All financial information in Canadian dollars

• Economic outlook: While GFL Environmental CEO Patrick Dovigi described the current inflationary environment as a challenging one, the company reported a 2.4% revenue contribution from volume growth and continues to see improvement in Canada as the country moves out of pandemic restrictions. “We hope this represents the final exit from the pandemic and this quarter's results demonstrate that our business continues to flex and respond to the challenges we face, as we always have,” he said during a Thursday earnings call.
• Inflation: The company largely offset significant labor and fuel cost increases through pricing, with further benefits expected as index-based residential price increases take effect in future quarters. Chief Financial Officer Luke Pelosi said efforts to ramp up fuel surcharges, in line with industry norms, have been “phenomenal” and recovered about 50% of GFL’s direct fuel costs in the quarter. Work is ongoing to accelerate the rollout of surcharges beyond an initially projected 18-month timeline.
• Investments: GFL spent approximately $150 million on capital expenditures in the quarter, including $19.6 million on the development of renewable natural gas projects. Pelosi said the supply chain for new trucks remains very tight, with no expectation that it will notably improve until at least next year.
• ESG spending: GFL now sees opportunities for RNG projects at 22 of its landfills, higher than previously anticipated, with new requests for proposals at nine additional sites. The first five projects are expected to come online during 2023 and early 2024. The company will also be piloting an electric collection truck in British Columbia, with 30-40 more EVs coming by 2025 for a contract in Gainesville, Florida.
• M&A spending: Aside from the May acquisition of Texas-based Sprint Waste Services, GFL doesn’t anticipate any more large transactions this year and will focus on tuck-ins. Pelosi anticipates the company will still meet or exceed its target to acquire upward of $500 million in annualized revenue in 2022.
• M&A strategy: Dovigi said the company hasn’t notably changed its approach, but it is being mindful of companies in markets with acute labor availability challenges and is seeing inflation affect certain deals. “Some businesses have performed better, some have reacted quicker to [price increases] and getting in front of a bunch of these inflationary pressures,” he said, adding that valuations may be shifting for those looking to exit due to the economy. “Potentially you're going to be buying that off of a lower base number than you maybe would have a year or two ago.”
• Looking ahead: GFL raised its annual guidance for the second time this year, with revenue now potentially reaching $6.475 billion. Figures for adjusted free cash flow, as well as adjusted earnings before interest, depreciation and amortization, were also raised. This guidance does not include the potential contribution from future acquisitions.