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Waste Connections Reports Third Quarter 2021 Results And Raises Full Year Outlook

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  • Strong execution, accelerating solid waste pricing growth and continued strength in both resource recovery values and acquisition activity again drive outsized results and increased full year outlook

  • Revenue of $1.597 billion, up 14.9% year over year, exceeding outlook

  • Reports organic growth of 11.3%, including 7.3% solid waste price + volume growth, exceeding outlook

  • Net income(a) of $114.4 million, and adjusted EBITDA(b) of $505.6 million, or 31.7% of revenue, up sequentially from Q2 and up 60 basis points year over year

  • Net income and adjusted net income(b) of $0.44 and $0.89 per share, respectively

  • Year to date net cash provided by operating activities of $1.270 billion and adjusted free cash flow(b) of $825.8 million, or 18.2% of revenue

  • Year to date closed acquisitions of approximately $240 million in annualized revenues

  • Increases regularly quarterly dividend by 12.2%

  • Provides full year 2021 revenue outlook of approximately $6.110 billion, net income of approximately $633 million, adjusted EBITDA(b) of approximately $1.910 billion, net cash from operating activities of approximately $1.689 billion and adjusted free cash flow of approximately $1.025 billion

TORONTO, Oct. 27, 2021 /CNW/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the third quarter of 2021.

Waste Connections logo. (PRNewsFoto/Waste Connections, Inc.) (PRNewsFoto/WASTE CONNECTIONS_ INC_)
Waste Connections logo. (PRNewsFoto/Waste Connections, Inc.) (PRNewsFoto/WASTE CONNECTIONS_ INC_)

"We delivered another top to bottom beat in the period on continued strength in solid waste pricing, higher recycled commodity values, and improving E&P waste activity, along with acquisitions closed during the period. More importantly, quality of revenue drove 60 basis points year-over-year adjusted EBITDA(b) margin expansion in the quarter, overcoming an estimated 40 basis points impact from margin dilutive acquisitions and hurricanes, putting us firmly on track to exceed the updated full year 2021 outlook we provided in August," said Worthing F. Jackman, President and Chief Executive Officer.

"Strong execution, proactive acceleration of solid waste pricing to address inflationary pressures, and outsized contribution from acquisitions completed in 2021, already position us for double-digit growth, underlying solid waste margin expansion and strong free cash flow conversion in 2022. Additional acquisitions expected to be completed later this year, and any continuation of trends in E&P waste activity or commodity-driven revenues, would provide incremental benefit."

Mr. Jackman continued, "As anticipated, the strength of our operating performance, free cash flow generation and balance sheet positioned us for another double-digit increase in our quarterly cash dividend, our eleventh straight year, demonstrating once again our ability to fund our differentiated growth strategy and outsized acquisition activity, along with an increasing return of capital to shareholders."

Q3 2021 Results

Revenue in the third quarter totaled $1.597 billion, up from $1.390 billion in the year ago period. Operating income was $285.1 million, which included $5.6 million in acquisition-related costs, $3.1 million of impairments and other operating items, and $0.9 million in fair value accounting changes to equity awards. This compares to operating income of $230.7 million in the third quarter of 2020, which included $7.9 million of costs primarily resulting from impairments and other operating items and acquisition-related costs. Net income in the third quarter was $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. In the year ago period, the Company reported net income of $158.0 million, or $0.60 per share on a diluted basis of 263.5 million shares.

Adjusted net income(b) in the third quarter was $233.1 million, or $0.89 per diluted share, versus $188.6 million, or $0.72 per diluted share, in the prior year period. Adjusted EBITDA(b) in the third quarter was $505.6 million and 31.7% of revenue, as compared to $432.6 million and 31.1% of revenue 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, 2021, revenue was $4.527 billion, up from $4.048 billion in the year ago period. Operating income, which included $9.8 million in impairments and other operating items, $7.6 million in fair value accounting changes to equity awards and $6.2 million in acquisition-related costs, was $790.3 million, as compared to operating income of $215.3 million for the same period in 2020, which included $453.1 million primarily related to impairments and other operating items.

Net income for the nine months ended September 30, 2021 was $451.7 million, or $1.72 per share on a diluted basis of 261.9 million shares. In the year ago period, the Company reported net income of $74.0 million, or $0.28 per share on a diluted basis of 263.7 million shares.

Adjusted net income(b) for the nine months ended September 30, 2021 was $629.5 million, or $2.39 per diluted share, compared to $517.2 million, or $1.96 per diluted share, in the year ago period. Adjusted EBITDA(b) for the nine months ended September 30, 2021 was $1.424 billion and 31.4% of revenue, up from $1.235 billion and 30.5% of revenue in the prior year period.

Updated 2021 Outlook

Waste Connections also updated its outlook for 2021, which assumes no change in the current economic environment or underlying economic trends, including as a result of or related to impacts from the COVID-19 pandemic. 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 2021 are subject to quarterly fluctuations. See reconciliations in the attached tables.

  • Revenue is estimated at approximately $6.110 billion, as compared to our revised revenue outlook of $5.975 billion provided in August.

  • Net income is estimated at approximately $633 million, and adjusted EBITDA(b) is estimated at approximately $1.910 billion, or about 31.3% of revenue, as compared to our revised adjusted EBITDA(b) outlook of $1.875 billion provided in August.

  • Capital expenditures are estimated at approximately $700 million, as compared to our revised capital expenditures outlook of approximately $675 million provided in August.

  • Net cash provided by operating activities is estimated at $1.689 billion, as compared to our revised outlook of $1.666 billion provided in August; adjusted free cash flow(b) is estimated at approximately $1.025 billion, or about 16.8% of revenue, as compared to our adjusted free cash flow outlook of $1.0 billion provided in August.

Q3 2021 Earnings Conference Call

Waste Connections will be hosting a conference call related to third quarter earnings on October 28th 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 800-915-4731 (within North America) or 212-231-2911 (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 November 4, 2021, by calling 800-633-8284 (within North America) or 402-977-9140 (international) and entering Passcode #21998075.

Waste Connections will be filing a Form 8-K on EDGAR and on SEDAR (as an "Other" document) prior to markets opening on October 28th, providing the Company's fourth quarter 2021 outlook for revenue, price plus volume growth for solid waste, and adjusted EBITDA(b).

----------------------------------------------------------------------------------------------------------------------------------------------------

(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.

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 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.

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 updated 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.

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 2021 and 2022 financial results, outlook and related assumptions, potential acquisition activity and return of capital to shareholders. 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 NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2021

(Unaudited)

(in thousands of U.S. dollars, except share and per share amounts)


















Three months ended

September 30,


Nine months ended

September 30,




2020


2021


2020


2021












Revenues


$

1,389,552


$

1,597,168


$

4,047,739


$

4,527,042


Operating expenses:














Cost of operations



828,822



946,098



2,429,957



2,673,209


Selling, general and administrative



136,003



155,520



404,213



454,885


Depreciation



157,590



171,965



459,641



498,588


Amortization of intangibles



32,653



35,337



96,062



100,237


Impairments and other operating items



3,805



3,104



442,582



9,819


Operating income



230,679



285,144



215,284



790,304
















Interest expense



(40,636)



(40,418)



(119,562)



(124,171)


Interest income



903



495



4,396



2,342


Other income (expense), net



702



3,140



(3,046)



5,452


Loss on early extinguishment of debt



-



(115,288)



-



(115,288)


Income before income tax provision



191,648



133,073



97,072



558,639
















Income tax provision



(33,657)



(18,419)



(23,654)



(106,578)


Net income



157,991



114,654



73,418



452,061


Plus (less): Net loss (income) attributable to noncontrolling interests



58



(273)



594



(325)


Net income attributable to Waste Connections


$

158,049


$

114,381


$

74,012


$

451,736
















Earnings per common share attributable to Waste Connections' common shareholders:














Basic


$

0.60


$

0.44


$

0.28


$

1.73
















Diluted


$

0.60


$

0.44


$

0.28


$

1.72
















Shares used in the per share calculations:














Basic



262,998,317



260,550,774



263,253,087



261,372,827


Diluted



263,507,486



261,145,220



263,718,001



261,879,754






























Cash dividends per common share


$

0.185


$

0.205


$

0.555


$

0.615


WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands of U.S. dollars, except share and per share amounts)












December 31,

2020


September 30,

2021


ASSETS








Current assets:








Cash and equivalents


$

617,294


$

339,479


Accounts receivable, net of allowance for credit losses of $19,380 and $20,306 at December 31, 2020 and September 30, 2021, respectively



630,264



692,051


Prepaid expenses and other current assets



160,714



128,758


Total current assets



1,408,272



1,160,288


Restricted cash



97,095



118,893


Restricted investments



57,516



58,430


Property and equipment, net



5,284,506



5,414,789


Operating lease right-of-use assets



170,923



162,640


Goodwill



5,726,650



6,006,533


Intangible assets, net



1,155,079



1,264,728


Other assets, net



92,323



88,531


Total assets


$

13,992,364


$

14,274,832


LIABILITIES AND EQUITY








Current liabilities:








Accounts payable


$

290,820


$

341,211


Book overdraft



17,079



16,527


Deferred revenue



233,596



254,135


Accrued liabilities



404,923



448,541


Current portion of operating lease liabilities



30,671



37,236


Current portion of contingent consideration



43,297



42,359


Current portion of long-term debt and notes payable



8,268



5,289


Total current liabilities



1,028,654



1,145,298










Long-term portion of debt and notes payable



4,708,678



4,869,213


Long-term portion of operating lease liabilities



147,223



132,589


Long-term portion of contingent consideration



28,439



24,592


Deferred income taxes



760,044



777,968


Other long-term liabilities



455,888



442,016


Total liabilities



7,128,926



7,391,676


Commitments and contingencies








Equity:








Common shares: 262,899,174 shares issued and 262,824,990 shares outstanding at December 31, 2020; 260,526,784 shares issued and 260,453,918 shares outstanding at September 30, 2021



4,030,368



3,726,134


Additional paid-in capital



170,555



184,995


Accumulated other comprehensive income (loss)



(651)



17,553


Treasury shares: 74,184 and 72,866 shares at December 31, 2020 and September 30, 2021, respectively



-



-


Retained earnings



2,659,001



2,949,984


Total Waste Connections' equity



6,859,273



6,878,666


Noncontrolling interest in subsidiaries



4,165



4,490


Total equity



6,863,438



6,883,156




$

13,992,364


$

14,274,832


WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2021

(Unaudited)

(in thousands of U.S. dollars)












Nine months ended September 30,




2020


2021


Cash flows from operating activities:








Net income


$

73,418


$

452,061


Adjustments to reconcile net income to net cash provided by operating activities:








Loss on disposal of assets and impairments



423,832



9,302


Depreciation



459,641



498,588


Amortization of intangibles



96,062



100,237


Loss on early extinguishment of debt



-



115,288


Deferred income taxes, net of acquisitions



(77,613)



(24,282)


Amortization of debt issuance costs



6,146



3,887


Share-based compensation



38,316



42,694


Interest accretion



12,843



12,068


Payment of contingent consideration recorded in earnings



-



(520)


Adjustments to contingent consideration



16,852



89


Other



936



(1,286)


Net change in operating assets and liabilities, net of acquisitions



135,140



61,835


Net cash provided by operating activities



1,185,573



1,269,961










Cash flows from investing activities:








Payments for acquisitions, net of cash acquired



(173,810)



(561,276)


Capital expenditures for property and equipment



(420,694)



(479,480)


Capital expenditures for undeveloped landfill property



(66,809)



-


Proceeds from disposal of assets



11,564



10,109


Other



(317)



(4,193)


Net cash used in investing activities



(650,066)



(1,034,840)










Cash flows from financing activities:








Proceeds from long-term debt



1,790,625



1,943,192


Principal payments on notes payable and long-term debt



(1,505,641)



(1,814,034)


Premiums paid on early extinguishment of debt



-



(110,617)


Payment of contingent consideration recorded at acquisition date



(2,812)



(7,998)


Change in book overdraft



(862)



(563)


Payments for repurchase of common shares



(105,654)



(305,640)


Payments for cash dividends



(145,921)



(160,754)


Tax withholdings related to net share settlements of equity-based compensation



(23,390)



(18,576)


Debt issuance costs



(11,117)



(17,997)


Proceeds from issuance of shares under employee share purchase plan



-



1,275


Proceeds from sale of common shares held in trust



679



131


Net cash used in financing activities



(4,093)



(491,581)


Effect of exchange rate changes on cash, cash equivalents and restricted cash



980



443


Net increase (decrease) in cash, cash equivalents and restricted cash



532,394



(256,017)


Cash, cash equivalents and restricted cash at beginning of period



423,221



714,389


Cash, cash equivalents and restricted cash at end of period


$

955,615


$

458,372


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
nine month periods ended September 30, 2021:











Three months ended
September 30, 2021


Nine months ended
September 30, 2021

Core Price


4.7

%


4.6

%

Surcharges


0.4

%


0.1

%

Volume


2.2

%


1.8

%

Recycling


2.1

%


1.5

%

Foreign Exchange Impact


0.7

%


1.0

%

Total


10.1

%


9.0

%

Revenue Breakdown: The following table reflects a breakdown of our revenue for the three month periods ended September 30, 2020 and 2021:
















Three months ended September 30, 2020




Revenue


Inter-company

Elimination

...

Reported

Revenue


%

Solid Waste Collection


$

1,010,497


$

(3,940)


$

1,006,557


72.4

%

Solid Waste Disposal and Transfer



514,705



(203,136)



311,569


22.4

%

Solid Waste Recycling



21,377



(656)



20,721


1.5

%

E&P Waste Treatment, Recovery and Disposal



26,218



(2,575)



23,643


1.7

%

Intermodal and Other



27,141



(79)



27,062


2.0

%

Total


$

1,599,938


$

(210,386)


$

1,389,552


100.0

%




Three months ended September 30, 2021




Revenue


Inter-company

Elimination


Reported

Revenue


%

Solid Waste Collection


$

1,137,206


$

(3,091)


$

1,134,115


71.0

%

Solid Waste Disposal and Transfer



553,974



(217,899)



336,075


21.0

%

Solid Waste Recycling



55,772



(1,354)



54,418


3.4

%

E&P Waste Treatment, Recovery and Disposal



38,519



(3,560)



34,959


2.2

%

Intermodal and Other



38,377



(776)



37,601


2.4

%

Total


$

1,823,848


$

(226,680)


$

1,597,168


100.0

...

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