Quarterly Results

Second Quarter 2023
Waste Connections Reports Second Quarter 2023 Results And Raises Full Year Margin Outlook

  • Top-to-bottom beat led by solid execution in Q2 sets up increases to full year 2023 outlook
  • Revenue of $2.021 billion, above outlook and up 11.3% year over year
  • Net income(a) of $209.2 million, and adjusted EBITDA(b) of $628.9 million, above outlook
  • Adjusted EBITDA(b) margin of 31.1% of revenue, 30bps above outlook
  • Net income of $0.81 per share, and adjusted net income(b) of $1.02 per share
  • Year to date net cash provided by operating activities of $1.017 billion and adjusted free cash flow(b) of $630.0 million, or 16.1% of revenue
  • Year to date closed acquisitions with over $160 million of total annualized revenue, including Arrowhead Environmental Holdings, LLC ("Arrowhead"), the largest integrated waste-to-rail disposal network in the Northeast U.S.
  • Updates full year 2023 outlook to net income of approximately $931 million, increasing adjusted EBITDA(b) to approximately $2.525 billion or 31.5% on revenue of approximately $8.025 billion

TORONTO, Aug. 2, 2023 /PRNewswire/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the second quarter of 2023 and updated its outlook for the full year. 

"We are extremely pleased by the strength of operational execution during the quarter for a solid beat on revenue and adjusted EBITDA(b) to deliver margins 30 basis points above our outlook.  Solid waste core pricing growth of 9.8% positioned us to expand underlying solid waste collection, transfer and disposal margins by one hundred basis points in the period, largely overcoming the ongoing headwinds from year-over-year declines in recovered commodity values and continued inflationary pressures during the period," said Ronald J. Mittelstaedt, President and Chief Executive Officer. 

"Our performance in the first half of 2023, along with recent acquisitions and reduced headwinds from fuel and other commodity-related impacts, positions us to increase our full year outlook for adjusted EBITDA(b) to approximately $2.525 billion, expanding our adjusted EBITDA(b) margin to 31.5%, up 40 basis points from our initial outlook and up 70 basis points as compared to the prior year."

Mr. Mittelstaedt added, "The strength of our results reflects our focus on quality of revenue through the shedding of low margin volumes and furthered by strategic acquisitions, including Arrowhead, a $100 million revenue integrated transportation and disposal network with rail access providing enhanced internalization opportunities to our operations across the Northeast.  Already having completed acquisitions with over $160 million in annualized solid waste revenue year to date, we see plenty of runway and opportunity for continued activity throughout the balance of the year.  Most importantly, we are encouraged by improving trends in safety and employee retention, as we double down on human capital in our decentralized operating model, including through the realignment of our organizational structure with the addition of a sixth region and refinements to our corporate operational structure, and we look forward to driving outsized margin expansion in the second half of 2023 and into 2024."   

Q2 2023 Results

Revenue in the second quarter totaled $2.021 billion, up from $1.816 billion in the year ago period.  Operating income was $344.1 million, which included $27.8 million primarily in executive separation costs, impairments and other operating items, and transaction-related expenses.  This compares to operating income of $329.6 million in the second quarter of 2022, which included $6.8 million primarily in impairments and other operating items and transaction-related expenses.  Net income in the second quarter was $209.2 million, or $0.81 per share on a diluted basis of 258.1 million shares.  In the year ago period, the Company reported net income of $224.1 million, or $0.87 per share on a diluted basis of 257.7 million shares. 

Adjusted net income(b) in the second quarter was $262.3 million, or $1.02 per diluted share, versus $257.1 million, or $1.00 per diluted share, in the prior year period.  Adjusted EBITDA(b) in the second quarter was $628.9 million, as compared to $566.8 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, 2023, revenue was $3.922 billion, up from $3.463 billion in the year ago period.  Operating income, which included $32.1 million primarily attributable to executive separation costs, impairments and other operating items, and transaction-related expenses, was $658.8 million, as compared to operating income of $603.4 million in the prior year period, which included $13.4 million primarily attributable to transaction-related expenses.   

Net income for the six months ended June 30, 2023 was $407.0 million, or $1.58 per share on a diluted basis of 258.1 million shares.  In the year ago period, the Company reported net income of $404.4 million, or $1.57 per share on a diluted basis of 258.1 million shares. 

Adjusted net income(b) for the six months ended June 30, 2023 was $492.7 million, or $1.91 per diluted share, compared to $470.6 million, or $1.82 per diluted share, in the year ago period. Adjusted EBITDA(b) for the six months ended June 30, 2023 was $1.196  billion, as compared to $1.069 billion in the prior year period. 

Updated 2023 Outlook

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

  • Revenue is estimated to be approximately $8.025 billion, down $25 million from our original outlook to reflect a reduction in fuel and material surcharges of $35 million as a result of lower fuel costs.
  • Net income is estimated to be approximately $931.0 million, and adjusted EBITDA(b) is estimated to be approximately $2.525 billion, or about 31.5% of revenue, as compared to our original outlook for adjusted EBITDA(b) of $2.500 billion or 31.1% of revenue.
  • Capital expenditures are estimated to be approximately $950 million, up $25 million from our original outlook.
  • Net cash provided by operating activities is estimated to be approximately $2.141 billion, and adjusted free cash flow(b) is estimated to be approximately $1.225 billion, or about 15.3% 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 $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.

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 (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 2023 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, 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 August 10, 2023, by calling 877-344-7529 (within North America) or 412-317-0088 (international) and entering Passcode #3794968.   

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 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, including by rail, 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

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 and 2024 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, 2022 and 2023

(Unaudited)

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

 
   
   

Three months ended
June 30,

 

Six months ended
June 30,

 
   

2022

 

2023

 

2022

 

2023

 
                   

Revenues

 

$

1,816,435

 

$

2,021,095

 

$

3,462,690

 

$

3,921,598

 

Operating expenses:

                         

Cost of operations

   

1,087,892

   

1,197,349

   

2,077,410

   

2,344,290

 

Selling, general and administrative

   

168,404

   

216,385

   

331,818

   

410,052

 

Depreciation

   

188,937

   

213,322

   

368,887

   

417,380

 

Amortization of intangibles

   

37,462

   

39,052

   

75,098

   

78,335

 

Impairments and other operating items

   

4,150

   

10,859

   

6,028

   

12,724

 

Operating income

   

329,590

   

344,128

   

603,449

   

658,817

 
                           

Interest expense

   

(45,079)

   

(67,545)

   

(86,404)

   

(135,898)

 

Interest income

   

652

   

1,338

   

790

   

4,053

 

Other income (expense), net

   

(2,649)

   

(200)

   

(6,114)

   

2,974

 

Income before income tax provision

   

282,514

   

277,721

   

511,721

   

529,946

 
                           

Income tax provision

   

(58,307)

   

(68,551)

   

(107,146)

   

(122,940)

 

Net income

   

224,207

   

209,170

   

404,575

   

407,006

 

Plus/(Less): Net loss (income) attributable to noncontrolling interests

   

(133)

   

38

   

(177)

   

15

 

Net income attributable to Waste Connections

 

$

224,074

 

$

209,208

 

$

404,398

 

$

407,021

 
                           

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

                         

Basic

 

$

0.87

 

$

0.81

 

$

1.57

 

$

1.58

 
                           

Diluted

 

$

0.87

 

$

0.81

 

$

1.57

 

$

1.58

 
                           

Shares used in the per share calculations:

                         

Basic

   

257,179,434

   

257,596,993

   

257,555,033

   

257,485,587

 

Diluted

   

257,736,745

   

258,110,491

   

258,140,714

   

258,050,350

 
                           
                           

Cash dividends per common share

 

$

0.23

 

$

0.255

 

$

0.46

 

$

0.51

 

 

Waste Connections, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

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

 
               
   

December 31,
2022

 

June 30,
2023

 

ASSETS

             

Current assets:

             

Cash and equivalents

 

$

78,637

 

$

91,712

 

Accounts receivable, net of allowance for credit losses of $22,939 and $22,710 at
December 31, 2022 and June 30, 2023, respectively

   

833,862

   

855,479

 

Prepaid expenses and other current assets

   

205,146

   

164,485

 

Total current assets

   

1,117,645

   

1,111,676

 

Restricted cash

   

102,727

   

112,623

 

Restricted investments

   

68,099

   

73,075

 

Property and equipment, net

   

6,950,915

   

7,030,118

 

Operating lease right-of-use assets

   

192,506

   

248,967

 

Goodwill

   

6,902,297

   

6,992,466

 

Intangible assets, net

   

1,673,917

   

1,659,645

 

Other assets, net

   

126,497

   

130,957

 

Total assets

 

$

17,134,603

 

$

17,359,527

 

 

LIABILITIES AND EQUITY

             

Current liabilities:

             

Accounts payable

 

$

638,728

 

$

539,216

 

Book overdraft

   

15,645

   

15,411

 

Deferred revenue

   

325,002

   

341,408

 

Accrued liabilities

   

431,247

   

452,949

 

Current portion of operating lease liabilities

   

35,170

   

32,747

 

Current portion of contingent consideration

   

60,092

   

71,065

 

Current portion of long-term debt and notes payable

   

6,759

   

10,699

 

Total current liabilities

   

1,512,643

   

1,463,495

 
               

Long-term portion of debt and notes payable

   

6,890,149

   

6,681,384

 

Long-term portion of operating lease liabilities

   

165,462

   

224,566

 

Long-term portion of contingent consideration

   

21,323

   

21,344

 

Deferred income taxes

   

1,013,742

   

1,048,986

 

Other long-term liabilities

   

417,640

   

460,295

 

Total liabilities

   

10,020,959

   

9,900,070

 

Commitments and contingencies

             

Equity:

             

Common shares: 257,211,175 shares issued and 257,145,716 shares outstanding at
December 31, 2022; 257,614,671 shares issued and 257,555,015 shares outstanding at
June 30, 2023

   

3,271,958

   

3,274,564

 

Additional paid-in capital

   

244,076

   

255,667

 

Accumulated other comprehensive loss

   

(56,830)

   

(1,081)

 

Treasury shares: 65,459 and 59,656 shares at December 31, 2022 and June 30, 2023,
respectively

   

-

   

-

 

Retained earnings

   

3,649,494

   

3,925,376

 

Total Waste Connections' equity

   

7,108,698

   

7,454,526

 

Noncontrolling interest in subsidiaries

   

4,946

   

4,931

 

Total equity

   

7,113,644

   

7,459,457

 

Total liabilities and equity

 

$

17,134,603

 

$

17,359,527

 

 

Waste Connections, Inc.

Condensed Consolidated Statements of Cash Flows

SIX months ended JUNE 30, 2022 and 2023

(Unaudited)

(in thousands of U.S. dollars)

 
               
   

Six months ended June 30,

 
   

2022

 

2023

 

Cash flows from operating activities:

             

Net income

 

$

404,575

 

$

407,006

 

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

             

Loss on disposal of assets and impairments

   

6,048

   

12,558

 

Depreciation

   

368,887

   

417,380

 

Amortization of intangibles

   

75,098

   

78,335

 

Deferred income taxes, net of acquisitions

   

84,991

   

31,427

 

Current period provision for expected credit losses

   

6,907

   

7,035

 

Amortization of debt issuance costs

   

2,484

   

3,241

 

Share-based compensation

   

27,716

   

41,469

 

Interest accretion

   

8,798

   

9,835

 

Adjustments to contingent consideration

   

(1,030)

   

(910)

 

Other

   

(2,173)

   

(2,828)

 

Net change in operating assets and liabilities, net of acquisitions

   

(8,623)

   

12,164

 

Net cash provided by operating activities

   

973,678

   

1,016,712

 
               

Cash flows from investing activities:

             

Payments for acquisitions, net of cash acquired

   

(546,982)

   

(213,152)

 

Capital expenditures for property and equipment

   

(371,428)

   

(394,143)

 

Proceeds from disposal of assets

   

16,894

   

3,819

 

Other

   

9,566

   

(1,145)

 

Net cash used in investing activities

   

(891,950)

   

(604,621)

 
               

Cash flows from financing activities:

             

Proceeds from long-term debt

   

1,517,732

   

538,421

 

Principal payments on notes payable and long-term debt

   

(920,107)

   

(768,059)

 

Payment of contingent consideration recorded at acquisition date

   

(8,898)

   

(2,193)

 

Change in book overdraft

   

(54)

   

(234)

 

Payments for repurchase of common shares

   

(424,999)

   

-

 

Payments for cash dividends

   

(118,812)

   

(131,140)

 

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

   

(17,266)

   

(28,675)

 

Debt issuance costs

   

(4,668)

   

-

 

Proceeds from issuance of shares under employee share purchase plan

   

1,554

   

1,841

 

Proceeds from sale of common shares held in trust

   

660

   

765

 

Net cash provided by (used in) financing activities

   

25,142

   

(389,274)

 
               

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

   

(1,941)

   

154

 
               

Net increase in cash, cash equivalents and restricted cash

   

104,929

   

22,971

 

Cash, cash equivalents and restricted cash at beginning of period

   

219,615

   

181,364

 

Cash, cash equivalents and restricted cash at end of period

 

$

324,544

 

$

204,335

 

 

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, 2023:

   

Three months ended

June 30, 2023

 

Six months ended

June 30, 2023

 

Core Price

   

9.8 %

   

10.3 %

 

Surcharges

   

(0.7 %)

   

0.00 %

 

Volume

   

(1.9 %)

   

(1.6 %)

 

Recycling

   

(1.5 %)

   

(1.7 %)

 

Foreign Exchange Impact

   

(0.7 %)

   

(0.8 %)

 

Total

   

5.0 %

   

6.2 %

 

 

Revenue Breakdown: The following table reflects a breakdown of our revenue for the three month periods ended June 30, 2022 and 2023:

                           
   

 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

%

 

         

 Three months ended June 30, 2023

 
         

Revenue

 

Inter-company
Elimination

 

Reported
Revenue

 

%

Solid Waste Collection

       

$

1,485,705

 

$

(4,334)

 

$

1,481,371

 

73.3

%

Solid Waste Disposal and Transfer

         

688,965

   

(281,280)

   

407,685

 

20.2

%

Solid Waste Recycling

         

38,319

   

(991)

   

37,328

 

1.9

%

E&P Waste Treatment, Recovery and Disposal

         

58,607

   

(3,194)

   

55,413

 

2.7

%

Intermodal and Other

         

39,459

   

(161)

   

39,298

 

1.9

%

Total

       

$

2,311,055

 

$

(289,960)

 

$

2,021,095

 

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, 2022 and 2023:

                         
   

Three months ended
June 30,

 

Six months ended
June 30,

   

2022

 

2023

 

2022

 

2023

Acquisitions, net

 

$

141,356

 

$

121,285

 

$

251,363

 

$

253,394

 

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, 2022 and 2023:

                         
   

Three months ended
June 30,

 

Six months ended
June 30,

   

2022

 

2023

 

2022

 

2023

Cash Interest Paid

 

$

43,853

 

$

62,361

 

$

76,013

 

$

117,492

Cash Taxes Paid

   

20,423

   

39,713

   

37,812

   

51,040

 

Debt to Book Capitalization as of June 30, 2023:  47%

Internalization for the three months ended June 30, 2023:  56%

Days Sales Outstanding for the three months ended June 30, 2023:  39 (23 net of deferred revenue)

Share Information for the three months ended June 30, 2023:

 

     

Basic shares outstanding

 

257,596,993

Dilutive effect of equity-based awards 

 

513,498

Diluted shares outstanding

 

258,110,491

 

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,

   

2022

 

2023

 

2022

 

2023

Net income attributable to Waste Connections

 

$

224,074

 

$

209,208

 

$

404,398

 

$

407,021

Plus/(Less): Net income (loss) attributable to noncontrolling interests

   

133

   

(38)

   

177

   

(15)

Plus: Income tax provision

   

58,307

   

68,551

   

107,146

   

122,940

Plus: Interest expense

   

45,079

   

67,545

   

86,404

   

135,898

Less: Interest income

   

(652)

   

(1,338)

   

(790)

   

(4,053)

Plus: Depreciation and amortization

   

226,399

   

252,374

   

443,985

   

495,715

Plus: Closure and post-closure accretion

   

3,992

   

4,567

   

8,087

   

9,087

Plus: Impairments and other operating items

   

4,150

   

10,859

   

6,028

   

12,724

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

   

2,649

   

200

   

6,114

   

(2,974)

Adjustments:

                       

Plus: Transaction-related expenses(a)

   

3,692

   

1,824

   

8,232

   

3,905

Plus/(Less): Fair value changes to equity awards(b)

   

(1,009)

   

72

   

(847)

   

445

Plus: Executive separation costs(c)

   

-

   

15,063

   

-

   

15,063

Adjusted EBITDA

 

$

566,814

 

$

628,887

 

$

1,068,934

 

$

1,195,756

                         

As % of revenues

   

31.2 %

   

31.1 %

   

30.9 %

   

30.5 %

____________________________

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

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

(c)      Reflects the cash and non-cash components of severance expense associated with a recent executive departure. 

 

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 liquidity measure in the solid waste industry.  Waste Connections calculates 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 periodic distributions to noncontrolling interests.  Waste Connections further adjusts this calculation to exclude the effects of items management believes impact the ability to evaluate the liquidity of its business operations.  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,

   

2022

 

2023

 

2022

 

2023

Net cash provided by operating activities

 

$

532,781

 

$

574,353

 

$

973,678

 

$

1,016,712

Less: Change in book overdraft

   

(141)

   

(5,655)

   

(54)

   

(234)

Plus: Proceeds from disposal of assets

   

1,881

   

2,559

   

16,894

   

3,819

Less: Capital expenditures for property and equipment

   

(219,110)

   

(218,357)

   

(371,428)

   

(394,143)

Adjustments:

                       

Cash received for divestitures(a)

   

-

   

-

   

(5,671)

   

-

Transaction-related expenses(b)

   

3,692

   

1,015

   

27,096

   

2,264

Executive separation costs(c)

   

-

   

1,686

   

-

   

1,686

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

   

(64)

   

843

   

12

   

841

Tax effect(e)

   

(1,056)

   

(471)

   

(2,165)

   

(990)

Adjusted free cash flow

 

$

317,983

 

$

355,973

 

$

638,362

 

$

629,955

                         

As % of revenues

   

17.5 %

   

17.6 %

   

18.4 %

   

16.1 %

___________________________

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

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

(c)      Reflects the cash component of severance expense associated with a recent executive departure. 

(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,

   

2022

 

2023

 

2022

 

2023

Reported net income attributable to Waste Connections

 

$

224,074

 

$

209,208

 

$

404,398

 

$

407,021

Adjustments:

                       

Amortization of intangibles(a)

   

37,462

   

39,052

   

75,098

   

78,335

Impairments and other operating items(b)

   

4,150

   

10,859

   

6,028

   

12,724

Transaction-related expenses(c) 

   

3,692

   

1,824

   

8,232

   

3,905

Fair value changes to equity awards(d)

   

(1,009)

   

72

   

(847)

   

445

Executive separation costs(e)

   

-

   

15,063

   

-

   

15,063

Tax effect(f)

   

(11,224)

   

(13,746)

   

(22,316)

   

(24,770)

Adjusted net income attributable to Waste Connections

 

$

257,145

 

$

262,332

 

$

470,593

 

$

492,723

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

                       

Reported net income

 

$

0.87

 

$

0.81

 

$

1.57

 

$

1.58

Adjusted net income

 

$

1.00

 

$

1.02

 

$

1.82

 

$

1.91

                         
                         

____________________________

(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)      Reflects the cash and non-cash components of severance expense associated with a recent executive departure.

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

 

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

 

Reconciliation of Adjusted EBITDA:

 
   

Updated 2023 Outlook

   

Estimates

 

Observation

Net income attributable to Waste Connections

$

931,000

   

    Plus: Net income attributable to noncontrolling interests

 

200

   

    Plus: Income tax provision (a)

 

278,637

 

Approximate 23.0% effective rate

    Plus: Interest expense, net

 

265,000

   

    Plus: Depreciation and Depletion

 

845,000

 

Approximately 10.5% of revenue

    Plus: Amortization

 

158,000

   

    Plus: Closure and post-closure accretion

 

18,000

   

    Plus: Impairments and other operating items (b)

 

12,724

   

    Minus: Other income, net (b)

 

(2,974)

   

    Adjustments: (b)

       

        Plus: Transaction-related expenses

 

3,905

   

        Plus: Executive separation costs

 

15,063

   

        Plus: Fair value changes to equity awards

 

445

   

Adjusted EBITDA

$

2,525,000

 

Approximately 31.5% of revenue

         

____________________________

(a)      Approximately 23.0% full year effective tax rate, including amounts reported for the six month period ended June 30, 2023.

(b)     Reflects amounts reported for the six month period ended June 30, 2023, as shown on page 9.

 

Reconciliation of Adjusted Free Cash Flow:

 
     

Updated

2023 Outlook

Net cash provided by operating activities

 

$

2,141,433

Less:  Change in book overdraft (a)

   

(234)

Plus: Proceeds from disposal of assets

   

30,000

Less: Capital expenditures for property and equipment         

   

(950,000)

Adjustments: (a)

     

    Transaction-related expenses

   

2,264

    Executive separation costs

   

1,686

    Pre-existing Progressive Waste share-based grants

   

841

    Tax effect

   

(990)

Adjusted free cash flow

 

$

1,225,000

       

As % of revenues

   

15.3 %

       

____________________________

(a)     Reflects amounts reported for the six month period ended June 30, 2023, as shown on page 10.

 

 

SOURCE Waste Connections, Inc.