PR Newswire
TORONTO, Oct. 23, 2024
- Better than expected third quarter results drive further increases to full year 2024 outlook
- Revenue of $2.338 billion, up 13.3% year over year
- Net income(a) of $308.0 million, and adjusted EBITDA(b) of $787.4 million, up 17.3% year over year
- Adjusted EBITDA(b) margin of 33.7%, up 120 basis points year over year
- Net income of $1.19 per share, and adjusted net income(b) of $1.35 per share
- Year to date net cash provided by operating activities of $1.660 billion and adjusted free cash flow(b) of $1.044 billion
- Increased regular quarterly dividend by 10.5%
- On pace for acquisitions totaling over $700 million in annualized revenue, with an estimated rollover revenue contribution in 2025 of approximately 2%
- Increased full year 2024 outlook to $8.9 billion of revenue, up $150 million from original outlook, with net income of $1.082 billion and adjusted EBITDA(b) of $2.91 billion, up $50 million from original outlook
TORONTO, Oct. 23, 2024 /PRNewswire/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the third quarter of 2024.
"We are extremely pleased by the strength of our operating and financial results in the period, positioning for another increase to our full year 2024 outlook, with momentum as we look ahead to 2025. Solid waste growth led by 6.8% core pricing was supplemented by incremental acquisition contributions and 90 basis points sequential improvement in solid waste volumes during the period to drive results above expectations. Solid operational execution enabled us to deliver adjusted EBITDA(b) margin of 33.7% in the third quarter, as expected, up 120 basis points year over year, overcoming margin dilution from acquisitions closed during the quarter and storm-related impacts at quarter-end," said Ronald J. Mittelstaedt, President and Chief Executive Officer.
"Our results also reflect continued progress in employee retention, with voluntary turnover improving for the eighth consecutive quarter, bringing multi-year reductions to over 40%, as we continue to invest in our most important asset, our people," continued Mr. Mittelstaedt. "Further, we anticipate that our innovative approaches to drive continued improvement in employee engagement and retention should position us in 2025 for another year of above average underlying margin expansion in solid waste collection, transfer and disposal. On that basis, we should be positioned for high single-digit adjusted EBITDA(b) growth in 2025 on expected mid to high single-digit revenue growth, including approximately 2% revenue carryover from a record amount of private company acquisition activity expected to be completed in 2024, with upside potential from additional acquisition activity."
Mr. Mittelstaedt concluded, "As anticipated, the strength of our operating performance, free cash flow generation and balance sheet positioned us for another double-digit increase to our quarterly cash dividend, demonstrating once again the compatibility of funding our differentiated growth strategy and acquisition activity, along with an increasing return of capital to shareholders."
Q3 2024 Results
Revenue in the third quarter totaled $2.338 billion, up from $2.065 billion in the year ago period. Operating income was $475.3 million, which included $8.1 million in transaction-related expenses and $3.0 million primarily from impairments and other operating items. This compares to operating income of $353.0 million in the third quarter of 2023 that included $59.2 million primarily in impairments and other operating items and transaction-related expenses. Net income in the third quarter was $308.0 million, or $1.19 per share on a diluted basis of 258.8 million shares. In the year ago period, the Company reported net income of $229.0 million, or $0.89 per share on a diluted basis of 258.2 million shares.
Adjusted net income(b) in the third quarter was $350.0 million, or $1.35 per diluted share, versus $303.1 million, or $1.17 per diluted share, in the prior year period. Adjusted EBITDA(b) in the third quarter was $787.4 million, as compared to $671.2 million in the prior year period. Adjusted net income, adjusted net income per diluted share and adjusted EBITDA, all non-GAAP measures, primarily exclude impairments and acquisition-related items, as reflected in the detailed reconciliations in the attached tables.
Nine Months Year to Date Results
For the nine months ended September 30, 2024, revenue was $6.659 billion, up from $5.986 billion in the year ago period. Operating income was $1.267 billion, which included $38.2 million primarily attributable to transaction-related expenses, impairments and other operating items and fair value changes to equity awards. This compares to operating income in the prior year period of $1.012 billion, which included $91.3 million primarily attributable to impairments and other operating items, executive separation costs and transaction-related expenses.
Net income for the nine months ended September 30, 2024 was $813.6 million, or $3.15 per share on a diluted basis of 258.6 million shares. In the year ago period, the Company reported net income of $636.0 million, or $2.46 per share on a diluted basis of 258.1 million shares.
Adjusted net income(b) for the nine months ended September 30, 2024 was $938.7 million, or $3.63 per diluted share, compared to $795.8 million, or $3.08 per diluted share, in the year ago period. Adjusted EBITDA(b) for the nine months ended September 30, 2024 was $2.170 billion, as compared to $1.867 billion in the prior year period.
Updated 2024 Outlook
Waste Connections also updated its outlook for 2024, 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 2024 are subject to quarterly fluctuations. See reconciliations in the attached tables.
- Revenue is estimated to be approximately $8.9 billion, up $150 million from our original outlook.
- Net income is estimated to be approximately $1.082 billion, and adjusted EBITDA(b) is estimated to be approximately $2.910 billion, up $50 million from our original outlook.
- Capital expenditures are estimated to be approximately $1.150 billion, in line with our original outlook.
- Net cash provided by operating activities is estimated to be approximately $2.342 billion, and adjusted free cash flow(b) is estimated to be approximately $1.200 billion, in line with our original outlook.
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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 2024 Earnings Conference Call
Waste Connections will be hosting a conference call related to third quarter earnings on October 24th 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 October 31, 2024, by calling 877-344-7529 (within North America) or 412-317-0088 (international) and entering Passcode #1135108.
Waste Connections will be filing a Form 8-K on EDGAR and on SEDAR (as an "Other" document) prior to markets opening on October 24th, providing the Company's fourth quarter 2024 outlook for revenue, price plus volume growth for solid waste, and adjusted EBITDA(b).
About Waste Connections
Waste Connections (wasteconnections.com) 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 approximately nine million residential, commercial and industrial customers in mostly exclusive and secondary markets across 46 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. and Canada, as well as intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest. 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 and focused 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. Visit wasteconnections.com/sustainability for more information and updates on our progress towards targeted achievement.
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 2024 and 2025 financial results, outlook and related assumptions, and potential acquisition activity. Important factors that could cause actual results to differ, possibly materially, from those indicated by the forward-looking statements include, but are not limited to, risk factors detailed from time to time in the Company's filings with the SEC and the securities commissions or similar regulatory authorities in Canada. You should not place undue reliance on forward-looking statements, which speak only as of the date of this press release. Waste Connections undertakes no obligation to update the forward-looking statements set forth in this press release, whether as a result of new information, future events, or otherwise, unless required by applicable securities laws.
– financial tables attached –
CONTACT: | ||||||||||||||||||||||||||||
Mary Anne Whitney / (832) 442-2253 | Joe Box / (832) 442-2153 | |||||||||||||||||||||||||||
WASTE CONNECTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2024 (Unaudited) (in thousands of U.S. dollars, except share and per share amounts) | |||||||||||||
Three months ended | Nine months ended | ||||||||||||
2023 | 2024 | 2023 | 2024 | ||||||||||
Revenues | $ | 2,064,744 | $ | 2,338,488 | $ | 5,986,342 | $ | 6,659,308 | |||||
Operating expenses: | |||||||||||||
Cost of operations | 1,204,603 | 1,344,079 | 3,548,893 | 3,866,932 | |||||||||
Selling, general and administrative | 196,316 | 222,526 | 606,367 | 672,110 | |||||||||
Depreciation | 214,966 | 248,473 | 632,347 | 712,392 | |||||||||
Amortization of intangibles | 39,405 | 45,170 | 117,740 | 129,584 | |||||||||
Impairments and other operating items | 56,477 | 2,897 | 69,201 | 11,441 | |||||||||
Operating income | 352,977 | 475,343 | 1,011,794 | 1,266,849 | |||||||||
Interest expense | (69,016) | (83,520) | (204,914) | (244,385) | |||||||||
Interest income | 2,833 | 3,331 | 6,886 | 9,391 | |||||||||
Other income, net | 5,372 | 4,904 | 8,346 | 12,727 | |||||||||
Income before income tax provision | 292,166 | 400,058 | 822,112 | 1,044,582 | |||||||||
Income tax provision | (62,975) | (92,012) | (185,915) | (232,008) | |||||||||
Net income | 229,191 | 308,046 | 636,197 | 812,574 | |||||||||
Plus/(Less): Net loss (income) attributable to noncontrolling interests | (165) | - | (150) | 1,003 | |||||||||
Net income attributable to Waste Connections | $ | 229,026 | $ | 308,046 | $ | 636,047 | $ | 813,577 | |||||
Earnings per common share attributable to Waste Connections' common shareholders: | |||||||||||||
Basic | $ | 0.89 | $ | 1.19 | $ | 2.47 | $ | 3.15 | |||||
Diluted | $ | 0.89 | $ | 1.19 | $ | 2.46 | $ | 3.15 | |||||
Shares used in the per share calculations: | |||||||||||||
Basic | 257,633,703 | 258,023,661 | 257,535,408 | 257,939,935 | |||||||||
Diluted | 258,229,404 | 258,756,528 | 258,110,484 | 258,601,815 | |||||||||
Cash dividends per common share | $ | 0.255 | $ | 0.285 | $ | 0.765 | $ | 0.855 | |||||
WASTE CONNECTIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands of U.S. dollars, except share and per share amounts) | |||||||
December 31, | September 30, | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and equivalents | $ | 78,399 | $ | 115,265 | |||
Accounts receivable, net of allowance for credit losses of $23,553 and $23,660 at December 31, 2023 and September 30, 2024, respectively | 856,953 | 990,896 | |||||
Prepaid expenses and other current assets | 206,433 | 248,971 | |||||
Total current assets | 1,141,785 | 1,355,132 | |||||
Restricted cash | 105,639 | 123,243 | |||||
Restricted investments | 70,350 | 79,455 | |||||
Property and equipment, net | 7,228,331 | 8,234,162 | |||||
Operating lease right-of-use assets | 261,782 | 311,717 | |||||
Goodwill | 7,404,400 | 7,922,757 | |||||
Intangible assets, net | 1,603,541 | 1,982,809 | |||||
Other assets, net | 100,048 | 86,089 | |||||
Total assets | $ | 17,915,876 | $ | 20,095,364 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 642,455 | $ | 706,284 | |||
Book overdraft | 14,855 | 14,568 | |||||
Deferred revenue | 355,203 | 377,475 | |||||
Accrued liabilities | 521,428 | 552,741 | |||||
Current portion of operating lease liabilities | 32,533 | 39,618 | |||||
Current portion of contingent consideration | 94,996 | 55,474 | |||||
Current portion of long-term debt and notes payable | 26,462 | 7,873 | |||||
Total current liabilities | 1,687,932 | 1,754,033 | |||||
Long-term portion of debt and notes payable | 6,724,771 | 8,160,538 | |||||
Long-term portion of operating lease liabilities | 238,440 | 275,547 | |||||
Long-term portion of contingent consideration | 20,034 | 27,125 | |||||
Deferred income taxes | 1,022,480 | 1,099,369 | |||||
Other long-term liabilities | 524,438 | 517,297 | |||||
Total liabilities | 10,218,095 | 11,833,909 | |||||
Commitments and contingencies | |||||||
Equity: | |||||||
Common shares: 257,659,921 shares issued and 257,600,479 shares outstanding at December 31, 2023; 258,062,086 shares issued and 258,009,392 shares outstanding at September 30, 2024 | 3,276,661 | 3,282,345 | |||||
Additional paid-in capital | 284,284 | 310,046 | |||||
Accumulated other comprehensive loss | (9,826) | (64,950) | |||||
Treasury shares: 59,442 and 52,694 shares at December 31, 2023 and September 30, 2024, respectively | - | - | |||||
Retained earnings | 4,141,690 | 4,734,014 | |||||
Total Waste Connections' equity | 7,692,809 | 8,261,455 | |||||
Noncontrolling interest in subsidiaries | 4,972 | - | |||||
Total equity | 7,697,781 | 8,261,455 | |||||
Total liabilities and equity | $ | 17,915,876 | $ | 20,095,364 | |||
WASTE CONNECTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2024 (Unaudited) (in thousands of U.S. dollars) | |||||||
Nine months ended | |||||||
2023 | 2024 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 636,197 | $ | 812,574 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Loss from disposal of assets, impairments and other | 37,470 | 934 | |||||
Depreciation | 632,347 | 712,392 | |||||
Amortization of intangibles | 117,740 | 129,584 | |||||
Deferred income taxes, net of acquisitions | 29,060 | 81,270 | |||||
Current period provision for expected credit losses | 13,363 | 12,681 | |||||
Amortization of debt issuance costs | 4,862 | 7,974 | |||||
Share-based compensation | 56,110 | 61,229 | |||||
Interest accretion | 14,827 | 27,733 | |||||
Payment of contingent consideration recorded in earnings | - | (35,035) | |||||
Adjustments to contingent consideration | 30,367 | - | |||||
Other | (3,535) | (1,505) | |||||
Net change in operating assets and liabilities, net of acquisitions | 2,068 | (149,833) | |||||
Net cash provided by operating activities | 1,570,876 | 1,659,998 | |||||
Cash flows from investing activities: | |||||||
Payments for acquisitions, net of cash acquired | (573,185) | (2,010,274) | |||||
Capital expenditures for property and equipment | (615,554) | (659,302) | |||||
Proceeds from disposal of assets | 8,678 | 5,633 | |||||
Proceeds from sale of investment in noncontrolling interests | - | 37,000 | |||||
Other | (5,552) | (18,867) | |||||
Net cash used in investing activities | (1,185,613) | (2,645,810) | |||||
Cash flows from financing activities: | |||||||
Proceeds from long-term debt | 1,242,554 | 4,092,166 | |||||
Principal payments on notes payable and long-term debt | (1,383,415) | (2,759,676) | |||||
Payment of contingent consideration recorded at acquisition date | (4,255) | (26,625) | |||||
Change in book overdraft | 137 | (287) | |||||
Payments for cash dividends | (196,815) | (221,253) | |||||
Tax withholdings related to net share settlements of equity-based compensation | (29,415) | (32,203) | |||||
Debt issuance costs | - | (13,449) | |||||
Proceeds from issuance of shares under employee share purchase plan | 3,908 | 4,486 | |||||
Proceeds from sale of common shares held in trust | 765 | 1,198 | |||||
Other | - | (4,000) | |||||
Net cash provided by (used in) financing activities | (366,536) | 1,040,357 | |||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (1,060) | (75) | |||||
Net increase in cash, cash equivalents and restricted cash | 17,667 | 54,470 | |||||
Cash, cash equivalents and restricted cash at beginning of period | 181,364 | 184,038 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 199,031 | $ | 238,508 | |||
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, 2024:
Three months ended September 30, 2024 | Nine months ended September 30, 2024 | ||||||
Core Price | 6.8 % | 7.2 % | |||||
Surcharges | (0.3 %) | (0.4 %) | |||||
Volume | (1.9 %) | (2.8 %) | |||||
Recycling | 1.0 % | 0.9 % | |||||
Foreign Exchange Impact | (0.2 %) | (0.2 %) | |||||
Total | 5.4 % | 4.7 % | |||||
Revenue Breakdown: The following table reflects a breakdown of our revenue for the three month periods ended September 30, 2023 and 2024:
Three months ended September 30, 2023 | |||||||||||||||||||||||||
Revenue | Inter-company | Reported | % | ||||||||||||||||||||||
Solid Waste Collection | $ | 1,512,745 | $ | (4,742) | $ | 1,508,003 | 73.0 | % | |||||||||||||||||
Solid Waste Disposal and Transfer | 703,544 | (285,292) | 418,252 | 20.3 | % | ||||||||||||||||||||
Solid Waste Recycling | 36,103 | (988) | 35,115 | 1.7 | % | ||||||||||||||||||||
E&P Waste Treatment, Recovery and Disposal | 62,066 | (3,561) | 58,505 | 2.8 | % | ||||||||||||||||||||
Intermodal and Other | 44,984 | (115) | 44,869 | 2.2 | % | ||||||||||||||||||||
Total | $ | 2,359,442 | $ | (294,698) | $ | 2,064,744 | 100.0 | % | |||||||||||||||||
Three months ended September 30, 2024 | ||||||||||||
Revenue | Inter-company | Reported | % | |||||||||
Solid Waste Collection | $ | 1,622,308 | $ | (4,898) | $ | 1,617,410 | 69.2 | % | ||||
Solid Waste Disposal and Transfer | 776,928 | (317,142) | 459,786 | 19.6 | % | |||||||
Solid Waste Recycling | 69,748 | (2,611) | 67,137 | 2.9 | % | |||||||
E&P Waste Treatment, Recovery and Disposal | 154,202 | (6,923) | 147,279 | 6.3 | % | |||||||
Intermodal and Other | 47,341 | (465) | 46,876 | 2.0 | % | |||||||
Total | $ | 2,670,527 | $ | (332,039) | $ | 2,338,488 | 100.0 | % | ||||
Contribution from Acquisitions: The following table reflects revenues from acquisitions, net of divestitures, for the three and nine month periods ended September 30, 2023 and 2024:
Three months ended | Nine months ended | |||||||||||
2023 | 2024 | 2023 | 2024 | |||||||||
Acquisitions, net | $ | 102,908 | $ | 161,024 | $ | 356,301 | $ | 359,716 | ||||
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 nine month periods ended September 30, 2023 and 2024:
Three months ended | Nine months ended | |||||||||||
2023 | 2024 | 2023 | 2024 | |||||||||
Cash Interest Paid | $ | 73,563 | $ | 85,170 | $ | 191,055 | $ | 223,196 | ||||
Cash Taxes Paid | 74,510 | 81,235 | 125,550 | 164,615 | ||||||||
Debt to Book Capitalization as of September 30, 2024: 50%
Internalization for the three months ended September 30, 2024: 57%
Days Sales Outstanding for the three months ended September 30, 2024: 39 (24 net of deferred revenue)
Share Information for the three months ended September 30, 2024:
Basic shares outstanding | 258,023,661 | |
Dilutive effect of equity-based awards | 732,867 | |
Diluted shares outstanding | 258,756,528 |
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 | Nine months ended | |||||||||||
2023 | 2024 | 2023 | 2024 | |||||||||
Net income attributable to Waste Connections | $ | 229,026 | $ | 308,046 | $ | 636,047 | $ | 813,577 | ||||
Plus/(Less): Net income (loss) attributable to noncontrolling interests | 165 | - | 150 | (1,003) | ||||||||
Plus: Income tax provision | 62,975 | 92,012 | 185,915 | 232,008 | ||||||||
Plus: Interest expense | 69,016 | 83,520 | 204,914 | 244,385 | ||||||||
Less: Interest income | (2,833) | (3,331) | (6,886) | (9,391) | ||||||||
Plus: Depreciation and amortization | 254,371 | 293,643 | 750,087 | 841,976 | ||||||||
Plus: Closure and post-closure accretion | 4,609 | 7,387 | 13,696 | 22,879 | ||||||||
Plus: Impairments and other operating items | 56,477 | 2,897 | 69,201 | 11,441 | ||||||||
Less: Other income, net | (5,372) | (4,904) | (8,346) | (12,727) | ||||||||
Adjustments: | ||||||||||||
Plus: Transaction-related expenses(a) | 3,108 | 8,067 | 7,014 | 25,169 | ||||||||
Plus/(Less): Fair value changes to equity awards(b) | (379) | 99 | 65 | 1,602 | ||||||||
Plus: Executive separation costs(c) | - | - | 15,063 | - | ||||||||
Adjusted EBITDA | $ | 671,163 | $ | 787,436 | $ | 1,866,920 | $ | 2,169,916 | ||||
As % of revenues | 32.5 % | 33.7 % | 31.2 % | 32.6 % | ||||||||
(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 an 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. 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 | Nine months ended | |||||||||||
2023 | 2024 | 2023 | 2024 | |||||||||
Net cash provided by operating activities | $ | 554,164 | $ | 558,310 | $ | 1,570,876 | $ | 1,659,998 | ||||
Plus/(Less): Change in book overdraft | 371 | (1,637) | 137 | (287) | ||||||||
Plus: Proceeds from disposal of assets | 4,859 | 2,636 | 8,678 | 5,633 | ||||||||
Less: Capital expenditures for property and equipment | (221,411) | (272,132) | (615,554) | (659,302) | ||||||||
Adjustments: | ||||||||||||
Payment of contingent consideration recorded in earnings(a) | - | 35,035 | - | 35,035 | ||||||||
Transaction-related expenses(b) | 1,572 | 3,668 | 3,836 | 12,348 | ||||||||
Executive separation costs(c) | - | - | 1,686 | 1,670 | ||||||||
Pre-existing Progressive Waste share-based grants(d) | - | 39 | 841 | 1,170 | ||||||||
Tax effect(e) | (231) | (9,643) | (1,221) | (12,556) | ||||||||
Adjusted free cash flow | $ | 339,324 | $ | 316,276 | $ | 969,279 | $ | 1,043,709 | ||||
As % of revenues | 16.4 % | 13.5 % | 16.2 % | 15.7 % | ||||||||
(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 addback of acquisition-related transaction costs. | ||||||
(c) | Reflects the cash component of severance expense associated with an 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 valuation measures 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 | Nine months ended | |||||||||||
2023 | 2024 | 2023 | 2024 | |||||||||
Reported net income attributable to Waste Connections | $ | 229,026 | $ | 308,046 | $ | 636,047 | $ | 813,577 | ||||
Adjustments: | ||||||||||||
Amortization of intangibles(a) | 39,405 | 45,170 | 117,740 | 129,584 | ||||||||
Impairments and other operating items(b) | 56,477 | 2,897 | 69,201 | 11,441 | ||||||||
Transaction-related expenses(c) | 3,108 | 8,067 | 7,014 | 25,169 | ||||||||
Fair value changes to equity awards(d) | (379) | 99 | 65 | 1,602 | ||||||||
Executive separation costs(e) | - | - | 15,063 | - | ||||||||
Tax effect(f) | (24,586) | (14,275) | (49,356) | (42,655) | ||||||||
Adjusted net income attributable to Waste Connections | $ | 303,051 | $ | 350,004 | $ | 795,774 | $ | 938,718 | ||||
Diluted earnings per common share attributable to Waste Connections' common shareholders: | ||||||||||||
Reported net income | $ | 0.89 | $ | 1.19 | $ | 2.46 | $ | 3.15 | ||||
Adjusted net income | $ | 1.17 | $ | 1.35 | $ | 3.08 | $ | 3.63 | ||||
(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 an 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 2024 OUTLOOK NON-GAAP RECONCILIATION SCHEDULE (in thousands of U.S. dollars, except where noted) | ||||
Reconciliation of Adjusted EBITDA: | ||||
Updated 2024 Outlook | ||||
Estimates | Observation | |||
Net income attributable to Waste Connections | $ | 1,082,000 | ||
Less: Net loss attributable to noncontrolling interests (a) | (1,003) | |||
Plus: Income tax provision (b) | 313,518 | Approximate 22.5% effective rate | ||
Plus: Interest expense, net | 317,000 | |||
Plus: Depreciation and Depletion | 958,000 | Approximately 10.8% of revenue | ||
Plus: Amortization | 185,000 | |||
Plus: Closure and post-closure accretion | 30,000 | |||
Plus: Impairments and other operating items (a) | 11,441 | |||
Less: Other income, net (a) | (12,727) | |||
Adjustments: (a) | ||||
Plus: Transaction-related expenses | 25,169 | |||
Plus: Fair value changes to equity awards | 1,602 | |||
Adjusted EBITDA | $ | 2,910,000 | Approximately 32.7% of revenue | |
(a) | Reflects amounts reported for the nine month period ended September 30, 2024, as shown on page 9. | ||||||
(b) | Approximately 22.5% full year effective tax rate, including amounts reported for the nine month period ended September 30, 2024. | ||||||
Reconciliation of Adjusted Free Cash Flow: | ||||
Updated 2024 Outlook | ||||
Net cash provided by operating activities | $ | 2,342,022 | ||
Plus: Change in book overdraft (a) | (287) | |||
Plus: Proceeds from disposal of assets (a) | 5,633 | |||
Less: Capital expenditures for property and equipment | (1,150,000) | |||
Adjustments: (a) | ||||
Transaction-related expenses | 12,348 | |||
Executive separation costs | 1,670 | |||
Pre-existing Progressive Waste share-based grants | 1,170 | |||
Tax effect | (12,556) | |||
Adjusted free cash flow | $ | 1,200,000 | ||
As % of revenues | 13.5 % | |||
(a) | Reflects amounts reported for the nine month period ended September 30, 2024, as shown on page 10. | ||||||
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SOURCE Waste Connections, Inc.
