Waste Connections exceeds outlook for Q2

Waste Connections exceeds outlook for Q2

Company's revenue for the second quarter of 2017 was nearly $2 billion.

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July 26, 2017
Waste Today Staff
Municipal Recycling Municipal Solid Waste

Above: Ron Mittelstaedt, Wate Connections chairman and CEO. Photo by Derrick Bryant.

Waste Connections Inc., headquartered in The Woodlands, Texas, has announced that in the second quarter of 2017 its revenue totaled $1.18 billion, up from $727.6 million in the second quarter of 2016. The company adds that it exceeded expectations for the quarter and has updated its 2017 outlook as a result.

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 a leading provider of nonhazardous 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 6 million residential, commercial, industrial and exploration and production customers in 39 states in the U.S., and five provinces in Canada. The company also provides intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest.

Revenue from the Progressive Waste acquisition completed June 1, 2016, was $511.4 million and $174 million in the current year and prior year periods, respectively. Operating income, which included $7.4 million in charges primarily related to share-based compensation costs associated with share-based awards assumed in the Progressive Waste acquisition, was $206.9 million. This compares to operating income of $63.5 million in the second quarter of 2016, which included $73.2 million of items primarily related to the Progressive Waste acquisition completed in that period, Waste Connections reports.

Net income attributable to Waste Connections in the second quarter was $123.7 million, or 47 cents per share on a diluted basis of 264.1 million shares. In the second quarter of 2016, the company reported net income attributable to Waste Connections of $27.5 million, or 13 cents per share on a diluted basis of 210.9 million shares. Shares and per share numbers reflect a three-for-two share split completed in June 2017, Waste Connections says.

Adjusted net income attributable to Waste Connections in 2017’s second quarter was $145.5 million, or 55 cents per share, versus $93.2 million, or 44 cents per share, in the prior-year period. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) in the second quarter was $373.6 million compared with $233.6 million in the prior year period.

“Continued strength in solid waste volumes, recycled commodity prices and E&P (exploration and production) waste activity enabled us to once again exceed our outlook for the quarter,” says Ronald J. Mittelstaedt, chairman and chief executive officer of Waste Connections. “Given our strong results in the first half of the year and expected continuing momentum from these trends, we believe we are on track to report approximately $1.45 billion of adjusted EBITDA in 2017, exceeding our initial outlook provided in February. More importantly, full year adjusted free cash flow, now estimated at approximately $750 million, or almost 52 percent of adjusted EBITDA, is also pacing ahead of initial expectations.”

Mittelstaedt continues, “We are pleased to report that our divestiture program is nearing completion, with the expected benefits greater than initially anticipated. Moreover, we are encouraged by our progress on potential acquisitions, for which we could fully utilize existing cash and projected excess cash flow over the next few quarters. In addition to funding potentially above average acquisition activity, our strong financial profile also positions us for another double-digit percentage increase in our quarterly dividend in October.”

For the six months ended June 30, 2017, revenue was $2.27 billion. This compares with revenue of $1.24 billion in the first half of 2016. Operating income, which included $159 million of expenses primarily related to goodwill impairment against the company's E&P segment resulting from the early adoption of Financial Accounting Standards Board’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, was $233.3 million. That compares with $154.5 million for the same period in 2016, which included $82 million in costs primarily related to the Progressive Waste acquisition completed in that period.

Net income attributable to Waste Connections for the six months ended June 30, 2017, was $138.5 million, or 52 cents per share on a diluted basis of 264 million shares. In the second quarter of 2016, the company reported net income attributable to Waste Connections of $72.3 million, or 37 cents per share on a diluted basis of 198 million shares.

Adjusted net income attributable to Waste Connections for the six months ended June 30, 2017, was $275.5 million, or $1.04 per share, compared with $148.4 million, or 75 cents per share, in the first half of 2016. Adjusted EBITDA for the six months ended June 30, 2017, was $706.4 million. In the comparable period for 2016, that figure was $403.3 million.

Waste Connections says it has updated its outlook for 2017, which assumes no change in the current economic environment. The company says its outlook excludes effects of additional divestitures and acquisitions that may close during the year and expensing of transaction-related items. Based on this outlook, the company estimates its revenue is will be approximately $4.57 billion for the year compared with its original revenue outlook of approximately $4.45 billion.

Net income is estimated to be approximately $390 million, and adjusted EBITDA is estimated to be approximately $1.45 billion, or about 31.7 percent of revenue, as compared with Waste Connection’s original adjusted EBITDA outlook of $1.41 billion.

Net cash provided by operating activities is estimated to be approximately $1.19 billion, and Waste Connections estimates adjusted free cash flow of approximately $750 million, or about 16.4 percent of revenue compared with its original adjusted free cash flow outlook of approximately $725 million.