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Accelerating solid waste pricing growth and E&P waste activity drive better than expected Q2 results
Revenue of $1.816 billion, up 18.4%
Net income(a) of $224.1 million, and adjusted EBITDA(b) of $566.8 million, up 16.9%
Adjusted EBITDA(b) margin of 31.2% of revenue, in line with outlook and flat year over year, excluding acquisitions
Net income of $0.87 per share, and adjusted net income(b) of $1.00 per share, up 23.5%
Year to date net cash provided by operating activities of $973.7 million and adjusted free cash flow(b) of $638.4 million, or 18.4% of revenue
Year to date signed or closed acquisitions with approximately $470 million of total annualized revenue
Increases full year 2022 outlook to revenue of approximately $7.125 billion, net income of approximately $837.5 million, adjusted EBITDA(b) of approximately $2.190 billion, net cash provided by operating activities of approximately $1.974 billion and adjusted free cash flow(b) of approximately $1.160 billion
TORONTO, Aug. 2, 2022 /CNW/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the second quarter of 2022 and updated its outlook for 2022.
"Accelerating solid waste pricing and E&P waste activity drove a top-to-bottom beat in the period. Solid waste pricing growth of 8.8% enabled us to overcome increased inflationary pressures during the period and deliver adjusted EBITDA(b) margin in line with our outlook for Q2 and flat on a year over year basis excluding the margin dilutive impact from acquisitions completed since the year ago period," said Worthing F. Jackman, President and Chief Executive Officer.
"Our outperformance in the first half of 2022, expected further sequential increases in solid waste pricing growth, continuing strength in E&P waste activity, and acquisitions closed year to date, position us to update our outlook for the full year to revenue of approximately $7.125 billion, adjusted EBITDA(b) of approximately $2.190 billion and adjusted free cash flow(b) of approximately $1.160 billion, exceeding our initial outlook as provided in February and another reflection of our culture of accountability in a challenging operating environment."
Mr. Jackman added, "As anticipated, acquisition activity is pacing well above average. We have closed approximately $245 million in annualized revenues, with another approximately $225 million in total annualized revenue under definitive agreements expected to close during the third quarter, subject to customary closing conditions, and our pipeline remains quite robust. As such, we believe we are well-positioned for double digit revenue growth in 2023 along with margin expansion from continuing solid waste pricing strength and rollover contribution from acquisitions already signed or closed year to date; additional acquisitions expected to close later this year and early next year would provide further growth."
Q2 2022 Results
Revenue in the second quarter totaled $1.816 billion, up from $1.534 billion in the year ago period. Operating income was $329.6 million, which included $6.8 million primarily in impairments and other operating items. This compares to operating income of $266.8 million in the second quarter of 2021, which included $12.5 million primarily related to fair value accounting changes to equity awards. Net income in the second quarter was $224.1 million, or $0.87 per share on a diluted basis of 257.7 million shares. In the year ago period, the Company reported net income of $177.0 million, or $0.68 per share on a diluted basis of 261.4 million shares.
Adjusted net income(b) in the second quarter was $257.1 million, or $1.00 per diluted share, versus $210.9 million, or $0.81 per diluted share, in the prior year period. Adjusted EBITDA(b) in the second quarter was $566.8 million, as compared to $484.9 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, 2022, revenue was $3.463 billion, up from $2.930 billion in the year ago period. Operating income, which included $13.4 million primarily attributable to transaction-related expenses, was $603.4 million, as compared to operating income of $505.2 million in 2021, which included $14.0 million primarily related to fair value changes in equity awards.
Net income for the six months ended June 30, 2022 was $404.4 million, or $1.57 per share on a diluted basis of 258.1 million shares. In the year ago period, the Company reported net income of $337.4 million, or $1.29 per share on a diluted basis of 262.3 million shares.
Adjusted net income(b) for the six months ended June 30, 2022 was $470.6 million, or $1.82 per diluted share, compared to $396.3 million, or $1.51 per diluted share, in the year ago period. Adjusted EBITDA(b) for the six months ended June 30, 2022 was $1.069 billion, as compared to $918.1 million in the prior year period.
Updated 2022 Outlook
Waste Connections also updated its outlook for 2022, 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 2022 are subject to quarterly fluctuations. See reconciliations in the attached tables.
Revenue is estimated to be approximately $7.125 billion, as compared to our original revenue outlook of approximately $6.875 billion.
Net income is estimated to be approximately $837.5 million, and adjusted EBITDA(b) is estimated to be approximately $2.190 billion, or about 30.7% of revenue, as compared to our original adjusted EBITDA(b) outlook of $2.145 billion or 31.2% of revenue.
Capital expenditures are estimated to be approximately $850 million, in line with our original outlook.
Net cash provided by operating activities is estimated to be approximately $1.974 billion, and adjusted free cash flow(b) of approximately $1.160 billion, or about 16.3% of revenue, as compared to our original adjusted free cash flow(b) outlook of $1.150 billion or 16.7% 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 over $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 through reduced incidents and enhancing employee engagement through improved voluntary turnover and Servant Leadership scores. The Company's 2021 Sustainability Report provides progress updates on its targets and investments towards their achievement. For more information, visit the Waste Connections website at wasteconnections.com/sustainability.
(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
Q2 2022 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, listeners may access the call by dialing 800-747-0365 (within North America) or 212-231-2939 (international) approximately 10 minutes prior to the scheduled start time; a passcode is not required. A replay of the conference call will be available until August 10, 2022, by calling 800-633-8284 (within North America) or 402-977-9140 (international) and entering Passcode #22019767.
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 2022 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.
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 2022 and 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 –
Mary Anne Whitney / (832) 442-2253
Joe Box / (832) 442-2153
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME
THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2022
(in thousands of U.S. dollars, except share and per share amounts)
Three months ended
Six months ended
Cost of operations
Selling, general and administrative
Amortization of intangibles
Impairments and other operating items
Other income (expense), net
Income before income tax provision
Income tax provision
Less: Net income attributable to noncontrolling interests
Net income attributable to Waste Connections
Earnings per common share attributable to Waste Connections' common shareholders:
Shares used in the per share calculations:
Cash dividends per common share
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars, except share and per share amounts)
Cash and equivalents
Accounts receivable, net of allowance for credit losses of $18,480 and $20,253 at
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use assets
Intangible assets, net
Other assets, net