Mr. Patrick Dovigi reports

GFL ENVIRONMENTAL REPORTS SECOND QUARTER 2023 RESULTS AND RAISES FULL YEAR 2023 GUIDANCE

GFL Environmental Inc. has released its results for the second quarter of 2023.

"Our exceptional start to the year continued into the second quarter, thanks to the hard work and commitment of our over 20,000 employees," said Patrick Dovigi, founder and chief executive officer of GFL. "Our strong execution once again resulted in our achievement of double-digit revenue growth in the quarter. We also grew adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] by 19.3 per cent and demonstrated the effectiveness of our pricing and efficiency initiatives resulting in industry-leading adjusted EBITDA margin expansion of 130 basis points. This top-line growth and margin expansion, both of which exceeded our expectations, demonstrate the strength in our best-in-class asset base and the ability of our exceptional team to execute on our proven value creation strategies."

Mr. Dovigi added: "During the second quarter, we successfully completed our portfolio rationalization initiative that we committed to earlier this year. We realized $1.65-billion of gross proceeds from these non-core divestitures, $150-million more than our original expectation, and completed the process one quarter ahead of plan. A portion of the net proceeds from the divestitures was used to accelerate our balance sheet deleveraging commitment and we ended the second quarter with net leverage of 4.18 times, the lowest level in our history. The resulting enhanced strength of our balance sheet, coupled with our margin expansion and accelerated free cash flow, sets us on a path to ending the year with net leverage of less than four times, mid-three times by the end of 2024 and a pathway to investment grade in the medium term."

Mr. Dovigi continued: "We remain focused on executing on our strategy to create long-term shareholder value. We have completed 16 acquisitions year to date, the majority of which were smaller tuck-in acquisitions, which have continued to densify our existing footprint. With the success of the divestiture transactions, we intend to allocate a portion of the proceeds to a number of incremental sustainability-related capital projects, primarily related to opportunities arising from extended producer responsibility legislation and RNG, in keeping with our highest and best capital use strategy. We are excited about the positive contribution that these investments will have across many facets of our strategy."

Mr. Dovigi concluded: "Our strong performance for the first half of the year, coupled with our expectation for the balance of the year, the resilience of our business model and the effectiveness of our growth strategies, are leading us to increase our already industry-leading full-year guidance for this year. We are increasing our guidance for revenue, adjusted EBITDA and adjusted free cash flow. We continue to see upside opportunities from our robust M&A pipeline and any incremental contribution from further M&A completed in the second half of the year would be upside to our updated guidance."

Second quarter results:

• Revenue increased by 13.8 per cent to $1,943.6-million in the second quarter of 2023, compared with the second quarter of 2022.
  • Solid waste revenue of $1,556.3-million, including organic growth of 4.8 per cent driven predominantly by core pricing increases;
  • Environmental services revenue of $387.3-million, including organic growth of 10.2 per cent driven by the strength of industrial collection and processing activity at GFL's facilities and by core pricing and surcharge increases.
• Adjusted EBITDA increased by 19.3 per cent to $540.7-million in the second quarter of 2023, compared with the second quarter of 2022. Adjusted EBITDA margin was 27.8 per cent in the second quarter of 2023, compared with 26.5 per cent in the second quarter of 2022. Solid waste adjusted EBITDA margin was 31.6 per cent in the second quarter of 2023, compared with 29.4 per cent in the second quarter of 2022.
• Net income from continuing operations was $293.8-million in the second quarter of 2023, compared with net income from continuing operations of $82.6-million in the second quarter of 2022.
• Adjusted free cash flow was $8.5-million in the second quarter of 2023, compared with $102.2-million in the second quarter of 2022. The decrease of $93.7-million was inclusive of $138.8-million of incremental net capital expenditure and $28.2-million of incremental cash interest paid.

Year-to-date results:

• Revenue increased by 20.4 per cent to $3,742.7-million for the six months ended June 30, 2023, compared with the six months ended June 30, 2022.
  • Solid waste revenue of $3,038.5-million, including organic growth of 8.3 per cent driven predominantly by core pricing increases;
  • Environmental services revenue of $704.2-million, including organic growth of 16.5 per cent driven by the strength of industrial collection and processing activity at GFL's facilities and by core pricing and surcharge increases.
• Adjusted EBITDA increased by 21.5 per cent to $981.2-million for the six months ended June 30, 2023, compared with the six months ended June 30, 2022. Adjusted EBITDA margin was 26.2 per cent for the six months ended June 30, 2023, compared with 26 per cent for the six months ended June 30, 2022. Solid waste adjusted EBITDA margin was 30.6 per cent for the six months ended June 30, 2023, compared with 29.6 per cent for the six months ended June 30, 2022.
• Net income from continuing operations was $76-million for the six months ended June 30, 2023, compared with net income from continuing operations of $219.6-million for the six months ended June 30, 2022.
• Adjusted free cash flow was $(46.3-million) for the six months ended June 30, 2023, compared with $220.8-million for the six months ended June 30, 2022. The decrease of $267.1-million was inclusive of $286.9-million of incremental net capex and $93-million of incremental cash interest paid.

Updated full-year 2023 guidance

GFL also provided its updated guidance for 2023 assuming a Canadian-dollar/U.S.-dollar exchange rate of 1.32 for the remainder of the year (compared with 1.34 provided in GFL's original guidance on Feb. 21, 2023).

• Revenue is estimated to be approximately $7,400-million.
  • Full-year solid waste core pricing of 9.5 per cent, surcharges of (1 per cent), volume of (1.9 per cent) and commodity price impact of (0.6 per cent);
  • Environmental services organic growth of 7 per cent;
  • Changes in foreign exchange resulting in 1.6-per-cent revenue growth and revenue from merger and acquisition contribution of 1.7 per cent.
• Adjusted EBITDA is estimated to be approximately $2,000-million.
  • Full-year adjusted EBITDA margin is expected to be approximately 27 per cent.
• Adjusted free cash flow is estimated to be approximately $705-million.
  • Full-year cash interest is expected to be approximately $490-million, inclusive of $20-million of cash interest incremental to original guidance as a result of higher interest rates and borrowings and the in-year savings from the repayment of variable debt using net proceeds from the sale of three non-core U.S. solid waste businesses;
  • Full-year net capex is expected to be approximately $805-million, excluding approximately $200-million to $300-million of incremental purchase of property and equipment which will be offset by an equal allocation of a portion of the net proceeds from the sale of three non-core U.S. solid waste businesses.
• Year-end net leverage is estimated to be less than four times, resulting from growth in adjusted EBITDA and adjusted free cash flow.

The 2023 updated guidance includes the expected contribution of acquisitions already completed in 2023, net of divestitures completed to date, but excludes any impact from acquisitions not yet completed.

Q2 2023 earnings call

GFL will host a conference call related to its second quarter earnings on July 27, 2023 at 8:30 a.m. Eastern Time. A live audio webcast of the conference call can be accessed by logging onto GFL's investors page. Listeners may access the call toll-free by dialling 1-888-575-5163 approximately 15 minutes prior to the scheduled start time.

GFL encourages participants who will be dialling in to preregister for the conference call. Callers who preregister will be given a PIN to gain immediate access to the call and bypass the live operator on the day of the call. Participants may preregister at any time, including up to and after the call start time. For those unable to listen live, an audio replay of the call will be available until Aug. 10, 2023, by dialling 1-877-674-7070 (access code: 021187). A copy of the presentation for the call will be available on GFL's website.

About GFL Environmental Inc.

GFL, headquartered in Vaughan, Ont., is the fourth-largest diversified environmental services company in North America, providing a comprehensive line of solid waste management, liquid waste management and soil remediation services through its platform of facilities throughout Canada and in more than half of the U.S. states. Across its organization, GFL has a work force of more than 20,000 employees.

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