WASTE CONNECTIONS REPORTS FIRST QUARTER 2023 RESULTS

Rhea-AI Summary

Waste Connections reported a strong first quarter of 2023, achieving revenue of $1.901 billion, a 15.4% increase year-over-year. Net income was $197.8 million, translating to $0.77 per diluted share, while adjusted EBITDA reached $566.9 million. The company attributed its performance to solid waste pricing growth and operational execution, despite challenges from weather impacts and a decline in resource recovery values from the previous year. With ongoing acquisition activity, the company remains optimistic about meeting its full-year outlook, highlighting potential benefits from further acquisitions and improvements in recycled commodities values. Waste Connections also noted that it closed approximately $45 million in acquired revenue year-to-date, with expectations for continued activity throughout the year.

Positive

• Revenue increased by 15.4% to $1.901 billion.
• Net income rose to $197.8 million, up from $180.3 million year-over-year.
• Adjusted EBITDA improved to $566.9 million, compared to $502.1 million in Q1 2022.
• Ongoing acquisition activity with $45 million in revenue closed year-to-date.

Negative

• Weather-related impacts affected solid waste roll-off activity and landfill volumes.
• Acquisitions dilutive to reported margins by 30 basis points.

• Price-led organic growth, strong operational execution, and continuing acquisition activity drive strong start to 2023
• Revenue of $1.901 billion, up 15.4%
• Net income^(a) of $197.8 million and adjusted EBITDA^(b) of $566.9 million
• Net income and adjusted net income^(b) of $0.77 and $0.89 per share, respectively
• Net cash provided by operating activities of $442.4 million and adjusted free cash flow^(b) of $274.0 million
• On track to achieve full year outlook as provided in February, with potential upside from any additional acquisitions, increases in recycled commodities and renewable fuels values, or reduction of inflationary pressures

TORONTO, April 26, 2023 /PRNewswire/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the first quarter of 2023.    

"Record solid waste pricing growth, strong operational execution and continuing acquisition activity in the first quarter provided a strong start to the year.  Q1 was recognized to be a difficult year-over-year comparison given the precipitous decline in resource recovery values during the second half of 2022, and results in the period were further affected by weather-related impacts to solid waste roll-off activity and landfill volumes, particularly on the West Coast.  Underlying adjusted EBITDA^(b) margins were in line with our expectations, but acquisitions completed since the year-ago period were 30 basis points dilutive to reported margins, or more than 20 basis points higher than expected, given the disproportionate weather-related impacts on West Coast acquisitions," said Ronald J. Mittelstaedt, President and Chief Executive Officer.

Mr. Mittelstaedt added, "Continued visibility on pricing, improving trends in labor availability and retention, and recent normalization of weather patterns position us to deliver the full year outlook we provided in February.  And as we also noted then, upside potential to this outlook remains from any additional acquisitions, increases in recycled commodities and renewable fuels values, or reduction of inflationary pressures.  We've already closed approximately $45 million of acquired revenue year-to-date, and currently expect that pace of activity to continue throughout the year."

Q1 2023 Results

Revenue in the first quarter totaled $1.901 billion, up from $1.646 billion in the year ago period.  Operating income was $314.7 million, which included $4.3 million primarily in transaction-related expenses and impairments and other operating items.  This compares to operating income of $273.9 million in the first quarter of 2022, which included $6.6 million primarily related to transaction-related expenses.  Net income in the first quarter was $197.8 million, or $0.77 per share on a diluted basis of 258.0 million shares.  In the year ago period, the Company reported net income of $180.3 million, or $0.69 per share on a diluted basis of 259.6 million shares.  

Adjusted net income^(b) in the first quarter was $230.4 million, or $0.89 per diluted share, up from $213.4 million, or $0.82 per diluted share, in the prior year period.  Adjusted EBITDA^(b) in the first quarter was $566.9 million, as compared to $502.1 million in the prior year period.  Adjusted net income, adjusted net income per diluted share and adjusted EBITDA, all non-GAAP measures, primarily exclude impairments and transaction-related items, as reflected in the detailed reconciliations in the attached tables.

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(a)	All references to "Net income" refer to the financial statement line item "Net income attributable to Waste Connections".
(b)	A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule.

Q1 2023 Earnings Conference Call

Waste Connections will be hosting a conference call related to first quarter earnings on April 27^th at 8:30 A.M. Eastern Time.  A live audio webcast of the conference call can be accessed by visiting investors.wasteconnections.com and selecting "News & Events" from the website menu. Alternatively, conference call participants can preregister by clicking here.  Registered participants will receive dial-in instructions and a personalized code for entry to the conference call.  A replay of the conference call will be available until May 4, 2023, by calling 877-344-7529 (within North America) or 412-317-0088 (international) and entering Passcode #6074895.   

Waste Connections will be filing a Form 8-K on EDGAR and on SEDAR (as an "Other" document) prior to markets opening on April 27^th, providing the Company's second quarter 2023 outlook for revenue, price plus volume growth for solid waste, and adjusted EBITDA^(b).

About Waste Connections

Waste Connections is an integrated solid waste services company that provides non-hazardous waste collection, transfer and disposal services, along with resource recovery primarily through recycling and renewable fuels generation.  The Company serves more than eight million residential, commercial and industrial customers in mostly exclusive and secondary markets across 43 states in the U.S. and six provinces in Canada.  Waste Connections also provides non-hazardous oilfield waste treatment, recovery and disposal services in several basins across the U.S., as well as intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest.  For more information, visit Waste Connections at wasteconnections.com. 

Environmental, Social and Governance

Waste Connections views its Environmental, Social and Governance ("ESG") efforts as integral to its business, with initiatives consistent with its objective of long-term value creation.  In 2020, the Company introduced long-term, aspirational ESG targets and committed $500 million to the advancement of such sustainability targets. These investments primarily focus on reducing emissions, increasing resource recovery of both recyclable commodities and clean energy fuels, reducing reliance on off-site disposal for landfill leachate, further improving safety and enhancing employee engagement.  The Company's 2022 Sustainability Report provides progress updates on its targets and investments towards their achievement, and introduces new emissions reduction targets.  For more information, visit wasteconnections.com/sustainability.

Safe Harbor and Forward-Looking Information

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 ("PSLRA"), including "forward-looking information" within the meaning of applicable Canadian securities laws. These forward-looking statements are neither historical facts nor assurances of future performance and reflect Waste Connections' current beliefs and expectations regarding future events and operating performance. These forward-looking statements are often identified by the words "may," "might," "believes," "thinks," "expects," "estimate," "continue," "intends" or other words of similar meaning. All of the forward-looking statements included in this press release are made pursuant to the safe harbor provisions of the PSLRA and applicable securities laws in Canada. Forward-looking statements involve risks and uncertainties. Forward-looking statements in this press release include, but are not limited to, statements about expected 2023 financial results, outlook and related assumptions, and potential acquisition activity. Important factors that could cause actual results to differ, possibly materially, from those indicated by the forward-looking statements include, but are not limited to, risk factors detailed from time to time in the Company's filings with the SEC and the securities commissions or similar regulatory authorities in Canada.  You should not place undue reliance on forward-looking statements, which speak only as of the date of this press release.  Waste Connections undertakes no obligation to update the forward-looking statements set forth in this press release, whether as a result of new information, future events, or otherwise, unless required by applicable securities laws.

– financial tables attached –

CONTACT:
Mary Anne Whitney / (832) 442-2253	Joe Box / (832) 442-2153
maryannew@wasteconnections.com	joe.box@wasteconnections.com

 

WASTE CONNECTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME THREE MONTHS ENDED MARCH 31, 2022 AND 2023 (Unaudited) (in thousands of U.S. dollars, except share and per share amounts)
		Three months ended March 31,
		2022			2023
Revenues		$	1,646,255		$	1,900,503
Operating expenses:
Cost of operations			989,518			1,146,941
Selling, general and administrative			163,414			193,667
Depreciation			179,950			204,059
Amortization of intangibles			37,635			39,282
Impairments and other operating items			1,878			1,865
Operating income			273,860			314,689
Interest expense			(41,324)			(68,353)
Interest income			137			2,715
Other income (expense), net			(3,466)			3,174
Income before income tax provision			229,207			252,225
Income tax provision			(48,839)			(54,389)
Net income			180,368			197,836
Less: Net income attributable to noncontrolling interests			(44)			(23)
Net income attributable to Waste Connections		$	180,324		$	197,813
Earnings per common share attributable to Waste Connections' common shareholders:
Basic		$	0.70		$	0.77
Diluted		$	0.69		$	0.77
Shares used in the per share calculations:
Basic			258,946,933			257,372,942
Diluted			259,560,983			257,988,971
Cash dividends per common share		$	0.23		$	0.255

 

WASTE CONNECTIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands of U.S. dollars, except share and per share amounts)
		December 31, 2022			March 31, 2023
ASSETS
Current assets:
Cash and equivalents		$	78,637		$	133,860
Accounts receivable, net of allowance for credit losses of $22,939 and $22,239 at December 31, 2022 and March 31, 2023, respectively			833,862			814,680
Prepaid expenses and other current assets			205,146			185,718
Total current assets			1,117,645			1,134,258
Restricted cash			102,727			106,625
Restricted investments			68,099			74,358
Property and equipment, net			6,950,915			6,956,620
Operating lease right-of-use assets			192,506			195,030
Goodwill			6,902,297			6,940,567
Intangible assets, net			1,673,917			1,697,193
Other assets, net			126,497			122,443
Total assets		$	17,134,603		$	17,227,094
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	638,728		$	526,229
Book overdraft			15,645			21,067
Deferred revenue			325,002			336,613
Accrued liabilities			431,247			390,195
Current portion of operating lease liabilities			35,170			34,078
Current portion of contingent consideration			60,092			64,489
Current portion of long-term debt and notes payable			6,759			10,513
Total current liabilities			1,512,643			1,383,184
Long-term portion of debt and notes payable			6,890,149			6,921,839
Long-term portion of operating lease liabilities			165,462			169,051
Long-term portion of contingent consideration			21,323			21,333
Deferred income taxes			1,013,742			1,041,152
Other long-term liabilities			417,640			451,571
Total liabilities			10,020,959			9,988,130
Commitments and contingencies
Equity:
Common shares: 257,211,175 shares issued and 257,145,716 shares outstanding at      December 31, 2022; 257,547,090 shares issued and 257,487,434 shares outstanding at      March 31, 2023			3,271,958			3,274,564
Additional paid-in capital			244,076			238,484
Accumulated other comprehensive loss			(56,830)			(60,572)
Treasury shares: 65,459 and 59,656 shares at December 31, 2022 and March 31, 2023,      respectively			-			-
Retained earnings			3,649,494			3,781,519
Total Waste Connections' equity			7,108,698			7,233,995
Noncontrolling interest in subsidiaries			4,946			4,969
Total equity			7,113,644			7,238,964
Total liabilities and equity		$	17,134,603		$	17,227,094

 

WASTE CONNECTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2022 AND 2023 (Unaudited) (in thousands of U.S. dollars)
		Three months ended March 31,
		2022			2023
Cash flows from operating activities:
Net income		$	180,368		$	197,836
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on disposal of assets and impairments			2,090			1,910
Depreciation			179,950			204,059
Amortization of intangibles			37,635			39,282
Deferred income taxes, net of acquisitions			38,378			28,229
Current period provision for expected credit losses			3,022			2,247
Amortization of debt issuance costs			1,195			1,621
Share-based compensation			14,635			18,469
Interest accretion			4,448			4,884
Adjustments to contingent consideration			(52)			(637)
Other			382			(2,937)
Net change in operating assets and liabilities, net of acquisitions			(21,154)			(52,605)
Net cash provided by operating activities			440,897			442,358
Cash flows from investing activities:
Payments for acquisitions, net of cash acquired			(355,212)			(144,611)
Capital expenditures for property and equipment			(152,318)			(175,786)
Proceeds from disposal of assets			15,012			1,260
Other			2,637			1,378
Net cash used in investing activities			(489,881)			(317,759)
Cash flows from financing activities:
Proceeds from long-term debt			1,305,288			336,649
Principal payments on notes payable and long-term debt			(505,597)			(320,027)
Payment of contingent consideration recorded at acquisition date			(3,571)			(1,319)
Change in book overdraft			87			5,421
Payments for repurchase of common shares			(424,999)			-
Payments for cash dividends			(59,391)			(65,788)
Tax withholdings related to net share settlements of equity-based compensation			(17,236)			(22,966)
Debt issuance costs			(4,382)			-
Proceeds from issuance of shares under employee share purchase plan			1,554			1,841
Proceeds from sale of common shares held in trust			305			765
Net cash provided by (used in) financing activities			292,058			(65,424)
Effect of exchange rate changes on cash, cash equivalents and restricted cash			595			(54)
Net increase in cash, cash equivalents and restricted cash			243,669			59,121
Cash, cash equivalents and restricted cash at beginning of period			219,615			181,364
Cash, cash equivalents and restricted cash at end of period		$	463,284		$	240,485

 

ADDITIONAL STATISTICS
(in thousands of U.S. dollars, except where noted)

Solid Waste Internal Growth:  The following table reflects a breakdown of the components of our solid waste internal growth for the three months ended March 31, 2023:

		Three months ended March 31, 2023
Core Price			11.0 %
Surcharges			0.8 %
Volume			(1.3 %)
Recycling			(1.9 %)
Foreign Exchange Impact			(0.9 %)
Total			7.7 %

 

Revenue Breakdown: The following table reflects a breakdown of our revenue for the three month periods ended March 31, 2022 and 2023:

		Three months ended March 31, 2022
		Revenue			Inter-company Elimination			Reported Revenue			%
Solid Waste Collection		$	1,199,452		$	(2,883)		$	1,196,569		72.7	%
Solid Waste Disposal and Transfer			517,722			(213,019)			304,703		18.5	%
Solid Waste Recycling			63,094			(2,573)			60,521		3.7	%
E&P Waste Treatment, Recovery and Disposal			43,555			(2,732)			40,823		2.5	%
Intermodal and Other			45,693			(2,054)			43,639		2.6	%
Total		$	1,869,516		$	(223,261)		$	1,646,255		100.0	%

 

		Three months ended March 31, 2023
		Revenue			Inter-company Elimination			Reported Revenue			%
Solid Waste Collection		$	1,434,647		$	(5,514)		$	1,429,133		75.2	%
Solid Waste Disposal and Transfer			616,954			(262,445)			354,509		18.7	%
Solid Waste Recycling			31,301			(623)			30,678		1.6	%
E&P Waste Treatment, Recovery and Disposal			51,759			(3,624)			48,135		2.5	%
Intermodal and Other			38,212			(164)			38,048		2.0	%
Total		$	2,172,873		$	(272,370)		$	1,900,503		100.0	%

 

Contribution from Acquisitions: The following table reflects revenues from acquisitions, net of divestitures, for the three month periods ended March 31, 2022 and 2023:

		Three months ended March 31,
		2022			2023
Acquisitions, net		$	110,007		$	132,109

 

ADDITIONAL STATISTICS (continued)
(in thousands of U.S. dollars, except where noted)

 

Other Cash Flow Items: The following table reflects cash interest and cash taxes for the three month periods ended March 31, 2022 and 2023:

		Three months ended March 31,
		2022			2023
Cash Interest Paid		$	32,159		$	55,131
Cash Taxes Paid			17,389			11,326

 

Debt to Book Capitalization at March 31, 2023:  49%

Internalization for the three months ended March 31, 2023:  56%

Days Sales Outstanding for the three months ended March 31, 2023:  39 (23 net of deferred revenue)

Share Information for the three months ended March 31, 2023:

Basic shares outstanding		257,372,942
Dilutive effect of equity-based awards		616,029
Diluted shares outstanding		257,988,971

 

NON-GAAP RECONCILIATION SCHEDULE
(in thousands of U.S. dollars, except where noted)

Reconciliation of Adjusted EBITDA:

Adjusted EBITDA, a non-GAAP financial measure, is provided supplementally because it is widely used by investors as a performance and valuation measure in the solid waste industry.  Management uses adjusted EBITDA as one of the principal measures to evaluate and monitor the ongoing financial performance of Waste Connections' operations.  Waste Connections defines adjusted EBITDA as net income attributable to Waste Connections, plus or minus net income (loss) attributable to noncontrolling interests, plus income tax provision, plus interest expense, less interest income, plus depreciation and amortization expense, plus closure and post-closure accretion expense, plus or minus any loss or gain on impairments and other operating items, plus other expense, less other income.  Waste Connections further adjusts this calculation to exclude the effects of other items management believes impact the ability to assess the operating performance of its business.  This measure is not a substitute for, and should be used in conjunction with, GAAP financial measures.  Other companies may calculate adjusted EBITDA differently. 

		Three months ended March 31,
		2022			2023
Net income attributable to Waste Connections		$	180,324		$	197,813
Plus: Net income attributable to noncontrolling interests			44			23
Plus: Income tax provision			48,839			54,389
Plus: Interest expense			41,324			68,353
Less: Interest income			(137)			(2,715)
Plus: Depreciation and amortization			217,585			243,341
Plus: Closure and post-closure accretion			4,096			4,520
Plus: Impairments and other operating items			1,878			1,865
Plus/(Less): Other expense (income), net			3,466			(3,174)
Adjustments:
Plus: Transaction-related expenses(a)			4,540			2,081
Plus: Fair value changes to equity awards(b)			161			373
Adjusted EBITDA		$	502,120		$	566,869
As % of revenues			30.5 %			29.8 %

____________________________
(a)	Reflects the addback of acquisition-related transaction costs.
(b)	Reflects fair value accounting changes associated with certain equity awards.

 

NON-GAAP RECONCILIATION SCHEDULE (continued)
(in thousands of U.S. dollars, except where noted)

Reconciliation of Adjusted Free Cash Flow:

Adjusted free cash flow, a non-GAAP financial measure, is provided supplementally because it is widely used by investors as a liquidity measure in the solid waste industry. Waste Connections calculates adjusted free cash flow as net cash provided by operating activities, plus or minus change in book overdraft, plus proceeds from disposal of assets, less capital expenditures for property and equipment and periodic distributions to noncontrolling interests. Waste Connections further adjusts this calculation to exclude the effects of items management believes impact the ability to evaluate the liquidity of its business operations. This measure is not a substitute for, and should be used in conjunction with, GAAP liquidity or financial measures. Other companies may calculate adjusted free cash flow differently.

		Three months ended March 31,
		2022			2023
Net cash provided by operating activities		$	440,897		$	442,358
Plus: Change in book overdraft			87			5,421
Plus: Proceeds from disposal of assets			15,012			1,260
Less: Capital expenditures for property and equipment			(152,318)			(175,786)
Adjustments:
Cash received for divestitures(a)			(5,671)			-
Transaction-related expenses(b)			23,404			1,249
Pre-existing Progressive Waste share-based grants(c)			76			(2)
Tax effect(d)			(1,110)			(519)
Adjusted free cash flow		$	320,377		$	273,981
As % of revenues			19.5 %			14.4 %

___________________________
(a)	Reflects the elimination of cash received in conjunction with the divestiture of certain operations.
(b)	Reflects the addback of acquisition-related transaction costs and the settlement of an acquired tax liability.
(c)	Reflects the cash settlement of pre-existing Progressive Waste share-based awards during the period.
(d)	The aggregate tax effect of footnotes (a) through (c) is calculated based on the applied tax rates for the respective periods.

 

NON-GAAP RECONCILIATION SCHEDULE (continued)
(in thousands of U.S. dollars, except per share amounts)

Reconciliation of Adjusted Net Income attributable to Waste Connections and Adjusted Net Income per Diluted Share attributable to Waste Connections:

Adjusted net income attributable to Waste Connections and adjusted net income per diluted share attributable to Waste Connections, both non-GAAP financial measures, are provided supplementally because they are widely used by investors as valuation measures in the solid waste industry.  Management uses adjusted net income attributable to Waste Connections and adjusted net income per diluted share attributable to Waste Connections as one of the principal measures to evaluate and monitor the ongoing financial performance of Waste Connections' operations.  Waste Connections provides adjusted net income attributable to Waste Connections to exclude the effects of items management believes impact the comparability of operating results between periods.  Adjusted net income attributable to Waste Connections has limitations due to the fact that it excludes items that have an impact on the Company's financial condition and results of operations.  Adjusted net income attributable to Waste Connections and adjusted net income per diluted share attributable to Waste Connections are not a substitute for, and should be used in conjunction with, GAAP financial measures.  Other companies may calculate these non-GAAP financial measures differently. 

		Three months ended March 31,
		2022			2023
Reported net income attributable to Waste Connections		$	180,324		$	197,813
Adjustments:
Amortization of intangibles(a)			37,635			39,282
Impairments and other operating items(b)			1,878			1,865
Transaction-related expenses(c)			4,540			2,081
Fair value changes to equity awards(d)			161			373
Tax effect(e)			(11,092)			(11,024)
Adjusted net income attributable to Waste Connections		$	213,446		$	230,390
Diluted earnings per common share attributable to Waste Connections' common shareholders:
Reported net income		$	0.69		$	0.77
Adjusted net income		$	0.82		$	0.89

____________________________
(a)	Reflects the elimination of the non-cash amortization of acquisition-related intangible assets.
(b)	Reflects adjustments for impairments and other operating items.
(c)	Reflects the addback of acquisition-related transaction costs.
(d)	Reflects fair value accounting changes associated with certain equity awards.
(e)	The aggregate tax effect of the adjustments in footnotes (a) through (d) is calculated based on the applied tax rates for the respective periods.

 

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SOURCE Waste Connections, Inc.

FAQ

What was Waste Connections' revenue for the first quarter of 2023?

Waste Connections reported revenue of $1.901 billion for Q1 2023.

How much net income did Waste Connections generate in Q1 2023?

The company's net income for Q1 2023 was $197.8 million.

What is the adjusted EBITDA for Waste Connections in Q1 2023?

Waste Connections reported an adjusted EBITDA of $566.9 million in Q1 2023.

What challenges did Waste Connections face in Q1 2023?

The company faced weather-related impacts on solid waste activities and a decline in resource recovery values.

What is the outlook for Waste Connections for the full year of 2023?

Waste Connections is on track to meet its full year outlook, with potential upside from acquisitions and improvements in commodity values.