WASTE CONNECTIONS REPORTS THIRD QUARTER 2022 RESULTS AND UPDATES FULL YEAR OUTLOOK
Increasing solid waste pricing growth, E&P waste activity and acquisition contribution once again drive better than expected quarterly results
Revenue of $1.880 billion, up 17.7%
Net income(a) of $236.9 million, and adjusted EBITDA(b) of $588.1 million, up 16.3%
Adjusted EBITDA(b) margin of 31.3% of revenue, above outlook and up 20 basis points year over year, excluding acquisitions
Net income of $0.92 per share, and adjusted net income(b) of $1.10 per share
Year to date net cash provided by operating activities of $1.500 billion and adjusted free cash flow(b) of $929.0 million, or 17.4% of revenue
Year to date signed or closed acquisitions with approximately $570 million of total annualized revenue
Increases regular quarterly dividend by 10.9%
TORONTO, Nov. 2, 2022 /CNW/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the third quarter of 2022 and updated its outlook for 2022.
"Strong execution once again provided for better than expected results, driven in the third quarter by continued acceleration of solid waste pricing to 10.1% and higher E&P waste activity, along with acquisitions closed during the period. Most notably, we overcame 50 basis points in incremental headwinds, primarily from the precipitous decline in recycled commodity values in September, to beat our outlook and expand adjusted EBITDA margin both sequentially and on a year-over-year basis, excluding the dilutive impact from acquisitions completed since the year ago period," said Worthing F. Jackman, President and Chief Executive Officer.
Mr. Jackman added, "As anticipated, acquisition activity continues to run well above historical levels, with $535 million in annualized revenue closed in 2022 plus an additional $35 million under definitive agreement expected to close by year end or early in 2023. These transactions include multi-market solid waste franchises in California and Oregon; integrated market expansions in Arizona and Texas; new market entries in Pennsylvania, British Columbia and Quebec; and multiple tuck-ins and market expansions within our recently established footprint in Massachusetts."
"The strength of our balance sheet, operating performance and free cash flow generation positioned us for another double-digit increase in our quarterly cash dividend, once again demonstrating our capacity for outsized acquisition activity while continuing to fund our differentiated growth strategy and increasing return of capital to shareholders."
Mr. Jackman concluded, "Our outperformance through the third quarter and acquisitions closed year to date enhance our visibility for expected double-digit revenue growth in 2023, led by pricing expected to remain at elevated levels, plus rollover contribution from acquisitions already signed or closed year to date. In addition, we expect underlying margin expansion to overcome headwinds from recent decreases in recycled commodity values."
Q3 2022 Results
Revenue in the third quarter totaled $1.880 billion, up from $1.597 billion in the year ago period. Operating income was $326.8 million, which included $25.1 million primarily in impairments and other operating items and transaction expenses. This compares to operating income of $285.1 million in the third quarter of 2021, which included $9.7 million primarily related to transaction expenses and impairments and other operating items. Net income in the third quarter was $236.9 million, or $0.92 per share on a diluted basis of 257.9 million shares, including a $15.3 million net of tax benefit, or $0.06 per share, primarily as a result of the impact from changes in foreign currency exchange rates on certain debt in the period. In the year ago period, the Company reported net income of $114.4 million, or $0.44 per share on a diluted basis of 261.1 million shares, including a net of tax loss on debt extinguishment associated with the prepayment of senior notes of $84.2 million or $0.32 per share.
Adjusted net income(b) in the third quarter was $284.9 million, or $1.10 per diluted share, versus $233.1 million, or $0.89 per diluted share, in the prior year period. Adjusted EBITDA(b) in the third quarter was $588.1 million, as compared to $505.6 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 acquisition-related items, as reflected in the detailed reconciliations in the attached tables.
Nine Months Year to Date Results
For the nine months ended September 30, 2022, revenue was $5.343 billion, up from $4.527 billion in the year ago period. Operating income, which included $38.5 million primarily attributable to impairments and other operating items and transaction-related expenses, was $930.2 million, as compared to operating income of $790.3 million in 2021, which included $23.7 million in impairments, fair value changes in equity awards and transaction expenses.
Net income for the nine months ended September 30, 2022 was $641.3 million, or $2.49 per share on a diluted basis of 258.1 million shares, including a $18.9 million net of tax benefit, or $0.07 per share, primarily as a result of the impact from changes in foreign currency exchange rates on certain debt. In the year ago period, the Company reported net income of $451.7 million, or $1.72 per share on a diluted basis of 261.9 million shares, including a net of tax loss on debt extinguishment associated with the prepayment of senior notes of $84.2 million or $0.32 per share.
Adjusted net income(b) for the nine months ended September 30, 2022 was $755.5 million, or $2.93 per diluted share, compared to $629.5 million, or $2.39 per diluted share, in the year ago period. Adjusted EBITDA(b) for the nine months ended September 30, 2022 was $1.657 billion, as compared to $1.424 billion 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 $7.190 billion, as compared to our previously revised revenue outlook of approximately $7.125 billion.
Net income is estimated to be approximately $836.7 million, and adjusted EBITDA(b) is estimated to be approximately $2.210 billion, or about 30.7% of revenue, as compared to our previously revised adjusted EBITDA(b) outlook of $2.190 billion or 30.7% 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 $1.963 billion, and adjusted free cash flow(b) is estimated at approximately $1.160 billion, or about 16.1% of revenue, as compared to our previously revised adjusted free cash flow(b) outlook of $1.160 billion or 16.3% 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 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 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.
(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. |
Q3 2022 Earnings Conference Call
Waste Connections will be hosting a conference call related to third quarter earnings on November 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 November 10, 2022, by calling 877-344-7529 (within North America) or 412-317-0088 (international) and entering Passcode #5667024.
Waste Connections will be filing a Form 8-K on EDGAR and on SEDAR (as an "Other" document) prior to markets opening on November 3rd, providing the Company's fourth 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 –
CONTACT: | |
Mary Anne Whitney / (832) 442-2253 | Joe Box / (832) 442-2153 |
WASTE CONNECTIONS, INC. | |||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME | |||||||||||||
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2022 | |||||||||||||
(Unaudited) | |||||||||||||
(in thousands of U.S. dollars, except share and per share amounts) | |||||||||||||
Three months ended | Nine months ended | ||||||||||||
2021 | 2022 | 2021 | 2022 | ||||||||||
Revenues | $ | 1,597,168 | $ | 1,879,868 | $ | 4,527,042 | $ | 5,342,558 | |||||
Operating expenses: | |||||||||||||
Cost of operations | 946,098 | 1,120,629 | 2,673,209 | 3,198,039 | |||||||||
Selling, general and administrative | 155,520 | 186,887 | 454,885 | 518,705 | |||||||||
Depreciation | 171,965 | 193,287 | 498,588 | 562,174 | |||||||||
Amortization of intangibles | 35,337 | 38,859 | 100,237 | 113,956 | |||||||||
Impairments and other operating items | 3,104 | 13,438 | 9,819 | 19,467 | |||||||||
Operating income | 285,144 | 326,768 | 790,304 | 930,217 | |||||||||
Interest expense | (40,418) | (51,161) | (124,171) | (137,565) | |||||||||
Interest income | 495 | 1,784 | 2,342 | 2,574 | |||||||||
Other income, net | 3,140 | 8,487 | 5,452 | 2,373 | |||||||||
Loss on early extinguishment of debt | (115,288) | - | (115,288) | - | |||||||||
Income before income tax provision | 133,073 | 285,878 | 558,639 | 797,599 | |||||||||
Income tax provision | (18,419) | (48,753) | (106,578) | (155,899) | |||||||||
Net income | 114,654 | 237,125 | 452,061 | 641,700 | |||||||||
Less: Net income attributable to noncontrolling interests | (273) | (213) | (325) | (390) | |||||||||
Net income attributable to Waste Connections | $ | 114,381 | $ | 236,912 | $ | 451,736 | $ | 641,310 | |||||
Earnings per common share attributable to Waste | |||||||||||||
Basic | $ | 0.44 | $ | 0.92 | $ | 1.73 | $ | 2.49 | |||||
Diluted | $ | 0.44 | $ | 0.92 | $ | 1.72 | $ | 2.49 | |||||
Shares used in the per share calculations: | |||||||||||||
Basic | 260,550,774 | 257,197,010 | 261,372,827 | 257,438,756 | |||||||||
Diluted | 261,145,220 | 257,891,635 | 261,879,754 | 258,060,751 | |||||||||
Cash dividends per common share | $ | 0.205 | $ | 0.230 | $ | 0.615 | $ | 0.690 | |||||
WASTE CONNECTIONS, INC. | |||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(Unaudited) | |||||||
(in thousands of U.S. dollars, except share and per share amounts) | |||||||
December 31, | September 30, | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and equivalents | $ | 147,441 | $ | 200,179 | |||
Accounts receivable, net of allowance for credit losses of $18,480 and $20,512 at | 709,614 | 810,932 | |||||
Prepaid expenses and other current assets | 175,722 | 219,203 | |||||
Total current assets | 1,032,777 | 1,230,314 | |||||
Restricted cash | 72,174 | 108,194 | |||||
Restricted investments | 59,014 | 55,922 | |||||
Property and equipment, net | 5,721,949 | 6,353,367 | |||||
Operating lease right-of-use assets | 160,567 | 190,860 | |||||
Goodwill | 6,187,643 | 6,574,860 | |||||
Intangible assets, net | 1,350,597 | 1,489,242 | |||||
... | |||||||