GFL Sees 2022 Q2 Revenue Grow 40.4 Percent from Previous Year's Quarter

The waste and recycling industry continues to demonstrate economic resilience as second quarter 2022 earnings results are reported.

GFL Environmental experienced a 40.4 percent revenue increase from the prior year quarter as its Solid Waste and Environmental Services segments accelerated the hauler's growth.

"Solid Waste pricing of 7.3 percent was significantly above our original plan and a testament to our ability to respond to changing market conditions in real-time," commented Patrick Dovigi, GFL founder and CEO. "The strength of this pricing, together with continued positive trends in volume and contribution from M&A drove nearly 30 percent revenue growth in our Solid Waste segment, a result that was ahead of our expectations."

Revenue reached $1.7 billion in Q2 2022, up from $1.3 billion in Q1 2021.  Adjusted EBITDA grew to $453.3 million, up 34.2 percent year over year (YOY). 

Environmental Services earned $324.3 million in revenue as "the strength of industrial collection and processing revenue" led to 21.6 percent organic growth. Higher used motor oil selling prices impacted the segment.

A 125-basis point headwind due to high fuel costs impacted the company's Solid Waste business adjusted EBITDA margin resulting in a 29.4 percent increase in 2022 compared to 30.9 percent in the previous year's quarter. The segment achieved overall organic growth of 12.4 percent, which included the 7.3 percent from core pricing, 1.9 percent from surcharges and 2.4 percent positive volume.

"We knew there would be margin pressure in the first half of the year resulting from labor and other costs increases we saw in the back half of 2021," Dovigi said. "We also knew that the ramping up of travel and other costs post-pandemic would put pressure on margins. But we had not anticipated the extent of the rising fuel costs and how the labor shortages and supply chain disruptions would continue."

Year-to-date merger and acquisition activity has resulted in $965 million in acquisitions and approximately $365 million in annual revenue realization.

"And that's really the summary," said Luke Pelosi, GFL CFO and executive vice president. "Fuel and other costs are increasing $220 million. We'll recover the majority of the dollars, but in doing so with temporary margin pressure. We're using this period to accelerate our pricing and surcharge strategies, which we strongly believe will position us for accelerated margin expansion."

Full-Year Guidance

GFL readjusted its full-year 2022 guidance following a strong showing in the first six months of the year. Revenue is now expected to be between $6.425 billion and $6.475 billion, up from the previous range of $6 to $6.1 billion. Full-year Solid Waste core pricing is estimated to be 7 percent.

The company estimates adjusted EBITDA to reach $1.71 billion and $1.73 billion, up from $1.68 billion and $1.72 billion. The estimated range for adjusted free cash flow is not $650 million to $680 million, up from between $645 million and $675 million.

The updated figures consider the expected contribution of acquisitions already completed in 2022, net of divestitures completed to date, but excludes any impact from additional acquisitions not yet completed, refinancing opportunities and any potential redeployment of capital, according to the company.

"We see a temporary and strongly believed better performance of the quarter once again demonstrate the resilience of our business model," Dovigi concluded. "History suggests that the unit rate cost inflation will eventually moderate and higher cost driven by labor shortages and supply chain disruptions will eventually subside. Additionally, our ability to recover energy costs will continue to improve."

2022 Q2 Highlights

Revenue: $1.7 billion
Adjusted EBITDA: $453.3 million
Net income: $82.6 million
Adjusted Free Cash Flow: $102.2 million