Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- GFL Environmental Inc (GFL, Financial) reported nearly 20% adjusted EBITDA growth, showcasing strong operational and financial performance.
- The company achieved the highest adjusted EBITDA margin in its history at 31.1%, a 300 basis point expansion over the prior year.
- GFL successfully executed its capital allocation strategy, deploying $96 million in incremental growth investments primarily in recycling and R&G infrastructure.
- The company ended the quarter with net leverage of 4.05, the lowest in its history, demonstrating commitment to deleveraging targets.
- GFL has a robust pipeline of M&A opportunities and expects to deploy approximately $900 million on M&A and growth investments this year.
Negative Points
- GFL faced decreases in commodity and energy prices, which reduced third-quarter revenues derived from the sale of commodities and fuel surcharges.
- The environmental services segment experienced headwinds from used motor oil pricing and increased cost of risk.
- The company is dealing with a security incident that is under investigation, which could potentially impact operations.
- There is uncertainty regarding the potential sale of the environmental services segment, with tax implications affecting the net proceeds.
- GFL's working capital seasonality remains a challenge, with significant unwinding expected in the fourth quarter.
Q & A Highlights
Q: Can you clarify if the $6 billion from the ESL sale is net of taxes and if the implied multiple is consistent with previous discussions?
A: Yes, the $6 billion is net of taxes. We have a high degree of confidence in delivering this amount in cash proceeds. The implied multiple remains attractive and consistent with what we discussed last quarter.
Q: What is the expected incremental EBITDA from EPR and R&G in 2025?
A: For EPR, we expect an incremental EBITDA of $35 to $45 million, increasing from $5 to $10 million this year. For R&G, we anticipate an incremental EBITDA of $25 to $30 million, with the potential for more depending on RIN pricing.
Q: How should we think about the margin journey for the solid waste business over the next few years?
A: We expect ongoing margin expansion driven by price/cost spread, ancillary pricing charges, and contributions from EPR and R&G. We anticipate industry-leading margin expansion, bringing us close to best-in-class solid waste margins.
Q: Will the sale of the environmental services segment impact your leverage targets?
A: Yes, we plan to repay at least $3.5 billion of debt, which will bring our leverage to a low three times range. This aligns with our goal of achieving an investment-grade credit rating.
Q: How does the potential sale of the environmental services segment affect your M&A strategy?
A: The sale will provide us with proceeds to pursue M&A opportunities, particularly in the solid waste sector. We have a robust pipeline and expect to execute on attractive opportunities while maintaining our leverage targets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
