GFL Environmental earnings: Dovigi says 2021 could be another year of ‘outsized M&A’ for company

GFL Environmental, Ontario, announced its earnings results for the fourth quarter and full-year period of 2020 Feb. 22.

Highlights include (All figures in U.S. dollars.):

• Q4 revenue of $987.55 million, an increase of 37.8 percent from the prior year;
• Q4 adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $248.73 million, an increase of 49 percent, net loss of $388.99 million and adjusted net income of $11.51 million; 
• Q4 adjusted EBITDA margin of 25.2 percent, an increase of 190 basis points and solid waste adjusted EBITDA margin of 30.2 percent, an increase of 240 basis points; 
• Q4 adjusted cash flow from operating activities of $193.18 million, cash flow from operating activities of $130.68 million and adjusted free cash flow of $99.59 million;
• full-year revenue of $3.35 billion;
• full-year adjusted EBITDA of $860.55 million, an increase of 30.4 percent, a net loss of $795.17 million and adjusted net income of $49.71 million; and
• Full-year adjusted cash flow from operating activities of $617.26 million, cash flow from operating activities of $401.38 million and adjusted free cash flow of $287.73 million.

"During the year, we were able to take advantage of market opportunities and deliver on the commitments we made to our stakeholders at the time of our IPO (initial public offering) and more, including our commitment to reduce leverage by using the proceeds from the IPO to repay debt and raising $600 million in equity from a long-time GFL investor to fund part of our acquisition of WCA Waste Corp.,” GFL founder and CEO Patrick Dovigi says. “We also leveraged our improved credit quality to reduce our weighted average cost of debt by nearly 200 basis points through opportunistic refinancings."

Dovigi concludes, "As we head into 2021, GFL has never been in a better financial position. Our free cash flow gives us the ability to naturally de-lever while at the same time allowing us to continue to deploy capital on attractive organic growth opportunities, accretive tuck-in acquisitions, as well as sustainability initiatives. We have always been opportunistic acquirers. Interest rates are at all-time lows, giving us access to financing markets that position us well to continue to lower our cost of debt while pursuing accretive M&A at very attractive multiples, both tuck-ins and potentially larger-sized opportunities, within our expanded platform. 2021 has the potential for being another year of outsized M&A and you should expect to see us continue to make these strategic value-creating investments as these opportunities arise."

On the company’s earnings call, Dovigi remarked further on the state of the company.

Dovigi on the company’s recent M&A dealings:

“The WCA and WM-ADS integrations remain on track and we remain confident in the opportunities we previously outlined for these deals. The Q4 revenue contribution from both of these businesses exceeded our expectations and early indications from 2021 are also positive. During Q4, we also closed seven smaller tuck-in transactions and the pipeline is lined up such that 2021 could be another outsized year for M&A. … From my perspective, the most exciting part of 2020 is how it has set us up for 2021 and beyond. We have assembled the pieces of the puzzle to build that we believe is a rock-solid foundation that we can leverage for exceptional high-quality growth over the next several years.”

Dovigi on the company’s 2020 performance exceeding the company’s expectations:

“At a high level, we exceeded our plans on nearly every level. Despite even greater than expected COVID-related headwinds in our eastern Canadian business, revenue increased by 37 percent, and the business as a whole returned to overall positive organic growth for the first time since the first quarter [of 2020]. Solid waste pricing ended the year strong, thanks to late Q3 pricing initiatives, and volumes continued to show meaningful sequential improvements across all of our lines of business. Consistent with what we said before, our liquid and infrastructure business have been the most impacted by COVID-related volume declines, but we continue to believe that these volumes will return and the meaningful sequential improvements in the business during the quarter are supported by that view.

“At the adjusted EBITDA margin line, the fourth quarter saw expansion of 190 basis points driven by continued margin expansion in our solid and liquid waste businesses partially offset by the compression in our infrastructure line. Our solid waste business ended the year as a whole at a 30 percent margin, an outcome in excess of what we had guided to, toward an area where we think we can continue to build on.” 

GFL's full earnings report is available online.