- Revenue of $1.240 billion, exceeding outlook

- Net income attributable to Waste Connections of $138.7 million, or $0.52 per share

- Adjusted net income attributable to Waste Connections* of $172.3 million, or $0.65 per share, up 18.2%

- Adjusted EBITDA* of $395.5 million, or 31.9% of revenue

- YTD net cash provided by operating activities of $664.9 million

- YTD adjusted free cash flow* of $472.7 million, or 19.9% of revenue

- Completes previously announced acquisitions, bringing YTD acquired annualized revenue to approximately $175 million

TORONTO, July 24, 2018 /PRNewswire/ -- Waste Connections, Inc. WCN ("Waste Connections" or the "Company") today announced its results for the second quarter of 2018.  Revenue in the second quarter totaled $1.240 billion, up from $1.176 billion in the year ago period.  Operating income was $210.7 million, which included $7.1 million of impairments and other operating items primarily associated with the Company's termination of certain contracts assumed in the Progressive Waste acquisition, and $5.6 million in acquisition-related costs; this compares to $206.9 million in the year ago period, which primarily included $7.4 million in charges related to share-based compensation costs associated with share-based awards assumed in the Progressive Waste acquisition. 

Net income attributable to Waste Connections in the second quarter was $138.7 million, or $0.52 per share on a diluted basis of 264.3 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $123.7 million, or $0.47 per share on a diluted basis of 264.1 million shares.

Adjusted net income attributable to Waste Connections* in the second quarter was $172.3 million, or $0.65 per share, versus $145.5 million, or $0.55 per share, in the prior year period.  Adjusted EBITDA* in the second quarter was $395.5 million and 31.9% of revenue, as compared to adjusted EBITDA* of $373.6 million and 31.8% of revenue in the prior year period.  Adjusted net income attributable to Waste Connections, adjusted net income attributable to Waste Connections per diluted share and adjusted EBITDA, all non-GAAP measures, primarily exclude acquisition-related items, as reflected in the detailed reconciliations in the attached tables.

"Continued strength in solid waste pricing growth, E&P waste activity and acquisition contribution enabled us to exceed our outlook for the period, overcoming increased headwinds from recycling and a weather-delayed ramp in special waste activity across many markets.  We are especially pleased with our year-to-date adjusted EBITDA* margin expansion and adjusted free cash flow* generation in spite of these headwinds, as well as our upwardly revised outlook for the full year," said Ronald J. Mittelstaedt, Chief Executive Officer and Chairman.

Mr. Mittelstaedt added, "Looking ahead to 2019, we believe we should be well-positioned for above average revenue growth and margin expansion as current favorable trends for solid waste pricing, E&P waste activity and acquisition contribution should continue, while the current recycling headwinds and reported negative volume growth primarily associated with our purposeful shedding of lower quality solid waste revenues, should abate.  Our strong financial profile and free cash flow generation provide us the flexibility to not only invest in new growth projects and fund expected continuing above-average acquisition activity, but to also increase our return of capital to shareholders through double-digit percentage increases in our quarterly dividend each October and opportunistic share repurchases."

* A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule.  

For the six months ended June 30, 2018, revenue was $2.380 billion, as compared to revenue of $2.267 billion in the year ago period.  Operating income was $399.4 million, which included $18.3 million of expenses primarily related to impairments and other items related to the termination of certain contracts and other acquisition-related costs; this compared to $233.3 million for the same period in 2017, which included $159.0 million of expenses primarily related to both goodwill impairment against the Company's E&P segment resulting from the early adoption of FASB's recent accounting pronouncement simplifying the test for goodwill impairment and items related to the expected divestiture of certain assets acquired in the Progressive Waste acquisition.

Net income attributable to Waste Connections for the six months ended June 30, 2018, was $263.6 million, or $1.00 per share on a diluted basis of 264.5 million shares.  In the year ago period, the Company reported net income attributable to Waste Connections of $138.5 million, or $0.52 per share on a diluted basis of 264.0 million shares. 

Adjusted net income attributable to Waste Connections* for the six months ended June 30, 2018, was $320.9 million, or $1.21 per share, compared to $275.5 million, or $1.04 per share, in the year ago period. Adjusted EBITDA* for the six months ended June 30, 2018, was $752.4 million and 31.6% of revenue, as compared to $706.4 million and 31.2% of revenue in the prior year period. 

UPDATED 2018 OUTLOOK

Waste Connections also updated its outlook for 2018, which assumes no change in the current economic environment.  The Company's outlook excludes any impact from additional acquisitions and divestitures 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 2018 are subject to quarterly fluctuations.  See reconciliation in the attached tables.

• Revenue is estimated to be approximately $4.880 billion, as compared to our original revenue outlook of approximately $4.825 billion.
• Net income attributable to Waste Connections is estimated to be approximately $559 million, and adjusted EBITDA* is estimated to be approximately $1.555 billion, or about 31.9% of revenue, as compared to our original adjusted EBITDA* outlook of $1.550 billion.
• Net cash provided by operating activities is estimated to be approximately $1.379 billion and adjusted free cash flow* is estimated to be approximately $860 million, or about 17.6% of revenue, as compared to our original adjusted free cash flow* outlook of approximately $850 million.
• Capital expenditures are estimated to be approximately $530 million, as compared to our original capital expenditures outlook of approximately $500 million.

* A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule.

CONFERENCE CALL

Waste Connections will be hosting a conference call related to second quarter earnings and third quarter outlook on July 25^th at 8:30 A.M. Eastern Time.  The call will be broadcast live over the Internet through a link on the Company's website at www.wasteconnections.com.  A playback of the call will be available on the Company's website. Waste Connections will be filing a Form 8-K on EDGAR and on SEDAR (as an "Other" document) prior to markets opening on July 25^th , providing the Company's third quarter 2018 outlook for revenue, core price plus volume growth for solid waste and adjusted EBITDA*.

*A non-GAAP measure.

About Waste Connections

Waste Connections is an integrated solid waste services company that provides waste collection, transfer, disposal and recycling services in mostly exclusive and secondary markets in the United States and Canada.  Through its R360 Environmental Solutions subsidiary, Waste Connections is also a leading provider of non-hazardous oilfield waste treatment, recovery and disposal services in several of the most active natural resource producing areas in the United States, including the Permian, Bakken and Eagle Ford Basins.  Waste Connections serves more than six million residential, commercial, industrial, and exploration and production customers in 40 states in the U.S., and six provinces in Canada.  The Company also provides intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest. 

For more information, visit the Waste Connections website at www.wasteconnections.com.  Copies of financial literature, including this release, are available on the Waste Connections website or through contacting us directly at (905) 532-7510.  Investors can also obtain these materials and other documents filed with the U.S. Securities and Exchange Commission (the "SEC") and the Canadian securities regulators free of charge at the SEC's website, www.sec.gov, and at the System for Electronic Document Analysis and Retrieval maintained by the Canadian Securities Administrators at www.sedar.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 2018 and 2019 financial results, capital expenditures, adjusted free cash flow, outlook and related assumptions, potential acquisition activity and the amount of capital returned to shareholders. Important factors that could cause actual results to differ, possibly materially, from those indicated by the forward-looking statements include, but are not limited to, risk factors detailed from time to time in the Company's filings with the SEC and the securities commissions or similar regulatory authorities in Canada.  You should not place undue reliance on forward-looking statements, which speak only as of the date of this press release.  Waste Connections undertakes no obligation to update the forward-looking statements set forth in this press release, whether as a result of new information, future events, or otherwise, unless required by applicable securities laws.

– financial tables attached –

CONTACT:

Mary Anne Whitney / (832) 442-2253

maryannew@wasteconnections.com

 

 

 

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 months ended June 30, 2018:

Revenue Breakdown: The following table reflects a breakdown of our revenue for the three month periods ended June 30, 2017 and 2018:

 

Contribution from Acquisitions: The following table reflects revenues from solid waste acquisitions, net of divestitures, for the three month periods ended June 30, 2017 and 2018:

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, 2017 and 2018:

Debt to Book Capitalization as of June 30, 2018:  37%

Internalization for the three months ended June 30, 2018:  57%

Days Sales Outstanding for the three months ended June 30, 2018:  44 (32 net of deferred revenue)

Share Information for the three months ended June 30, 2018:

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 net income attributable to noncontrolling interests, plus or minus income tax provision (benefit), 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, plus foreign currency transaction loss, less foreign currency transaction gain.  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. 

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. 

NON-GAAP RECONCILIATION SCHEDULE (continued)

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

Reconciliation of Net Income attributable to Waste Connections to 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. 

UPDATED 2018 OUTLOOK

NON-GAAP RECONCILIATION SCHEDULE

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

Reconciliation of Adjusted EBITDA:

Reconciliation of Adjusted Free Cash Flow:

 

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SOURCE Waste Connections, Inc.