WCN Waste Connections Inc New

• Top-to-bottom beat led by solid execution in Q2 sets up increases to full year 2023 outlook
• Revenue of $2.021 billion, above outlook and up 11.3% year over year
• Net income^(a) of $209.2 million, and adjusted EBITDA^(b) of $628.9 million, above outlook
• Adjusted EBITDA^(b) margin of 31.1% of revenue, 30bps above outlook
• Net income of $0.81 per share, and adjusted net income^(b) of $1.02 per share
• Year to date net cash provided by operating activities of $1.017 billion and adjusted free cash flow^(b) of $630.0 million, or 16.1% of revenue
• Year to date closed acquisitions with over $160 million of total annualized revenue, including Arrowhead Environmental Holdings, LLC ("Arrowhead"), the largest integrated waste-to-rail disposal network in the Northeast U.S.
• Updates full year 2023 outlook to net income of approximately $931 million, increasing adjusted EBITDA^(b) to approximately $2.525 billion or 31.5% on revenue of approximately $8.025 billion

TORONTO, Aug. 2, 2023 /PRNewswire/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the second quarter of 2023 and updated its outlook for the full year. 

"We are extremely pleased by the strength of operational execution during the quarter for a solid beat on revenue and adjusted EBITDA^(b) to deliver margins 30 basis points above our outlook.  Solid waste core pricing growth of 9.8% positioned us to expand underlying solid waste collection, transfer and disposal margins by one hundred basis points in the period, largely overcoming the ongoing headwinds from year-over-year declines in recovered commodity values and continued inflationary pressures during the period," said Ronald J. Mittelstaedt, President and Chief Executive Officer. 

"Our performance in the first half of 2023, along with recent acquisitions and reduced headwinds from fuel and other commodity-related impacts, positions us to increase our full year outlook for adjusted EBITDA^(b) to approximately $2.525 billion, expanding our adjusted EBITDA^(b) margin to 31.5%, up 40 basis points from our initial outlook and up 70 basis points as compared to the prior year."

Mr. Mittelstaedt added, "The strength of our results reflects our focus on quality of revenue through the shedding of low margin volumes and furthered by strategic acquisitions, including Arrowhead, a $100 million revenue integrated transportation and disposal network with rail access providing enhanced internalization opportunities to our operations across the Northeast.  Already having completed acquisitions with over $160 million in annualized solid waste revenue year to date, we see plenty of runway and opportunity for continued activity throughout the balance of the year.  Most importantly, we are encouraged by improving trends in safety and employee retention, as we double down on human capital in our decentralized operating model, including through the realignment of our organizational structure with the addition of a sixth region and refinements to our corporate operational structure, and we look forward to driving outsized margin expansion in the second half of 2023 and into 2024."   

Q2 2023 Results

Revenue in the second quarter totaled $2.021 billion, up from $1.816 billion in the year ago period.  Operating income was $344.1 million, which included $27.8 million primarily in executive separation costs, impairments and other operating items, and transaction-related expenses.  This compares to operating income of $329.6 million in the second quarter of 2022, which included $6.8 million primarily in impairments and other operating items and transaction-related expenses.  Net income in the second quarter was $209.2 million, or $0.81 per share on a diluted basis of 258.1 million shares.  In the year ago period, the Company reported net income of $224.1 million, or $0.87 per share on a diluted basis of 257.7 million shares. 

Adjusted net income^(b) in the second quarter was $262.3 million, or $1.02 per diluted share, versus $257.1 million, or $1.00 per diluted share, in the prior year period.  Adjusted EBITDA^(b) in the second quarter was $628.9 million, as compared to $566.8 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 acquisition-related items, as reflected in the detailed reconciliations in the attached tables.

Six Months Year to Date Results

For the six months ended June 30, 2023, revenue was $3.922 billion, up from $3.463 billion in the year ago period.  Operating income, which included $32.1 million primarily attributable to executive separation costs, impairments and other operating items, and transaction-related expenses, was $658.8 million, as compared to operating income of $603.4 million in the prior year period, which included $13.4 million primarily attributable to transaction-related expenses.   

Net income for the six months ended June 30, 2023 was $407.0 million, or $1.58 per share on a diluted basis of 258.1 million shares.  In the year ago period, the Company reported net income of $404.4 million, or $1.57 per share on a diluted basis of 258.1 million shares. 

Adjusted net income^(b) for the six months ended June 30, 2023 was $492.7 million, or $1.91 per diluted share, compared to $470.6 million, or $1.82 per diluted share, in the year ago period. Adjusted EBITDA^(b) for the six months ended June 30, 2023 was $1.196  billion, as compared to $1.069 billion in the prior year period. 

Updated 2023 Outlook

Waste Connections also updated its outlook for 2023, which assumes no change in the current economic environment or underlying economic trends.  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 2023 are subject to quarterly fluctuations.  See reconciliations in the attached tables.

• Revenue is estimated to be approximately $8.025 billion, down $25 million from our original outlook to reflect a reduction in fuel and material surcharges of $35 million as a result of lower fuel costs.
• Net income is estimated to be approximately $931.0 million, and adjusted EBITDA^(b) is estimated to be approximately $2.525 billion, or about 31.5% of revenue, as compared to our original outlook for adjusted EBITDA^(b) of $2.500 billion or 31.1% of revenue.
• Capital expenditures are estimated to be approximately $950 million, up $25 million from our original outlook.
• Net cash provided by operating activities is estimated to be approximately $2.141 billion, and adjusted free cash flow^(b) is estimated to be approximately $1.225 billion, or about 15.3% of revenue.

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 for investments to meet or exceed 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.

Q3 2023 Earnings Conference Call

Waste Connections will be hosting a conference call related to second quarter earnings on August 3rd 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 August 10, 2023, by calling 877-344-7529 (within North America) or 412-317-0088 (international) and entering Passcode #3794968.   

Waste Connections will be filing a Form 8-K on EDGAR and on SEDAR (as an "Other" document) prior to markets opening on August 3rd, providing the Company's third 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, including by rail, 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 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., 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. 

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 and 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 –

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 six month periods ended June 30, 2023:

Revenue Breakdown: The following table reflects a breakdown of our revenue for the three month periods ended June 30, 2022 and 2023:

Contribution from Acquisitions: The following table reflects revenues from acquisitions, net of divestitures, for the three and six month periods ended June 30, 2022 and 2023:

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 six month periods ended June 30, 2022 and 2023:

Debt to Book Capitalization as of June 30, 2023:  47%

Internalization for the three months ended June 30, 2023:  56%

Days Sales Outstanding for the three months ended June 30, 2023:  39 (23 net of deferred revenue)

Share Information for the three months ended June 30, 2023:

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. 

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.

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. 

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SOURCE Waste Connections, Inc.