Gfl Environmental Inc ((TSE:GFL)) has held its Q4 earnings call. Read on for the main highlights of the call.
GFL Environmental Inc. recently held its earnings call, revealing a strong financial performance and a promising outlook for 2025. Despite facing challenges such as declines in Environmental Services revenue and headwinds from commodity and fuel prices, the company expressed confidence in its strategic initiatives and enhanced balance sheet, positioning it well for future growth.
Strong Financial Performance
GFL reported consolidated revenue for the quarter of $1.98.6 billion, surpassing guidance. The fourth quarter saw solid waste organic growth accelerate to 7%. Adjusted EBITDA margins reached 29.1%, marking a 300 basis point increase from the previous year, highlighting the company’s robust financial health.
Margin Expansion and Guidance
For the second consecutive quarter, GFL achieved a 300 basis point margin expansion. The company is guiding for industry-leading organic growth across all financial metrics in 2025, with expectations of a 100 basis point expansion in adjusted EBITDA margins.
Strategic Initiatives
The anticipated sale of the Environmental Services business, expected to close on March 1, is set to enhance GFL’s balance sheet and capital deployment options. The proceeds will be used to repay $3.75 billion of long-term debt and support share buybacks, strengthening the company’s financial position.
M&A Activity and Growth Investments
GFL closed 11 transactions in 2024 and plans to deploy $325 million in incremental growth capital in 2025. The company maintains a robust M&A pipeline and aims to reignite its M&A strategies, signaling continued growth and expansion.
Environmental Services Revenue Decline
Revenue from Environmental Services declined by 2.2% compared to the previous year, impacted by lower used motor oil pricing, reduced soil volumes, and challenging comparisons from large-scale event-driven revenue in the prior year.
Commodity and Fuel Price Headwinds
Decreases in energy prices led to reduced fourth-quarter revenues from fuel surcharges, while lower commodity prices posed a headwind to revenues, impacting overall financial performance.
Canadian Postal Strike Impact
A Canadian postal strike in December negatively affected Q4 cash collections, creating a headwind to working capital during the quarter.
Leverage Increase Due to FX
The significant strengthening of the U.S. dollar against the Canadian dollar in Q4 resulted in an increase in net leverage to 4.06, due to the translational impact of revaluing the year-end debt stack.
Forward-Looking Guidance
GFL’s guidance for 2025 includes a top-line growth of 6% to 7%, with targeted revenues between $6.5 billion and $6.55 billion. The company anticipates a 100 basis point expansion in adjusted EBITDA margins to 29.7% and plans to deploy $325 million in growth capital, primarily for EPR contracts. M&A activity is expected to increase post-sale of the Environmental Services business, with a $2.25 billion share repurchase program planned to reduce the public float. GFL aims to maintain leverage around three times net debt to adjusted EBITDA, focusing on achieving an investment-grade credit rating.
In summary, GFL Environmental Inc. showcased a strong financial performance during its earnings call, with significant margin expansion and a positive outlook for 2025. Despite facing challenges, the company’s strategic initiatives and enhanced balance sheet position it well for future growth, making it an attractive prospect for investors.