2 billion or slightly more, with an adjusted EBITDA margin of 26.5 percent to 26.8 percent;
• Adjusted free cash flow of approximately $700 million, including $50 million in carried-over capital expenditures from 2022.
  

The company says it is “considering the potential sale of certain non-core solid waste operations in the United States with a view to optimizing its portfolio,” but those sales which could result in $1.5 billion in gross proceeds are not reflected in the company’s 2023 guidance figures.

Over the next several years, GFL plans to expand its renewable natural gas (RNG) programs, including three in 2023, 11 in 2024 and seven in 2025. Taken together, those projects should generate about 14.5 metric million British thermal units annually.