WASTE CONNECTIONS REPORTS FOURTH QUARTER 2023 RESULTS AND PROVIDES 2024 OUTLOOK

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Insights

The reported results for Waste Connections, Inc. indicate a robust financial performance, with a revenue increase of 8.9% in Q4 and 11.2% for the full year. The adjusted EBITDA margin expansion is particularly noteworthy, showing operational efficiency and cost management effectiveness. The margin's expansion by 200 basis points in Q4 and 70 basis points year over year suggests a strong control over expenses relative to revenue growth, which is commendable in the waste management industry known for its capital and operational intensity.

The acquisition strategy has contributed significantly to revenue, with a notable $215 million in annualized revenue from acquisitions in 2023. The focus on E&P waste disposal assets acquisition aligns with the industry trend of vertical integration, providing control over more stages of the waste management process. Investors should monitor how these acquisitions integrate into the existing operations and contribute to the bottom line in the long term.

The emphasis on adjusted free cash flow, which stands at 15.3% of revenue, highlights the company's ability to generate cash after accounting for capital expenditures. This is a critical metric for investors as it reflects the company's potential to pursue growth opportunities, pay dividends, or reduce debt. The projection of continued margin expansion and double-digit revenue growth for 2024 is optimistic, suggesting confidence in the company's strategic initiatives and market conditions.

The waste management sector is typically characterized by steady demand, given the essential nature of waste services. Waste Connections' focus on price-led organic solid waste growth is a strategic move to leverage this demand stability while improving profitability. The reported 8.7% core pricing growth indicates the company's pricing power in the market, which can be a result of limited competition or differentiated services.

The company's performance in the commodity-driven revenue segment is also of interest. Fluctuations in recovered commodity values can impact revenue unpredictably, but the company has managed to overcome headwinds and still achieve margin expansion. This resilience against commodity price volatility is a positive sign for investors.

Looking ahead, the forecasted adjusted EBITDA growth of over 13% and the margin expansion of 120 basis points for 2024 are ambitious targets. The company's ability to meet these targets amidst potential economic headwinds will be a key indicator of its operational excellence and strategic foresight. Furthermore, the focus on employee retention and safety, leading to multi-year lows in turnover and incident rates, can contribute to long-term operational stability and cost savings.

Waste Connections' financial results and projections must be contextualized within the broader economic environment. The company's strong performance amidst a period of inflationary pressures reflects efficient cost management and the ability to pass costs onto customers without losing market share. The waste management industry often has inelastic demand, which can be advantageous during inflationary times.

The reduction of inflationary pressures mentioned in the outlook could further bolster the company's financial performance in 2024. Lower inflation rates can reduce operating costs and capital expenditure, potentially leading to higher profit margins. However, investors should remain cautious and consider the potential for economic downturns or regulatory changes that could affect the industry.

The company's acquisition activities and improvements in recovered commodity values are seen as potential upsides to the 2024 outlook. These factors, combined with the company's operational strategies, could lead to outsized growth. However, the success of acquisitions depends on integration and market conditions, which can be unpredictable. Therefore, while the outlook is promising, it is important to remain vigilant of macroeconomic and industry-specific risks.

02/13/2024 - 04:05 PM

Fourth Quarter Highlights

Revenue of $2.036 billion, up 8.9% year over year
Net income^(a) of $126.8 million, and adjusted EBITDA^(b) of $656.0 million, up 16.4% year over year
Adjusted EBITDA^(b) margin of 32.2% of revenue, up 200 basis points year over year
Momentum from accelerating margin expansion and acquisition activity sets up 2024 for outsized growth

Full Year 2023 Highlights

Revenue of $8.022 billion, up 11.2% year over year
Net income of $762.8 million, and adjusted net income^(b) of $1.081 billion
Adjusted EBITDA^(b) of $2.523 billion, up 13.6%, and 31.5% of revenue, up 70 basis points year over year
Net cash provided by operating activities of $2.127 billion and adjusted free cash flow^(b) of $1.224 billion
Completes acquisitions with approximately $215 million of total annualized revenue in 2023

Expectations for 2024

Adjusted EBITDA growth of over 13%
Outsized adjusted EBITDA^(b) margin expansion of 120 basis points, or 32.7%
Revenue contribution of approximately 4% from acquisitions already completed
Additional acquisitions, further increases in values for recovered commodities or reduction of inflationary pressures to provide upside to 2024 outlook

TORONTO, Feb. 13, 2024 /PRNewswire/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the fourth quarter of 2023 and outlook for 2024.

"Adjusted EBITDA^(b) margin expansion of 200 basis points in Q4 capped off a remarkable year for Waste Connections, driven by solid execution and continued improvement in operating trends. Solid waste organic growth led by 8.7% core pricing was bolstered by improvements in commodity-driven revenues during the quarter, providing momentum for 2024. Acquisition activity also accelerated into year-end, as we announced the acquisition of the $225 million (US$) revenue E&P waste disposal-oriented assets of Secure Energy in Western Canada, which closed February 1^st, bringing expected 2024 acquisition revenue contribution to approximately $325 million, with dialogue ongoing," said Ronald J. Mittelstaedt, President and Chief Executive Officer.

"Looking at our differentiated results during the full year 2023, we delivered 70 basis points adjusted EBITDA^(b) margin expansion after overcoming 60 basis points in headwinds from recovered commodity values to report industry-leading margin of 31.5%. Double-digit growth in both revenue and adjusted EBITDA^(b) from price-led organic solid waste growth and outsized acquisition contribution, along with disciplined execution and focus on quality of revenue, drove adjusted free cash flow^(b) of $1.224 billion, or 15.3% of revenue," added Mr. Mittelstaedt. "Moreover, both employee turnover and safety incident rates exited 2023 at multi-year lows, setting up 2024 for continued improvement in trends, along with the opportunity for outsized margin expansion."

Mr. Mittelstatedt concluded, "We are extremely pleased by our 2023 results and our positioning for outsized growth in 2024. We applaud the resilience of our 23,000 dedicated employees who enabled us to deliver on our commitments and once again drive industry-leading results. Their efforts have already positioned us for 120 basis points adjusted EBITDA^(b) margin expansion in 2024 on approaching double-digit revenue growth, with upside from continued improvement in recovered commodity values or inflationary pressures, as well as any additional acquisition activity."

Q4 2023 Results

Revenue in the fourth quarter totaled $2.036 billion, up from $1.869 billion in the year ago period. Operating income was $224.5 million, which included $169.6 million in impairments primarily associated with adjustments to landfill closure and post-closure costs and $2.9 million primarily associated with transaction-related expenses. This compares to operating income of $312.0 million in the fourth quarter of 2022, which included $4.7 million primarily in transaction-related expenses. Net income in the fourth quarter was $126.8 million, or $0.49 per share on a diluted basis of 258.3 million shares. In the year ago period, the Company reported net income of $194.4 million, or $0.75 per share on a diluted basis of 258.0 million shares.

Adjusted net income^(b) in the fourth quarter was $285.5 million, or $1.11 per diluted share, up from $229.8 million, or $0.89 per diluted share, in the prior year period. Adjusted EBITDA^(b) in the fourth quarter was $656.0 million, as compared to $563.6 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.

Full Year 2023 Results

For the year ended December 31, 2023, revenue was $8.022 billion, up from $7.212 billion in the year ago period. Operating income was $1.236 billion, which included $238.8 million primarily related to adjustments associated with landfill closure and post-closure costs and other impairments, $10.7 million associated with transaction-related expenses and $14.4 million primarily related to executive separation costs and fair value changes to equity awards. In the year ago period, operating income was $1.242 billion, which included $43.2 million primarily attributable to transaction-related expenses and impairments and other operating items.

Net income for the year ended December 31, 2023 was $762.8 million, or $2.95 per share on a diluted basis of 258.1 million shares. In the year ago period, the Company reported net income of $835.7 million, or $3.24 per share on a diluted basis of 258.0 million shares.

Adjusted net income^(b) for the year ended December 31, 2023 was $1.081 billion, or $4.19 per diluted share, as compared to $985.3 million, or $3.82 per diluted share, in the year ago period. Adjusted EBITDA^(b) for the year ended December 31, 2023 was $2.523 billion, up from $2.221 billion in the prior year period.

2024 Outlook

Waste Connections also announced its outlook for 2024, which assumes no change in the current economic environment. The Company's outlook excludes any impact from additional acquisitions that may close during the year, and expensing of transaction-related items. The outlook provided below is forward looking, and actual results may differ materially depending on risks and uncertainties detailed at the end of this release and in our periodic filings with the U.S. Securities and Exchange Commission and the securities commissions or similar regulatory authorities in Canada. Certain components of the outlook for 2024 are subject to quarterly fluctuations. See reconciliations in the attached tables.

Revenue is estimated at approximately $8.750 billion;
Net income is estimated at approximately $1.096 billion;
Adjusted EBITDA^(b) is estimated at approximately $2.860 billion and 32.7% of revenue, up 120 basis points year over year;
Net cash provided by operating activities is estimated at approximately $2.350 billion;
Capital expenditures are estimated at $1.150 billion, including $150 million for Renewable Natural Gas (RNG) facilities; and
Adjusted free cash flow^(b) is estimated at $1.200 billion, including $150 million in RNG-related capex and $75 million in closure-related outlays at the Chiquita Canyon Landfill; adjusted free cash flow^(b)normalized for RNG and Chiquita outlays is estimated at $1.425 billion.

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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.

Q4 2023 Earnings Conference Call

Waste Connections will be hosting a conference call related to fourth quarter earnings on February 14^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 February 21, 2024, by calling 877-344-7529 (within North America) or 412-317-0088 (international) and entering Passcode #4262752.

Waste Connections will be filing a Form 8-K on EDGAR and on SEDAR (as an "Other" document) prior to markets opening on February 14^th, providing the Company's first quarter 2024 outlook for revenue, price plus volume growth for solid waste, and adjusted EBITDA^(b).

About Waste Connections

Waste Connections (wasteconnections.com) is an integrated solid waste services company that provides non-hazardous waste collection, transfer and disposal services, including by rail, along with resource recovery primarily through recycling and renewable fuels generation. The Company serves approximately nine million residential, commercial and industrial customers in mostly exclusive and secondary markets across 44 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. and Canada, as well as intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest. 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 and focused 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. Visit wasteconnections.com/sustainability for more information and updates on our progress towards targeted achievement.

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 2024 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 AND TWELVE MONTHS ENDED DECEMBER 31, 2022 AND 2023 (Unaudited) (in thousands of U.S. dollars, except share and per share amounts)

	Three months ended December 31,				Twelve months ended December 31,
	2022		2023		2022		2023

Revenues	$	1,869,302	$	2,035,609	$	7,211,859	$	8,021,951
Operating expenses:
Cost of operations		1,137,973		1,195,620		4,336,012		4,744,513
Selling, general and administrative		177,763		192,752		696,467		799,119
Depreciation		201,111		213,291		763,285		845,638
Amortization of intangibles		41,719		39,833		155,675		157,573
Impairments and other operating items		(1,237)		169,595		18,230		238,796
Operating income		311,973		224,518		1,242,190		1,236,312

Interest expense		(64,766)		(69,728)		(202,331)		(274,642)
Interest income		3,376		2,464		5,950		9,350
Other income, net		781		4,135		3,154		12,481
Income before income tax provision		251,364		161,389		1,048,963		983,501

Income tax provision		(57,063)		(34,760)		(212,962)		(220,675)
Net income		194,301		126,629		836,001		762,826
Plus/(less): Net loss (income) attributable to noncontrolling interests		51		124		(339)		(26)
Net income attributable to Waste Connections	$	194,352	$	126,753	$	835,662	$	762,800

Earnings per common share attributable to Waste Connections' common shareholders:
Basic	$	0.76	$	0.49	$	3.25	$	2.96

Diluted	$	0.75	$	0.49	$	3.24	$	2.95

Shares used in the per share calculations:
Basic		257,219,843		257,636,137		257,383,578		257,551,129
Diluted		257,974,749		258,303,370		258,038,801		258,149,244


Cash dividends per common share	$	0.255	$	0.285	$	0.945	$	1.05

WASTE CONNECTIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands of U.S. dollars, except share and per share amounts)

	December 31, 2022		December 31, 2023
ASSETS
Current assets:
Cash and equivalents	$	78,637	$	78,399
Accounts receivable, net of allowance for credit losses of $22,939 and $23,553 at December 31, 2022 and 2023, respectively		833,862		856,953
Prepaid expenses and other current assets		205,146		206,433
Total current assets		1,117,645		1,141,785

Restricted cash		102,727		105,639
Restricted investments		68,099		70,350
Property and equipment, net		6,950,915		7,228,331
Operating lease right-of-use assets		192,506		261,782
Goodwill		6,902,297		7,404,400
Intangible assets, net		1,673,917		1,603,541
Other assets, net		126,497		100,048
Total assets	$	17,134,603	$	17,915,876
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	638,728	$	642,455
Book overdraft		15,645		14,855
Deferred revenue		325,002		355,203
Accrued liabilities		431,247		521,428
Current portion of operating lease liabilities		35,170		32,533
Current portion of contingent consideration		60,092		94,996
Current portion of long-term debt and notes payable		6,759		26,462
Total current liabilities		1,512,643		1,687,932

Long-term portion of debt and notes payable		6,890,149		6,724,771
Long-term portion of operating lease liabilities		165,462		238,440
Long-term portion of contingent consideration		21,323		20,034
Deferred income taxes		1,013,742		1,022,480
Other long-term liabilities		417,640		524,438
Total liabilities		10,020,959		10,218,095
Commitments and contingencies
Equity:
Common shares: 257,211,175 shares issued and 257,145,716 shares outstanding at December 31, 2022; 257,659,921 shares issued and 257,600,479 shares outstanding at December 31, 2023		3,271,958		3,276,661
Additional paid-in capital		244,076		284,284
Accumulated other comprehensive loss		(56,830)		(9,826)
Treasury shares: 65,459 and 59,442 shares at December 31, 2022 and 2023, respectively		-		-
Retained earnings		3,649,494		4,141,690
Total Waste Connections' equity		7,108,698		7,692,809
Noncontrolling interest in subsidiaries		4,946		4,972
Total equity		7,113,644		7,697,781
Total liabilities and equity	$	17,134,603	$	17,915,876

WASTE CONNECTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS TWELVE MONTHS ENDED DECEMBER 31, 2022 AND 2023 (Unaudited) (in thousands of U.S. dollars)

	Twelve months ended December 31,
	2022		2023
Cash flows from operating activities:
Net income	$	836,001	$	762,826
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on disposal of assets and impairments		9,519		38,877
Adjustment to closure and post-closure liabilities		-		159,547
Depreciation		763,285		845,638
Amortization of intangibles		155,675		157,573
Deferred income taxes, net of acquisitions		93,481		6,329
Current period provision for expected credit losses		17,353		17,430
Amortization of debt issuance costs		5,454		6,483
Share-based compensation		63,485		70,436
Interest accretion		17,668		22,720
Payment of contingent consideration recorded in earnings		(2,982)		-
Adjustments to contingent consideration		(1,030)		30,367
Other		(8,217)		(3,943)
Net change in operating assets and liabilities, net of acquisitions		72,800		12,534
Net cash provided by operating activities		2,022,492		2,126,817

Cash flows from investing activities:
Payments for acquisitions, net of cash acquired		(2,206,901)		(676,793)
Capital expenditures for property and equipment		(912,677)		(934,000)
Proceeds from disposal of assets		30,676		31,581
Other		1,731		(1,867)
Net cash used in investing activities		(3,087,171)		(1,581,079)

Cash flows from financing activities:
Proceeds from long-term debt		4,816,146		1,818,765
Principal payments on notes payable and long-term debt		(3,073,985)		(2,052,153)
Payment of contingent consideration recorded at acquisition date		(16,911)		(13,317)
Change in book overdraft		(1,076)		(790)
Payments for repurchase of common shares		(424,999)		-
Payments for cash dividends		(243,013)		(270,604)
Tax withholdings related to net share settlements of equity-based compensation		(18,358)		(31,009)
Debt issuance costs		(13,271)		-
Proceeds from issuance of shares under employee share purchase plan		3,270		3,909
Proceeds from sale of common shares held in trust		660		794
Net cash provided by (used in) financing activities		1,028,463		(544,405)

Effect of exchange rate changes on cash, cash equivalents and restricted cash		(2,035)		1,341

Net increase (decrease) in cash, cash equivalents and restricted cash		(38,251)		2,674
Cash, cash equivalents and restricted cash at beginning of year		219,615		181,364
Cash, cash equivalents and restricted cash at end of year	$	181,364	$	184,038

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 and twelve month periods ended December 31, 2023:

	Three months ended December 31, 2023		Twelve months ended December 31, 2023
Core Price		8.7 %		9.5 %
Surcharges		(0.8 %)		(0.5 %)
Volume		(2.3 %)		(2.0 %)
Recycling		0.8 %		(0.8 %)
Foreign Exchange Impact		(0.1 %)		(0.5 %)
Total		6.3 %		5.7 %

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


	Three months ended December 31, 2022
	Revenue		Inter-company Elimination		Reported Revenue		%
Solid Waste Collection	$	1,385,682	$	(6,093)	$	1,379,589	73.8	%
Solid Waste Disposal and Transfer		619,176		(254,381)		364,795	19.5	%
Solid Waste Recycling		26,031		(496)		25,535	1.4	%
E&P Waste Treatment, Recovery and Disposal		55,857		(3,296)		52,561	2.8	%
Intermodal and Other		48,865		(2,043)		46,822	2.5	%
Total	$	2,135,611	$	(266,309)	$	1,869,302	100.0	%

	Three months ended December 31, 2023
	Revenue		Inter-company Elimination		Reported Revenue		%
Solid Waste Collection	$	1,501,882	$	(4,220)	$	1,497,662	73.6	%
Solid Waste Disposal and Transfer		672,318		(279,231)		393,087	19.3	%
Solid Waste Recycling		41,316		(1,462)		39,854	2.0	%
E&P Waste Treatment, Recovery and Disposal		59,780		(3,677)		56,103	2.7	%
Intermodal and Other		49,066		(163)		48,903	2.4	%
Total	$	2,324,362	$	(288,753)	$	2,035,609	100.0	%

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


	Three months ended December 31,					Twelve months ended December 31,
	2022		2023		2022			2023
Acquisitions, net	$	149,994	$	51,011	$		552,001	$	407,313

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 and twelve month periods ended December 31, 2022 and 2023:


	Three months ended December 31,				Twelve months ended December 31,
	2022		2023		2022		2023
Cash Interest Paid	$	58,883	$	69,868	$	177,424	$	260,923
Cash Taxes Paid		46,556		81,470		100,156		207,020

Debt to Book Capitalization as of December 31, 2023: 47%

Internalization for the three months ended December 31, 2023: 55%

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

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


Basic shares outstanding		257,636,138
Dilutive effect of equity-based awards		667,232
Diluted shares outstanding		258,303,370

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, plus loss on early extinguishment of debt. 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 December 31,				Twelve months ended December 31,
	2022		2023		2022		2023
Net income attributable to Waste Connections	$	194,352	$	126,753	$	835,662	$	762,800
Plus/(Less): Net income (loss) attributable to noncontrolling interests		(51)		(124)		339		26
Plus: Income tax provision		57,063		34,760		212,962		220,675
Plus: Interest expense		64,766		69,728		202,331		274,642
Less: Interest income		(3,376)		(2,464)		(5,950)		(9,350)
Plus: Depreciation and amortization		242,830		253,124		918,960		1,003,211
Plus: Closure and post-closure accretion		4,105		5,909		16,253		19,605
Plus/(Less): Impairments and other operating items		(1,237)		169,595		18,230		238,796
Less: Other income, net		(781)		(4,135)		(3,154)		(12,481)
Adjustments:
Plus: Transaction-related expenses^(a)		6,239		3,639		24,933		10,653
Plus/(Less): Fair value changes to equity awards^(b)		(263)		(1,791)		86		(1,726)
Plus: Executive separation costs^(c)		-		1,042		-		16,105
Adjusted EBITDA	$	563,647	$	656,036	$	2,220,652	$	2,522,956

As % of revenues		30.2 %		32.2 %		30.8 %		31.5 %

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(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.


	Twelve months ended December 31,
	2022		2023
Net cash provided by operating activities	$	2,022,492	$	2,126,817
Less: Change in book overdraft		(1,076)		(790)
Plus: Proceeds from disposal of assets		30,676		31,581
Less: Capital expenditures for property and equipment		(912,677)		(934,000)
Adjustments:
Payment of contingent consideration recorded in earnings^(a)		2,982		-
Cash received for divestitures^(b)		(5,671)		(6,194)
Transaction-related expenses^(c)		30,825		5,519
Executive separation costs ^(d)		-		1,686
Pre-existing Progressive Waste share-based grants^(e)		286		1,285
Tax effect^(f)		(2,993)		(1,772)
Adjusted free cash flow	$	1,164,844	$	1,224,132

As % of revenues		16.2 %		15.3 %

___________________________
(a)	Reflects the addback of acquisition-related payments for contingent consideration that were recorded as expenses in earnings and as a component of cash flows from operating activities as the amounts paid exceeded the fair value of the contingent consideration recorded at the acquisition date.
(b)	Reflects the elimination of cash received in conjunction with the divestiture of certain operations.
(c)	Reflects the addback of acquisition-related transaction costs and in 2022, the settlement of an acquired tax liability.
(d)	Reflects the cash component of severance expense associated with an executive departure.
(e)	Reflects the cash settlement of pre-existing Progressive Waste share-based awards during the period.
(f)	The aggregate tax effect of footnotes (a) through (e) 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 a valuation measure 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 December 31,				Twelve months ended December 31,
	2022		2023		2022		2023
Reported net income attributable to Waste Connections	$	194,352	$	126,753	$	835,662	$	762,800
Adjustments:
Amortization of intangibles^(a)		41,719		39,833		155,675		157,573
Impairments and other operating items^(b)		(1,237)		169,595		18,230		238,796
Transaction-related expenses^(c)		6,239		3,639		24,933		10,653
Fair value changes to equity awards^(d)		(263)		(1,791)		86		(1,726)
Executive separation costs^(e)		-		1,042		-		16,105
Tax effect^(f)		(11,053)		(53,592)		(49,312)		(102,948)
Adjusted net income attributable to Waste Connections	$	229,757	$	285,479	$	985,274	$	1,081,253
Diluted earnings per common share attributable to Waste Connections' common shareholders:
Reported net income	$	0.75	$	0.49	$	3.24	$	2.95
Adjusted net income	$	0.89	$	1.11	$	3.82	$	4.19

____________________________
(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)	Reflects the cash and non-cash components of severance expense associated with an executive departure.
(f)	The aggregate tax effect of the adjustments in footnotes (a) through (e) is calculated based on the applied tax rates for the respective periods.

2024 OUTLOOK
NON-GAAP RECONCILIATION SCHEDULE
(in thousands of U.S. dollars, except where noted)

Reconciliation of Adjusted EBITDA:

		2024 Outlook
		Estimates	Observation
Net income attributable to Waste Connections	$	1,096,000
Plus: Income tax provision		336,000	Approximate 23.5% effective rate
Plus: Interest expense, net		280,000
Plus: Depreciation and Depletion		948,000	Approximately 10.8% of revenue
Plus: Amortization		172,000	Approximately 2.0% of revenue
Plus: Closure and post-closure accretion		28,000
Adjusted EBITDA	$	2,860,000	Approximately 32.7% of revenue

Reconciliation of Adjusted Free Cash Flow:

	2024 Outlook Estimates
Net cash provided by operating activities^(a)	$	2,350,000
Less: Capital expenditures^(b)		(1,150,000)
Adjusted free cash flow	$	1,200,000

____________________________
(a)	Net cash provided by operating activities includes $75 million in closure-related outlays at the Chiquita Canyon Landfill.
(b)	Capital expenditures of $1.150 billion includes $150 million associated with renewable natural gas facilities.

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SOURCE Waste Connections, Inc.

FAQ

What was Waste Connections' revenue in the fourth quarter of 2023?

Waste Connections reported revenue of $2.036 billion in the fourth quarter of 2023.

How much was Waste Connections' net income for the full year of 2023?

Waste Connections' net income for the full year of 2023 was $762.8 million.

What was the adjusted EBITDA margin expansion in Q4 2023?

The adjusted EBITDA margin expanded by 200 basis points in Q4 2023.

What is Waste Connections' ticker symbol?

Waste Connections' ticker symbol is WCN.

WASTE CONNECTIONS REPORTS FOURTH QUARTER 2023 RESULTS AND PROVIDES 2024 OUTLOOK

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WASTE CONNECTIONS REPORTS FOURTH QUARTER 2023 RESULTS AND PROVIDES 2024 OUTLOOK

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What was Waste Connections' revenue in the fourth quarter of 2023?

How much was Waste Connections' net income for the full year of 2023?

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