GFL Environmental Inc. Q1 FY2026 earnings call

• Financial results for first quarter exceeded expectations with adjusted EBITDA margins at record high. - Pricing ahead of plan due to strong customer retention and growth investments. - Volumes better than expected despite winter storms, with special waste and EPR volumes offsetting other impacts. - Fifth consecutive quarter of year-over-year reductions in operational and SG&A cost intensity. - Active M&A start to the year with 8 acquisitions completed, including Frontier Way Solutions and proposed acquisition of Secure Waste Infrastructure. Frontier's assets complement GFL's and Secure's network complements GFL's in Western Canada.

For the first quarter, adjusted EBITDA margins expanded 180 basis points to 29.1%. Q1 revenues grew 8.5% before FX. Pricing was 7% for the quarter, 8.5% in Canada and 6.3% in the US. Volumes were 120 basis points behind prior year but better than expected excluding certain factors. Adjusted EBITDA margins were 29.1%, 180 basis points improvement over prior year. Canadian segment adjusted EBITDA margin up 340 basis points, US up over 100 basis points excluding certain impacts. Fuel and commodity prices were drags on margins in both segments. Q1 adjusted free cash flow was approximately $20 million ahead of plan. Net leverage at end of quarter was 3.6 times inclusive of FX impacts.

• Updated full-year 2026 guidance: Revenue of $7.32 to $7.34 billion, adjusted EBITDA of $2.23 billion, adjusted free cash flow of $850 million (inclusive of cash interest of $445 million) and net CapEx of $825 million. - Q2 2026 expected consolidated revenue of approximately $1.89 to $1.9 billion and adjusted EBITDA margin of 30.4%. Q2 adjusted free cash flow expected to be approximately $225 million inclusive of $85 million in cash interest and $265 million in net capex. - Strong start to the year gives multiple avenues of upside to current guide.

• Q: Question on pending transaction and vote confidence.

A: Patrick believes transaction will go through, noting positive investor calls and potential upside of combined business. - Q: Follow-up on guidance outlook for base business.

A: Luke says strength of pricing to start the year should flow through, but volume outlook depends on Q2, with potential upside from price, commodity and FX factors. - Q: On fuel surcharges and price momentum.

A: Luke says surcharge mechanisms should recover incremental fuel costs, price momentum from incremental portfolio opportunities and high retention rates. - Q: On getting to investment grade and M&A pace.

A: Luke says pro forma combined business will improve cash generating profile, rating agencies will take time to factor in, and M&A pace is based on maintaining leverage between 3-3.5 times. - Q: On Secure deal synergies and RNG.

A: Luke talks about operational, cost and revenue synergies from Secure deal, and update on RNG run rate contribution. - Q: On transaction and integration costs.

A: Adam says integration costs will depend on Secure deal, with team at Secure being able to minimize incremental costs. - Q: On region performance differences.

A: Luke says differences are due to exogenous factors like weather, EPR and margin expansion in Canada related to recycling contract repricing