GFL Environmental Q1 Earnings Call Highlights

Key Points

• GFL reported record Q1 profitability with adjusted EBITDA margin expanding 180 basis points to 29.1%, driven by stronger-than-planned pricing, and updated 2026 guidance to CAD 7.32–7.34B revenue, CAD 2.23B adjusted EBITDA and CAD 850M adjusted free cash flow.
• Volume growth was held back by lapping hurricane-related and weaker C&D activity (C&D landfill volumes down ~7.5%), but underlying volumes were positive after normalizing and management cited special waste, EPR investments and eight acquisitions—including Frontier in Texas—as drivers of ongoing growth and the guidance uplift.
• Diesel costs rose sharply (nearly 10% YoY and ~40% in March), creating a ~CAD 10M headwind with surcharge billing lagging but expected to offset by end‑Q2 (net neutral to EBITDA but margin dilutive); commodity prices are ~CAD 15/ton above the initial outlook, offering potential upside (every CAD 10 change ≈ CAD 6M to annual revenue/adj EBITDA).

GFL Environmental NYSE: GFL reported first-quarter 2026 results that management said exceeded expectations, highlighted by record first-quarter profitability and an updated full-year outlook reflecting recent acquisition activity.

Record first-quarter margins as pricing beats plan

Founder and CEO Patrick Dovigi said the company’s “financial results for the first quarter exceeded our expectations from top to bottom,” with adjusted EBITDA margin expanding 180 basis points year-over-year to 29.1%, which he said was the highest first-quarter adjusted EBITDA margin in company history.

Chief Financial Officer Luke Pelosi said revenue grew 8.5% before foreign exchange translation impacts, driven “largely on account of strong pricing and underlying volume.” Pricing was 7% for the quarter, about 25 basis points above plan, with 8.5% pricing in Canada and 6.3% in the U.S. Pelosi attributed the better-than-planned pricing to “higher retention rates” and continued execution on price optimization opportunities discussed at the company’s Investor Day.

Dovigi said pricing performance was supported by “strong customer retention and ongoing tailwinds from our recent growth investments, including EPR.” He added that the early outperformance “should carry forward through the rest of the year” and could represent upside to the original guidance, as the company continues targeting pricing above its internal inflation assumptions.

Volumes, storms, and mix: special waste and EPR offset C&D weakness

Pelosi said first-quarter volumes were 120 basis points behind the prior year, a result he characterized as better than expectations despite “outsized winter storms” in several markets. He said the negative year-over-year comparison was primarily due to lapping hurricane-related volumes and one-time transfer station volumes from the prior-year period.

Providing additional detail during Q&A, Pelosi said volume was down CAD 18.5 million versus the prior year, but that included a CAD 10 million one-time transfer station benefit and CAD 21 million of hurricane-related volumes in the prior year. Normalizing for those items, he said underlying volume was up CAD 12.5 million, or about 80 basis points. He also estimated weather created an approximately CAD 11 million headwind in the quarter.

Dovigi said the macro environment remained a drag on construction and demolition (C&D) volumes, but said the company believed it was “well-positioned to participate in the upside when these volumes inevitably return.” Pelosi said C&D landfill volumes were down 7.5% in Q1 and described uncertainty around a recovery as a key variable for the rest of the year.

Cost efficiency, fuel surcharge timing, and commodity sensitivity

Dovigi said GFL posted its fifth consecutive quarter of year-over-year reductions in operational and SG&A cost intensity as a percentage of revenue, citing “greater operational efficiency, improving labor turnover, fleet optimization, and procurement benefits.” He said these initiatives contributed to more than 200 basis points of underlying solid waste adjusted EBITDA margin expansion.

Pelosi said cost of sales (before depreciation, amortization, and integration costs) as a percentage of revenue decreased 90 basis points to 60.7%. He said reduced labor and repair-and-maintenance cost intensity more than offset higher fuel and transportation expenses.

Fuel was a major topic on the call. Pelosi said diesel costs were up nearly 10% year-over-year in the quarter and “40% up in March alone.” He said the rapid increase created a CAD 10 million cost headwind versus guidance, with only CAD 1 million recovered in the quarter due to lags in surcharge billing. Pelosi said the company expects fuel surcharges “by the end of the second quarter” to generate enough incremental revenue to offset the higher diesel expense, while still being “a headwind to margins” because of the cost-recovery nature of the mechanism. In response to an analyst question, Pelosi said fuel is expected to be “net, net, no impact to EBITDA and just really that sort of margin dilution.”

On commodities, Pelosi said average commodity prices were in line with plan, but market pricing was “now CAD 15 per ton higher than our initial 2026 outlook.” He added, “This is the first time in a while where it feels like commodity prices may have bottomed.” While there was no meaningful impact to the quarter, he said sustained pricing could be upside for the year, noting the company’s sensitivity: “every CAD 10 change in the gross basket price yields a CAD 6 million change to annual revenue and Adjusted EBITDA.”

M&A activity lifts 2026 guidance; Frontier closes and pipeline remains

Dovigi said GFL completed eight acquisitions year to date, including Frontier Waste Solutions, which closed in early April. He described Frontier as “a leading vertically integrated solid waste business” across the Texas Triangle and said the assets are expected to densify GFL’s footprint and strengthen its presence in the region. In Q&A, Dovigi said GFL has a plan to “double the revenue of the Texas market” over the next five years, and Pelosi pointed to organic growth initiatives in the region, including a new C&D recycling facility planned at the front end of Frontier’s C&D landfill.

Pelosi said the in-year contribution from the eight completed acquisitions led GFL to update full-year 2026 guidance (while not changing its prior guidance for the base business). The updated 2026 outlook is:

• Revenue: CAD 7.32 billion to CAD 7.34 billion
• Adjusted EBITDA: CAD 2.23 billion
• Adjusted free cash flow: CAD 850 million (including cash interest of CAD 445 million and net CapEx of CAD 825 million)

For the second quarter, Pelosi guided to revenue of approximately CAD 1.89 billion to CAD 1.9 billion and an adjusted EBITDA margin of 30.4%, with adjusted free cash flow expected to be about CAD 225 million (including CAD 85 million in cash interest and CAD 265 million in net CapEx). He said Q2 margin would be modestly behind the prior year due to “commodities, fuel price, and M&A.” He later quantified year-over-year headwinds for Q2 margin from fuel (about 40 to 45 basis points), commodities (20 to 25 basis points if prices hold), and M&A (40 to 45 basis points), along with non-recurring prior-year items in Canada.

Pelosi also said the company exited the quarter with net leverage of 3.6x, or 3.5x using the quarter’s average FX rate. He said the April acquisitions would temporarily increase leverage by about 30 basis points, with the business expected to de-lever back to the mid-3s by year-end.

Proposed SECURE Waste Infrastructure deal and shareholder vote

Dovigi used prepared remarks and Q&A to outline the strategic rationale for GFL’s proposed acquisition of SECURE Waste Infrastructure, which he described as “a best-in-class network of hard-to-replicate waste disposal assets” in Western Canada. He emphasized that Canadian permitting makes new disposal assets difficult to replicate and said more than 80% of SECURE’s business is tied to ongoing production rather than new drilling activity, which he said supports more stable and predictable volumes.

Dovigi said the company expects “material” synergies and described a potential incremental CAD 25 million to CAD 50 million of opportunity above the CAD 25 million of SG&A cost savings already identified. Pelosi later told analysts the additional synergy potential would come from operational internalization opportunities and revenue synergies, including cross-selling and capturing additional wallet share.

Asked about the upcoming shareholder vote and a public opponent, Dovigi said one investor had indicated it did not plan to support the transaction, and that GFL had reached out and planned to speak with that investor. He said feedback from investor outreach had been positive and that the company believed the deal would be approved, while noting shareholders can vote as they choose.

On the regulatory timeline, Dovigi said he did not expect material issues and suggested “somewhere between three and five months” as a reasonable timeframe, which would imply a potential close in September or October and roughly a quarter of ownership in 2026 if completed.

Elsewhere on the call, the company discussed extended producer responsibility (EPR) investments and renewable natural gas (RNG). Dovigi said most EPR-related capex is “materially winding down,” with growth capex expected to decrease to about CAD 100 million to CAD 125 million going into next year, though Alberta-related spending could continue modestly through the end of 2027. On RNG, Pelosi reiterated a CAD 125 million target contribution, with roughly CAD 50 million currently coming from five facilities; he said 2026 guidance assumes minimal incremental RNG contribution, with additional facilities expected to come online in 2027 and 2028.

About GFL Environmental NYSE: GFL

GFL Environmental Inc is a leading North American provider of diversified environmental services, offering comprehensive solutions across solid waste management, liquid waste management, soil remediation and infrastructure services. The company's core business activities include residential, commercial and industrial waste collection, recycling, composting and landfill management. In addition to traditional waste services, GFL provides specialized liquid waste hauling, treatment and disposal services as well as environmental consulting to support industrial and municipal clients in meeting regulatory and sustainability goals.

Founded in 2007 by entrepreneur Patrick Dovigi, GFL Environmental has pursued an aggressive growth strategy driven by strategic acquisitions and organic expansion.

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