Waste Connections Inc WCN

Fourth Quarter Highlights

• Price-led organic growth and acquisition activity drive Q4 results above expectations and provide higher entry point into 2023
• Revenue of $1.869 billion, net income^(a) of $194.4 million, and adjusted EBITDA^(b) of $563.6 million, or 30.2% of revenue, above expectations
• Net income and adjusted net income^(b) of $0.75 and $0.89 per share, respectively

Full Year 2022 Highlights

• Revenue of $7.212 billion, up 17.2%
• Net income of $835.7 million, or $3.24 per share, and adjusted net income^(b) of $985.3 million, or $3.82 per share, up 18.3%
• Adjusted EBITDA^(b) of $2.221 billion, up 15.7%, and 30.8% of revenue, up 10 basis points year over year, excluding acquisitions
• Net cash provided by operating activities of $2.022 billion, up 19.1%, and adjusted free cash flow^(b) of $1.165 billion, up 15.4%
• Completes acquisitions with approximately $640 million of total annualized revenue in 2022

Expectations for 2023

• Strong pricing and acquisition growth to drive both double-digit percentage increase in revenue, and adjusted EBITDA* margin expansion
• Revenue of approximately $8.05 billion, up 11.6%
• Net income of approximately $961 million and adjusted EBITDA^(b) of approximately $2.50 billion, or about 31.1% of revenue
• Additional acquisitions, increases in recycled commodities and renewable fuels values, or reduction of inflationary pressures to provide upside to 2023 outlook

TORONTO, Feb. 15, 2023 /PRNewswire/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the fourth quarter of 2022 and outlook for 2023.   

"Q4 topped off an extraordinary year for Waste Connections, highlighted by continuing outperformance during the period and providing a higher entry point and enhanced visibility for 2023.  Strong operational execution and over 10% solid waste pricing, along with acquisitions closed during the period, once again provided for better than expected results.  We more than offset inflationary pressures and commodity-related headwinds to expand adjusted EBITDA* margin by 30 basis points, excluding the margin dilutive impact of acquisitions completed since the year-ago period," said Worthing F. Jackman, President and Chief Executive Officer.

"Looking at the full year, double-digit percentage growth in both revenue and adjusted EBITDA, along with adjusted EBITDA margin expansion excluding the impact of acquisitions, continued to differentiate our results.  We overcame elevated wage, fuel and inflationary pressures, and a 70% drop in recycled commodity values in the second half of the year, with an acceleration in pricing during the year providing momentum for higher core pricing in 2023.  Moreover, we reported full year 2022 adjusted free cash flow of $1.165 billion or 16.2% of revenue, while navigating continuing uncertainties regarding timing of manufacturer fleet deliveries and related payments," continued Mr. Jackman.  "2022 acquisition activity also outpaced expectations for a total of approximately $640 million in acquired annualized revenues, which, along with activity year to date, already provides acquisition contribution of  5% in 2023, with additional dialogue ongoing." 

Mr. Jackman concluded, "Our 2022 results are a testament to the culture of accountability that has been integral to Waste Connections' twenty-five year history of outperformance and value creation.  The tireless efforts of our over 22,000 dedicated employees have positioned us for double-digit revenue growth and additional adjusted EBITDA margin expansion in 2023 in spite of an expected 100 basis points margin headwind at current recovered commodity values, with upside from any improvement in these values or inflationary pressures, as well as any additional acquisition activity."

Q4 2022 Results

Revenue in the fourth quarter totaled $1.869 billion, up from $1.624 billion in the year ago period.  Operating income was $312.0 million, which included $4.7 million primarily in transaction-related expenses.  This compares to operating income of $249.3 million in the fourth quarter of 2021, which included $28.4 million primarily related to impairments and other transaction-related expenses.  Net income in the fourth quarter was $194.4 million, or $0.75 per share on a diluted basis of 258.0 million shares.  In the year ago period, the Company reported net income of $166.3 million, or $0.64 per share on a diluted basis of 261.3 million shares.   

Adjusted net income^(b) in the fourth quarter was $229.8 million, or $0.89 per diluted share, up from $217.1 million, or $0.83 per diluted share, in the prior year period.  Adjusted EBITDA^(b) in the fourth quarter was $563.6 million, as compared to $495.4 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 2022 Results

For the year ended December 31, 2022, revenue was $7.212 billion, up from $6.151 billion in the year ago period.  Operating income, which included $43.2 million primarily attributable to transaction-related expenses and impairments and other operating items, was $1.242 billion, as compared to operating income of $1.040 billion in 2021, which included $52.0 million in impairments and other operating items, fair value changes in equity awards and transaction-related expenses.

Net income for the year ended December 31, 2022 was $835.7 million, or $3.24 per share on a diluted basis of 258.0 million shares, including a $16.4 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 year ago period, the Company reported net income of $618.0 million, or $2.36 per share on a diluted basis of 261.7 million shares.  

Adjusted net income^(b) for the year ended December 31, 2022 was $985.3 million, or $3.82 per diluted share, as compared to $846.6 million, or $3.23 per diluted share, in the year ago period. Adjusted EBITDA^(b) for the year ended December 31, 2022 was $2.221 billion, up from $1.919 billion in the prior year period.

2023 Outlook

Waste Connections also announced its outlook for 2023, 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 2023 are subject to quarterly fluctuations.  See reconciliations in the attached tables.

• Revenue is estimated at approximately $8.050 billion;
• Net income is estimated at approximately $961 million;
• Adjusted EBITDA^(b) is estimated at approximately $2.500 billion, or about 31.1% of revenue;
• Net cash provided by operating activities is estimated at approximately $2.120 billion;
• Capital expenditures are estimated at $925 million, including $50 million in delayed fleet deliveries from the prior year; proceeds from disposal of assets are estimated at $30 million; and
• Adjusted free cash flow^(b) is estimated at $1.225 billion.

Q4 2022 Earnings Conference Call

Waste Connections will be hosting a conference call related to fourth quarter earnings on February 16^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 23, 2023, by calling 877-344-7529 (within North America) or 412-317-0088 (international) and entering Passcode #1793448.

Waste Connections will be filing a Form 8-K on EDGAR and on SEDAR (as an "Other" document) prior to markets opening on February 16^th, providing the Company's first 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 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.

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 –

 

 

 

 

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, 2022:

 

Revenue Breakdown: The following table reflects a breakdown of our revenue for the three month periods ended December 31, 2021 and 2022:

 

 

Contribution from Acquisitions: The following table reflects revenues from acquisitions, net of divestitures, for the three and twelve month periods ended December 31, 2021 and 2022:

 

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, 2021 and 2022:

 

Debt to Book Capitalization as of December 31, 2022:  49%

Internalization for the three months ended December 31, 2022:  54%

Days Sales Outstanding for the three months ended December 31, 2022:  41 (25 net of deferred revenue)

Share Information for the three months ended December 31, 2022:

 

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. 

 

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 valuation and liquidity measure in the solid waste industry.  Management uses adjusted free cash flow as one of the principal measures to evaluate and monitor the ongoing financial performance of Waste Connections' operations.  Waste Connections defines 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 distributions to noncontrolling interests.  Waste Connections further adjusts this calculation to exclude the effects of 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 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. 

 

2023 OUTLOOK
NON-GAAP RECONCILIATION SCHEDULE
(in thousands of U.S. dollars, except where noted)

Reconciliation of Adjusted EBITDA:

 

Reconciliation of Adjusted Free Cash Flow:

 

 

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SOURCE Waste Connections, Inc.