VAUGHAN,
ON, Nov. 29, 2023 /PRNewswire/ - GFL
Environmental Inc. (NYSE: GFL) (TSX: GFL) ("GFL", "we", "our" or
the "Company") today provided an update on its capital allocation
strategy for 2024.
Patrick Dovigi, GFL's Founder and
Chief Executive Officer said, "We remain committed to making the
disciplined capital allocation decisions that we expect will
generate outsized returns while continuing on our trajectory of
de-levering the business, with a focus on moving toward an
investment grade credit rating. In order to align expectations for
2024, we are also providing detail on our planned growth capital
expenditures for the coming year."
Mr. Dovigi continued, "Our growth capital expenditures in 2024
will focus on sustainability investments and the continued
execution of our M&A strategy. We believe that the
sustainability-related investments we are making represent the best
risk adjusted returns that we have seen in decades. On M&A, our
investments in 2024 will be focused on densifying our existing
footprint. Given our current pipeline, we are confident that we can
deploy capital into these accretive opportunities at attractive
valuation multiples consistent with our track record."
The details of the incremental growth capital expected to be
deployed by GFL in 2024 are as follows:
- $250 million to $300 million in investments related to renewable
natural gas ("RNG") projects, material recovery facilities and
other infrastructure primarily related to opportunities arising
under extended producer responsibility ("EPR") legislation.
- $600 million to $650 million in M&A opportunities within its
existing geographies.
The total amount to be deployed by GFL into these growth
opportunities in 2024 will not exceed $900
million. This amount will be in addition to GFL's normal
course capital expenditures in the year which are expected to be
between $850 million and $900 million.
The EPR-related investments are expected to generate an
incremental $40 million to
$50 million of Adjusted
EBITDA1, resulting in an aggregate of $80 million to $100
million of incremental Adjusted EBITDA1 that GFL
expects to realize starting in Q4 2024 and ramping up to the full
run rate by 2026. GFL's first RNG facility at Arbor Hills is
now online and the Company continues to develop its portfolio of
other RNG projects that it expects will come online starting in Q4
2024 through 2026.
Mr. Dovigi concluded, "As we said in our Q3 investor call, we
expect to realize at least $2.2
billion of Adjusted EBITDA1 in our base business
in 2024 and organically de-lever to the mid 3's by the end of that
year. These incremental growth investments will add approximately
20 basis points to our leverage, yielding Net Leverage1
at year end of between 3.65x and 3.85x. We are fully committed to
these targets and we anticipate this balanced approach to capital
allocation will further demonstrate our absolute commitment
to de-levering. We look forward to updating you in February on
our 2023 results, 2024 guidance and broader outlook."
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(1)
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Information
contained herein includes preliminary 2024 outlook with respect to
Adjusted EBITDA and Net Leverage which are non-IFRS measures. Due
to the uncertainty of the likelihood, amount and timing of effects
of events or circumstances to be excluded from these measures, GFL
does not have information available to provide a quantitative
reconciliation of such projections to comparable IFRS measures. See
"Non-IFRS Measures" below.
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About GFL
GFL, headquartered in Vaughan,
Ontario, 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 workforce of more than 20,000 employees.
Forward-Looking
Information
This release includes certain "forward-looking statements" and
"forward-looking information" (collectively, "forward-looking
information") within the meaning of applicable U.S. and Canadian
securities laws, respectively. Forward-looking information includes
all statements that do not relate solely to historical or current
facts and may relate to our future outlook, financial guidance and
anticipated events or results and may include statements regarding
our financial performance, financial condition or results, business
strategy, growth strategies, budgets, operations and services.
Particularly, statements regarding our expectations of future
results, performance, achievements, prospects or opportunities or
the markets in which we operate is forward-looking information. In
some cases, forward-looking information can be identified by the
use of forward-looking terminology such as "plans", "targets",
"expects" or "does not expect", "is expected", "an opportunity
exists", "budget", "scheduled", "estimates", "outlook",
"forecasts", "projection", "prospects", "strategy", "intends",
"anticipates", "does not anticipate", "believes", or "potential" or
variations of such words and phrases or statements that certain
actions, events or results "may", "could", "would", "might",
"will", "will be taken", "occur" or "be achieved", although not all
forward-looking information includes those words or phrases. In
addition, any statements that refer to expectations, intentions,
projections, guidance, potential or other characterizations of
future events or circumstances contain forward-looking information.
Statements containing forward-looking information are not
historical facts nor assurances of future performance but instead
represent management's expectations, estimates and projections
regarding future events or circumstances.
Forward-looking information is based on our opinions, estimates
and assumptions that we considered appropriate and reasonable as of
the date such information is stated, is subject to known and
unknown risks, uncertainties, assumptions and other important
factors that may cause the actual results, level of activity,
performance or achievements to be materially different from those
expressed or implied by such forward-looking information, including
but not limited to certain assumptions set out herein; our ability
to obtain and maintain existing financing on acceptable terms; our
ability to source and execute on acquisitions on terms acceptable
to us; our ability to find purchasers for non-core assets on terms
acceptable to us; currency exchange and interest rates; commodity
price fluctuations; our ability to implement price increases and
surcharges; changes in waste volumes; labour, supply chain and
transportation constraints; inflationary cost pressures; our
ability to maintain a favourable working capital position; the
impact of competition; the changes and trends in our industry or
the global economy; changes in laws, rules, regulations, and global
standards; and the duration and severity of the COVID-19 pandemic,
including variants, and its impact on the economy, the North
American financial markets, our operations, our M&A pipeline
and our financial results. Other important factors that could
materially affect our forward-looking information can be found in
the "Risk Factors" section of GFL's annual information form for the
year ended December 31, 2022 and
GFL's other periodic filings with the U.S. Securities and Exchange
Commission and the securities commissions or similar regulatory
authorities in Canada.
Shareholders, potential investors and other readers are urged to
consider these risks carefully in evaluating our forward-looking
information and are cautioned not to place undue reliance on such
information. There can be no assurance that the underlying
opinions, estimates and assumptions will prove to be correct.
Although we have attempted to identify important risk factors that
could cause actual results to differ materially from those
contained in forward-looking information, there may be other
factors not currently known to us or that we currently believe are
not material that could also cause actual results or future events
to differ materially from those expressed in such forward-looking
information. There can be no assurance that such information will
prove to be accurate, as actual results and future events could
differ materially from those anticipated in such information. The
forward-looking information contained in this release represents
our expectations as of the date of this release (or as the date it
is otherwise stated to be made), and is subject to change after
such date. However, we disclaim any intention or obligation or
undertaking to update or revise any forward-looking information
whether as a result of new information, future events or otherwise,
except as required under applicable U.S. or Canadian securities
laws. The purpose of disclosing our financial outlook set out in
this release is to provide investors with more information
concerning the financial impact of our business initiatives and
growth strategies. The 2024 preliminary outlook 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. Implicit in forward-looking
information in respect of our preliminary outlook for 2024 are
certain current assumptions, including, among others, no changes to
the current economic environment, including fuel and commodities.
The 2024 preliminary outlook assumes GFL will continue to execute
on its strategy of organically growing our business, leverage our
scalable network to attract and retain customers across multiple
service lines, realize operational efficiencies, and extract
procurement and cost synergies.
Non-IFRS Measures
This release makes reference to certain non-IFRS measures. These
measures are not recognized measures under IFRS and do not have a
standardized meaning prescribed by IFRS and are therefore unlikely
to be comparable to similar measures presented by other companies.
Accordingly, these measures should not be considered in isolation
or as a substitute for analysis of our financial information
reported under IFRS. Rather, these non-IFRS measures are used to
provide investors with supplemental measures of our operating
performance and thus highlight trends in our core business that may
not otherwise be apparent when relying solely on IFRS measures. We
also believe that securities analysts, investors and other
interested parties frequently use non-IFRS measures in the
evaluation of issuers. Our management also uses non-IFRS measures
in order to facilitate operating performance comparisons from
period to period, to prepare annual operating budgets and forecasts
and to determine components of management compensation.
Acquisition EBITDA represents, for the applicable period,
management's estimates of the annual Adjusted EBITDA of an acquired
business, based on its most recently available historical financial
information at the time of acquisition, as adjusted to give effect
to (a) the elimination of expenses related to the prior owners and
certain other costs and expenses that are not indicative of the
underlying business performance, if any, as if such business had
been acquired on the first day of such period and (b) contract and
acquisition annualization for contracts entered into and
acquisitions completed by such acquired business prior to our
acquisition (collectively, "Acquisition EBITDA Adjustments").
Further adjustments are made to such annual Adjusted EBITDA to
reflect estimated operating cost savings and synergies, if any,
anticipated to be realized upon acquisition and integration of the
business into our operations. Acquisition EBITDA is calculated net
of divestitures. We use Acquisition EBITDA for the acquired
businesses to adjust our Adjusted EBITDA to include a proportional
amount of the Acquisition EBITDA of the acquired businesses based
upon the respective number of months of operation for such period
prior to the date of our acquisition of each such business.
Adjusted EBITDA is a supplemental measure used by management and
other users of our financial statements, including our lenders and
investors, to assess the financial performance of our business
without regard to financing methods or capital structure. Adjusted
EBITDA is also a key metric that management uses prior to execution
of any strategic investing or financing opportunity. For example,
management uses Adjusted EBITDA as a measure in determining the
value of acquisitions, expansion opportunities and dispositions. In
addition, Adjusted EBITDA is utilized by financial institutions to
measure borrowing capacity. Adjusted EBITDA is calculated by adding
and deducting, as applicable from EBITDA, certain expenses, costs,
charges or benefits incurred in such period which in management's
view are either not indicative of underlying business performance
or impact the ability to assess the operating performance of our
business, including: (a) (gain) loss on foreign exchange, (b)
(gain) loss on sale of property and equipment, (c) mark-to-market
(gain) loss on TEU Purchase Contracts, (d) share of net (income)
loss of investments accounted for using the equity method, (e)
share-based payments, (f) gain (loss) on divestiture, (g)
transaction costs, (h) acquisition, rebranding and other
integration costs (included in cost of sales related to acquisition
activity) and (i) other. We use Adjusted EBITDA to facilitate a
comparison of our operating performance on a consistent basis
reflecting factors and trends affecting our business. As we
continue to grow our business, we may be faced with new events or
circumstances that are not indicative of our underlying business
performance or that impact the ability to assess our operating
performance.
EBITDA represents, for the applicable period, net income (loss)
from continuing operations plus (a) interest and other finance
costs, plus (b) depreciation and amortization of property and
equipment, landfill assets and intangible assets, plus (less) (c)
the provision (recovery) for income taxes, in each case to the
extent deducted from or added to/from net income (loss) from
continuing operations. We present EBITDA to assist readers in
understanding the mathematical development of Adjusted EBITDA.
Management does not use EBITDA as a financial performance
metric.
Run-Rate EBITDA represents Adjusted EBITDA for the applicable
period as adjusted to give effect to management's estimates of (a)
Acquisition EBITDA Adjustments and (b) the impact of annualization
of certain new municipal and disposal contracts and cost savings
initiatives, entered into, commenced or implemented, as applicable,
in such period, as if such contracts or costs savings initiatives
had been entered into, commenced or implemented, as applicable, on
the first day of such period ((a) and (b), collectively, "Run-Rate
EBITDA Adjustments"). Run-Rate EBITDA has not been adjusted to take
into account the impact of the cancellation of contracts and cost
increases associated with these contracts. These adjustments
reflect monthly allocations of Acquisition EBITDA for the acquired
businesses based on straight line proration. As a result, these
estimates do not take into account the seasonality of a particular
acquired business. While we do not believe the seasonality of any
one acquired business is material when aggregated with other
acquired businesses, the estimates may result in a higher or lower
adjustment to our Run-Rate EBITDA than would have resulted had we
adjusted for the actual results of each of the acquired businesses
for the period prior to our acquisition. We primarily use Run-Rate
EBITDA to show how GFL would have performed if each of the
acquired businesses had been consummated at the start of the period
as well as to show the impact of the annualization of certain new
municipal and disposal contracts and cost savings initiatives. We
also believe that Run-Rate EBITDA is useful to investors and
creditors to monitor and evaluate our borrowing capacity and
compliance with certain of our debt covenants. Run-Rate EBITDA as
presented herein is calculated in accordance with the terms of our
revolving credit agreement.
Net Leverage is a supplemental measure used by management to
evaluate borrowing capacity and capital allocation strategies. Net
Leverage is equal to our total long-term debt, as adjusted for fair
value, deferred financings and other adjustments and reduced by our
cash, divided by Run-Rate EBITDA.
All references to "$" in this press release are to Canadian
dollars, unless otherwise noted.
For more information:
Patrick Dovigi
+1 905-326-0101
pdovigi@gflenv.com
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SOURCE GFL Environmental Inc.