News Releases

Waste Connections Reports Second Quarter 2022 Results And Raises Full Year Outlook

  • 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 /PRNewswire/ -- 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 –

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 SIX MONTHS ENDED JUNE 30, 2021 AND 2022

(Unaudited)

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

Three months ended
June 30,

  

Six months ended
June 30,

  
   

2021

  

2022

  

2021

  

2022

  
                   

Revenues

  

$

1,533,931

  

$

1,816,435

  

$

2,929,874

  

$

3,462,690

  

Operating expenses:

                          

Cost of operations

    

901,191

    

1,087,892

    

1,727,111

    

2,077,410

  

Selling, general and administrative

    

157,943

    

168,404

    

299,365

    

331,818

  

Depreciation

    

169,221

    

188,937

    

326,624

    

368,887

  

Amortization of intangibles

    

32,707

    

37,462

    

64,899

    

75,098

  

Impairments and other operating items

    

6,081

    

4,150

    

6,715

    

6,028

  

Operating income

    

266,788

    

329,590

    

505,160

    

603,449

  
                           

Interest expense

    

(41,328)

    

(45,079)

    

(83,753)

    

(86,404)

  

Interest income

    

744

    

652

    

1,848

    

790

  

Other income (expense), net

    

(1,235)

    

(2,649)

    

2,312

    

(6,114)

  

Income before income tax provision

    

224,969

    

282,514

    

425,567

    

511,721

  
                           

Income tax provision

    

(47,868)

    

(58,307)

    

(88,159)

    

(107,146)

  

Net income

    

177,101

    

224,207

    

337,408

    

404,575

  

Less: Net income attributable to noncontrolling interests

    

(54)

    

(133)

    

(52)

    

(177)

  

Net income attributable to Waste Connections

  

$

177,047

  

$

224,074

  

$

337,356

  

$

404,398

  
                           

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

                          

Basic

  

$

0.68

  

$

0.87

  

$

1.29

  

$

1.57

  
                           

Diluted

  

$

0.68

  

$

0.87

  

$

1.29

  

$

1.57

  
                           

Shares used in the per share calculations:

                          

Basic

    

260,951,405

    

257,179,434

    

261,791,088

    

257,555,033

  

Diluted

    

261,418,573

    

257,736,745

    

262,269,600

    

258,140,714

  
                           
                           

Cash dividends per common share

  

$

0.205

  

$

0.23

  

$

0.41

  

$

0.46

  

 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

December 31,
2021

  

June 30,
2022

  

ASSETS

              

Current assets:

              

Cash and equivalents

  

$

147,441

  

$

217,808

  

Accounts receivable, net of allowance for credit losses of $18,480 and $20,253 at
December 31, 2021 and June 30, 2022, respectively

    

709,614

    

797,877

  

Prepaid expenses and other current assets

    

175,722

    

242,050

  

Total current assets

    

1,032,777

    

1,257,735

  

Restricted cash

    

72,174

    

106,736

  

Restricted investments

    

59,014

    

56,234

  

Property and equipment, net

    

5,721,949

    

5,858,175

  

Operating lease right-of-use assets

    

160,567

    

167,099

  

Goodwill

    

6,187,643

    

6,457,910

  

Intangible assets, net

    

1,350,597

    

1,400,249

  

Other assets, net

    

115,203

    

112,103

  

Total assets

  

$

14,699,924

  

$

15,416,241

  

 

LIABILITIES AND EQUITY

              

Current liabilities:

              

Accounts payable

  

$

392,868

  

$

496,622

  

Book overdraft

    

16,721

    

16,668

  

Deferred revenue

    

273,720

    

305,724

  

Accrued liabilities

    

442,596

    

417,725

  

Current portion of operating lease liabilities

    

38,017

    

35,101

  

Current portion of contingent consideration

    

62,804

    

59,371

  

Current portion of long-term debt and notes payable

    

6,020

    

6,342

  

Total current liabilities

    

1,232,746

    

1,337,553

  
               

Long-term portion of debt and notes payable

    

5,040,500

    

5,633,524

  

Long-term portion of operating lease liabilities

    

129,628

    

139,191

  

Long-term portion of contingent consideration

    

31,504

    

31,264

  

Deferred income taxes

    

850,921

    

994,766

  

Other long-term liabilities

    

421,080

    

410,281

  

Total liabilities

    

7,706,379

    

8,546,579

  

Commitments and contingencies

              

Equity:

              

Common shares: 260,283,158 shares issued and 260,212,496 shares outstanding at
    December 31, 2021; 257,166,050 shares issued and 257,100,591 shares outstanding at
    June 30, 2022

    

3,693,027

    

3,270,242

  

Additional paid-in capital

    

199,482

    

210,767

  

Accumulated other comprehensive income

    

39,584

    

41,438

  

Treasury shares: 70,662 and 65,459 shares at December 31, 2021 and June 30, 2022,
     respectively

    

-

    

-

  

Retained earnings

    

3,056,845

    

3,342,431

  

Total Waste Connections' equity

    

6,988,938

    

6,864,878

  

Noncontrolling interest in subsidiaries

    

4,607

    

4,784

  

Total equity

    

6,993,545

    

6,869,662

  
   

$

14,699,924

  

$

15,416,241

  

 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2021 AND 2022

(Unaudited)

(in thousands of U.S. dollars)
               
   

Six months ended June 30,

  
   

2021

  

2022

  

Cash flows from operating activities:

              

Net income

  

$

337,408

  

$

404,575

  

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

              

Loss on disposal of assets and impairments

    

6,229

    

6,048

  

Depreciation

    

326,624

    

368,887

  

Amortization of intangibles

    

64,899

    

75,098

  

Deferred income taxes, net of acquisitions

    

3,520

    

84,991

  

Current period provision for expected credit losses

    

4,903

    

6,907

  

Amortization of debt issuance costs

    

2,689

    

2,484

  

Share-based compensation

    

28,724

    

27,716

  

Interest accretion

    

8,199

    

8,798

  

Payment of contingent consideration recorded in earnings

    

(520)

    

-

  

Adjustments to contingent consideration

    

89

    

(1,030)

  

Other

    

(1,118)

    

(2,173)

  

Net change in operating assets and liabilities, net of acquisitions

    

66,832

    

(8,623)

  

Net cash provided by operating activities

    

848,478

    

973,678

  
               

Cash flows from investing activities:

              

Payments for acquisitions, net of cash acquired

    

(67,493)

    

(546,982)

  

Capital expenditures for property and equipment

    

(271,392)

    

(371,428)

  

Proceeds from disposal of assets

    

7,906

    

16,894

  

Other

    

(1,815)

    

9,566

  

Net cash used in investing activities

    

(332,794)

    

(891,950)

  
               

Cash flows from financing activities:

              

Proceeds from long-term debt

    

311,000

    

1,517,732

  

Principal payments on notes payable and long-term debt

    

(267,050)

    

(920,107)

  

Payment of contingent consideration recorded at acquisition date

    

(5,595)

    

(8,898)

  

Change in book overdraft

    

(190)

    

(54)

  

Payments for repurchase of common shares

    

(305,640)

    

(424,999)

  

Payments for cash dividends

    

(107,330)

    

(118,812)

  

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

    

(18,510)

    

(17,266)

  

Debt issuance costs

    

-

    

(4,668)

  

Proceeds from issuance of shares under employee share purchase plan

    

-

    

1,554

  

Proceeds from sale of common shares held in trust

    

131

    

660

  

Net cash provided by (used in) financing activities

    

(393,184)

    

25,142

  
               

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

    

873

    

(1,941)

  
               

Net increase in cash, cash equivalents and restricted cash

    

123,373

    

104,929

  

Cash, cash equivalents and restricted cash at beginning of period

    

714,389

    

219,615

  

Cash, cash equivalents and restricted cash at end of period

  

$

837,762

  

$

324,544

  

 

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, 2022:    
         
   

Three months ended

June 30, 2022

  

Six months ended

June 30, 2022

Core Price

    

7.2 %

    

6.8 %

Surcharges

    

1.6 %

    

1.2 %

Volume

    

(0.7 %)

    

(0.1 %)

Recycling

    

0.4 %

    

0.7 %

Foreign Exchange Impact

    

(0.5 %)

    

(0.3 %)

Total

    

8.0 %

    

8.3 %

 

Revenue Breakdown: The following table reflects a breakdown of our revenue for the three month periods ended June 30, 2021
and 2022:
                           
   

 Three months ended June 30, 2021

  
   

Revenue

  

Inter-company
Elimination

  

Reported
Revenue

  

%

Solid Waste Collection

  

$

1,098,319

  

$

(3,232)

  

$

1,095,087

  

71.4

%

Solid Waste Disposal and Transfer

    

544,257

    

(215,481)

    

328,776

  

21.4

%

Solid Waste Recycling

    

41,539

    

(1,113)

    

40,426

  

2.7

%

E&P Waste Treatment, Recovery and Disposal

    

34,607

    

(3,454)

    

31,153

  

2.0

%

Intermodal and Other

    

38,590

    

(101)

    

38,489

  

2.5

%

Total

  

$

1,757,312

  

$

(223,381)

  

$

1,533,931

  

100.0

%

 

   

 Three months ended June 30, 2022

  
   

Revenue

  

Inter-company
Elimination

  

Reported
Revenue

  

%

Solid Waste Collection

  

$

1,297,402

  

$

(3,391)

  

$

1,294,011

  

71.2

%

Solid Waste Disposal and Transfer

    

601,194

    

(238,162)

    

363,032

  

20.0

%

Solid Waste Recycling

    

67,504

    

(2,823)

    

64,681

  

3.6

%

E&P Waste Treatment, Recovery and Disposal

    

54,155

    

(3,712)

    

50,443

  

2.8

%

Intermodal and Other

    

46,310

    

(2,042)

    

44,268

  

2.4

%

Total

  

$

2,066,565

  

$

(250,130)

  

$

1,816,435

  

100.0

%

 

Contribution from Acquisitions: The following table reflects revenues from acquisitions, net of divestitures, for the three and six
month periods ended June 30, 2021 and 2022:
                         
   

Three months ended
June 30,

  

Six months ended
June 30,
   

2021

  

2022

  

2021

  

2022

Acquisitions, net

  

$

44,125

  

$

141,356

  

$

84,666

  

$

251,363

 

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, 2021 and 2022:
                         
   

Three months ended
June 30,

  

Six months ended
June 30,
   

2021

  

2022

  

2021

  

2022

Cash Interest Paid

  

$

56,516

  

$

43,853

  

$

81,962

  

$

76,013

Cash Taxes Paid

    

32,072

    

20,423

    

60,693

    

37,812

 

Debt to Book Capitalization as of June 30, 2022:  45%

 

Internalization for the three months ended June 30, 2022:  55%

 

Days Sales Outstanding for the three months ended June 30, 2022:  40 (25 net of deferred revenue)

 

Share Information for the three months ended June 30, 2022:
     

Basic shares outstanding

  

257,179,434

Dilutive effect of equity-based awards 

  

557,311

Diluted shares outstanding

  

257,736,745

 

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. 
                         
   

Three months ended
June 30,

  

Six months ended
June 30,
   

2021

  

2022

  

2021

  

2022

Net income attributable to Waste Connections

  

$

177,047

  

$

224,074

  

$

337,356

  

$

404,398

Plus: Net income attributable to noncontrolling interests

    

54

    

133

    

52

    

177

Plus: Income tax provision

    

47,868

    

58,307

    

88,159

    

107,146

Plus: Interest expense

    

41,328

    

45,079

    

83,753

    

86,404

Less: Interest income

    

(744)

    

(652)

    

(1,848)

    

(790)

Plus: Depreciation and amortization

    

201,928

    

226,399

    

391,523

    

443,985

Plus: Closure and post-closure accretion

    

3,666

    

3,992

    

7,375

    

8,087

Plus: Impairments and other operating items

    

6,081

    

4,150

    

6,715

    

6,028

Plus/(Less): Other expense (income), net

    

1,235

    

2,649

    

(2,312)

    

6,114

Adjustments:

                        

Plus: Transaction-related expenses(a)

    

57

    

3,692

    

583

    

8,232

Plus: Fair value changes to equity awards(b)

    

6,385

    

(1,009)

    

6,723

    

(847)

Adjusted EBITDA

  

$

484,905

  

$

566,814

  

$

918,079

  

$

1,068,934
                         

As % of revenues

    

31.6 %

    

31.2 %

    

31.3 %

    

30.9 %

____________________________

(a)      Reflects the addback of acquisition-related transaction costs.

(b)     Reflects fair value accounting changes associated with certain equity awards.

 

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. 
                         
   

Three months ended
June 30,

  

Six months ended
June 30,
   

2021

  

2022

  

2021

  

2022

Net cash provided by operating activities

  

$

448,081

  

$

532,781

  

$

848,478

  

$

973,678

Plus/(Less): Change in book overdraft

    

16,659

    

(141)

    

(190)

    

(54)

Plus: Proceeds from disposal of assets

    

5,826

    

1,881

    

7,906

    

16,894

Less: Capital expenditures for property and equipment

    

(174,599)

    

(219,110)

    

(271,392)

    

(371,428)

Adjustments:

                        

   Payment of contingent consideration recorded in earnings(a)

    

-

    

-

    

520

    

-

Cash received for divestitures(b)

    

-

    

-

    

-

    

(5,671)

Transaction-related expenses(c)

    

57

    

3,692

    

583

    

27,096

Pre-existing Progressive Waste share-based grants(d)

    

47

    

(64)

    

144

    

12

Tax effect(e)

    

(26)

    

(1,056)

    

(214)

    

(2,165)

Adjusted free cash flow

  

$

296,045

  

$

317,983

  

$

585,835

  

$

638,362
                         

As % of revenues

    

19.3 %

    

17.5 %

    

20.0 %

    

18.4 %

___________________________

(a)      Reflects the addback of acquisition-related payments for contingent consideration that were recorded as expenses in earnings and as a component of
cash flows from operating activities as the amounts paid exceeded the fair value of the contingent consideration recorded at the acquisition date.

(b)     Reflects the elimination of cash received in conjunction with the divestiture of certain operations.

(c)      Reflects the addback of acquisition-related transaction costs and the settlement of an acquired tax liability.

(d)     Reflects the cash settlement of pre-existing Progressive Waste share-based awards during the period.

(e)      The aggregate tax effect of footnotes (a) through (d) is calculated based on the applied tax rates for the respective periods.
 

 

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. 
                         
   

Three months ended
June 30,

  

Six months ended
June 30,
   

2021

  

2022

  

2021

  

2022

Reported net income attributable to Waste Connections

  

$

177,047

  

$

224,074

  

$

337,356

  

$

404,398

Adjustments:

                        

Amortization of intangibles(a)

    

32,707

    

37,462

    

64,899

    

75,098

Impairments and other operating items(b)

    

6,081

    

4,150

    

6,715

    

6,028

Transaction-related expenses(c) 

    

57

    

3,692

    

583

    

8,232

Fair value changes to equity awards(d)

    

6,385

    

(1,009)

    

6,723

    

(847)

Tax effect(e)

    

(11,393)

    

(11,224)

    

(19,935)

    

(22,316)

Adjusted net income attributable to Waste Connections

  

$

210,884

  

$

257,145

  

$

396,341

  

$

470,593

Diluted earnings per common share attributable to Waste Connections' common shareholders:

                        

Reported net income

  

$

0.68

  

$

0.87

  

$

1.29

  

$

1.57

Adjusted net income

  

$

0.81

  

$

1.00

  

$

1.51

  

$

1.82

____________________________

(a)      Reflects the elimination of the non-cash amortization of acquisition-related intangible assets.

(b)     Reflects the addback of impairments and other operating items.

(c)      Reflects the addback of acquisition-related transaction costs.

(d)     Reflects fair value accounting changes associated with certain equity awards.

(e)      The aggregate tax effect of the adjustments in footnotes (a) through (d) is calculated based on the applied tax rates for the respective periods.

 

UPDATED 2022 OUTLOOK

NON-GAAP RECONCILIATION SCHEDULE

(in thousands of U.S. dollars, except where noted)
     

Reconciliation of Adjusted EBITDA:
     
   

Updated 2022 Outlook
   

Estimates

  

Observation

Net income attributable to Waste Connections

$

837,500

    

    Plus: Income tax provision (a)

  

232,973

  

Approximate 21.8% effective rate

    Plus: Interest expense, net

  

180,000

    

    Plus: Depreciation and Depletion

  

752,000

  

Approximately 10.6% of revenue

    Plus: Amortization

  

152,000

    

    Plus: Closure and post-closure accretion

  

16,000

    

    Plus: Impairments and other operating items (b)

  

6,028

    

    Plus: Other income, net (b)

  

6,114

    

    Adjustments: (b)

        

        Plus: Transaction-related expenses

  

8,232

    

        Plus: Fair value changes to equity awards

  

(847)

    

Adjusted EBITDA

$

2,190,000

  

Approximately 30.7% of revenue

___________________________

(a)      Approximately 21.8% full year effective tax rate, including amounts reported for the six month period ended June 30, 2022.

(b)     Reflects amounts reported for the six month period ended June 30, 2022, as shown on page 9.

 

Reconciliation of Adjusted Free Cash Flow:
       
     

Updated

2022 Outlook

Net cash provided by operating activities

  

$

1,973,888

Less:  Change in book overdraft (a)

    

(54)

Plus: Proceeds from disposal of assets (a)

    

16,894

Less: Capital expenditures for property and equipment         

    

(850,000)

Adjustments: (a)

      

    Cash received for divestitures

    

(5,671)

    Transaction-related expenses

    

27,096

    Pre-existing Progressive Waste share-based grants

    

12

    Tax effect

    

(2,165)

Adjusted free cash flow

  

$

1,160,000
       

As % of revenues

    

16.3 %
       

___________________________

(a)      Reflects amounts reported for the six month period ended June 30, 2022, as shown on page 10.

 

 

SOURCE Waste Connections, Inc.