• Consolidated Revenue: $1.986 billion for Q4, ahead of guidance.
• Solid Waste Organic Growth: 7% in Q4, driven by 6% pricing and 2.3% volume.
• Adjusted EBITDA Margin: 29.1% for Q4, a 300 basis point increase year-over-year.
• Solid Waste Adjusted EBITDA Margin: 33.4%, a 270 basis point increase year-over-year.
• Environmental Services Revenue: Down 2.2% compared to the prior year.
• Environmental Services Adjusted EBITDA Margin: 28.9%, a 390 basis point increase year-over-year.
• Adjusted Free Cash Flow: $360 million for Q4.
• Adjusted Net Income: $86 million for Q4.
• Incremental Growth CapEx: $51 million for Q4, totaling $298 million for the year.
• Total Capital Deployed into Growth Initiatives: $890 million for 2024.
• Net Leverage: 4.06 at year-end, impacted by FX rates.
• 2025 Revenue Guidance: $6.5 billion to $6.55 billion, with 6% to 7% top-line growth expected.
• 2025 Adjusted EBITDA Margin Guidance: Expected to be 29.7%.
• 2025 Adjusted Free Cash Flow Guidance: $750 million.

• Warning! GuruFocus has detected 10 Warning Signs with GFL.

Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• GFL Environmental Inc (NYSE:GFL) reported industry-leading organic growth, with a 300 basis point margin expansion for the second consecutive quarter.
• The company exceeded internal expectations for revenue, adjusted EBITDA, and adjusted free cash flow.
• The sale of the ES business is on track to close, enhancing the balance sheet and providing capital for M&A and share buybacks.
• GFL plans to deploy $325 million in incremental growth capital in 2025, focusing on EPR contracts.
• The company has a robust M&A pipeline and expects to continue densifying its existing networks and improving asset utilization.

Negative Points

• Decreases in energy prices and lower commodity prices were headwinds to revenue in the fourth quarter.
• Environmental Services revenue declined by 2.2% compared to the prior year due to lower used motor oil pricing and soil volumes.
• Q4 cash collections were negatively impacted by a Canadian postal strike, affecting working capital.
• Net leverage increased to 4.06 due to the translational impact of revaluing the year-end debt stack at the year-end FX rate.
• The company faces potential challenges from severe winter weather impacting Q1 volumes and ongoing tariff noise affecting capital requirements.

Q & A Highlights

Q: Can you update us on capital allocation priorities following the ES business sale? A: Patrick Dovigi, CEO, explained that $3.75 billion will be used to repay debt, including revolver, term loan, and bonds. The focus will then shift to share buybacks, as the stock is considered undervalued. They plan to buy back up to 10% of the public float, with a combination of normal course issuer bids and addressing the overhang from private equity shareholders.

Q: What are the key drivers for margin improvement in 2025? A: Luke Pelosi, CFO, highlighted that the margin expansion is driven by a 100 basis point spread from price/cost, with additional contributions from EPR and RNG projects, improved asset utilization, and reduced employee turnover. The company expects industry-leading results from these self-help levers.

Q: Can you provide details on the EBITDA bridge and the impact of EPR and RNG? A: Luke Pelosi, CFO, explained that the starting point for revenue is around $6.15 billion, with price growth of 5.25% to 5.5%, and volume expected to be flat. EPR and RNG are expected to contribute significantly, with RNG increasing from $25-$30 million in 2024 to $50 million in 2025, and EPR providing a $35-$40 million lift.

Q: What is the outlook for M&A activity in 2025? A: Patrick Dovigi, CEO, stated that the M&A pipeline is robust, with a focus on densifying existing markets in the US and Canada. The company expects to spend between $500 million to $700 million on M&A, with a potential upside of up to $1 billion.

Q: How does the company plan to achieve an investment-grade credit rating? A: Patrick Dovigi, CEO, mentioned that achieving an investment-grade rating is a priority, with significant debt repayment planned post-ES sale. The company expects credit rating upgrades over time, as they demonstrate improved financial metrics and leverage reduction.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.