Waste Connections Reports Third Quarter 2023 Results

Source: www.gulfoilandgas.com 10/25/2023, Location: North America

Revenue of $2.065 billion, up 9.8% year over year
Net income(a) of $229.0 million, and adjusted EBITDA(b) of $671.2 million, up 14.1% year over year
Adjusted EBITDA(b) margin of 32.5% of revenue, up 120 basis points year over year and up 140 basis points sequentially from Q2
Net income of $0.89 per share, and adjusted net income(b) of $1.17 per share
Year to date net cash provided by operating activities of $1.571 billion and adjusted free cash flow(b) of $969.3 million
Acquisition activity expected to continue through year-end, with an estimated rollover contribution in 2024 of almost 2% from approximately $250 million in annualized revenues signed or closed to date in 2023

Waste Connections, Inc. announced its results for the third quarter of 2023.

"We are extremely pleased by the durability of our financial and operating results in the quarter, with momentum for continued outsized margin expansion. Solid operational execution enabled us to deliver adjusted EBITDA(b) margin of 32.5% in the third quarter, as expected, up 140 basis points sequentially and up 120 basis points year over year, in spite of over $15 million in unforeseen headwinds. During the quarter, we overcame elevated levels of risk-related expenses and other lagging effects of higher employee turnover in prior periods, as well as site-specific incremental operating expenses at one of our landfills in California," said Ronald J. Mittelstaedt, President and Chief Executive Officer. "The expected Q4 and ongoing expanding impacts from that evolving landfill situation are currently being evaluated, along with a recent shorter-term development at a landfill in Texas, and as such weren't anticipated in the full year outlook we provided in August. We expect to get more clarity going forward but currently estimate the range of outcomes in Q4 to include impacts of up to $20 million to revenue, adjusted EBITDA and adjusted free cash flow."

Mr. Mittelstaedt continued, "We remain encouraged by the pace of improvement in employee retention, which, along with our differentiated strategy and execution, should provide for above average underlying margin expansion in solid waste collection, transfer and disposal in 2024. On that basis, we should be positioned for high single-digit adjusted EBITDA(b) growth in 2024 on expected mid to high single-digit revenue growth, including approximately $150 million of revenue carryover from acquisitions signed or closed year to date, with upside potential from additional acquisition activity and any further improvement in commodity-related 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 2023 Results
Revenue in the third quarter totaled $2.065 billion, up from $1.880 billion in the year ago period. Operating income was $353.0 million, which included $59.2 million primarily in impairments and other operating items, including $31.3 million of expenses associated with adjustments to contingent liabilities from acquisitions closed in prior periods and $25.0 million related to a non-cash impairment to adjust the carrying value of certain assets. This compares to operating income of $326.8 million in the third quarter of 2022, which included $25.1 million primarily in impairments and other operating items and transaction-related expenses. Net income in the third quarter was $229.0 million, or $0.89 per share on a diluted basis of 258.2 million shares. In the year ago period, the Company reported net income of $236.9 million, or $0.92 per share on a diluted basis of 257.9 million shares.

Adjusted net income(b) in the third quarter was $303.1 million, or $1.17 per diluted share, versus $284.9 million, or $1.10 per diluted share, in the prior year period. Adjusted EBITDA(b) in the third quarter was $671.2 million, as compared to $588.1 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, 2023, revenue was $5.986 billion, up from $5.343 billion in the year ago period. Operating income, which included $91.3 million primarily attributable to impairments and other operating items, executive separation costs, and transaction-related expenses, was $1.012 billion, as compared to operating income of $930.2 million in the prior year period, which included $38.5 million primarily attributable to impairments and other operating items and transaction-related expenses.

Net income for the nine months ended September 30, 2023 was $636.0 million, or $2.46 per share on a diluted basis of 258.1 million shares. In the year ago period, the Company reported net income of $641.3 million, or $2.49 per share on a diluted basis of 258.1 million shares.

Adjusted net income(b) for the nine months ended September 30, 2023 was $795.8 million, or $3.08 per diluted share, compared to $755.5 million, or $2.93 per diluted share, in the year ago period. Adjusted EBITDA(b) for the nine months ended September 30, 2023 was $1.867 billion, as compared to $1.657 billion in the prior year period.


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