Waste Connections announces 2018 earnings

Waste Connections announces 2018 earnings

The company's CEO says the fourth quarter "exceeded expectations."

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February 18, 2019

Waste Connections of Ontario, Canada, has recently released the financial results for its quarter ending Dec. 31, 2018, which the company Chairman and CEO Ronald Mittelstaedt says “exceeded expectations.”

Revenue in the fourth quarter totaled $1.262 billion, up from $1.157 billion in the prior year period.  Operating income, which included $14 million of impairments and other operating items and $2.8 million of acquisition-related costs, was $200 million.  This compares to $175 million in the prior year period, which included $15.2 million of impairments and other operating items and $7 million of acquisition-related costs.

"2018 finished on a high note, as financial results for the fourth quarter exceeded expectations on better-than-expected solid waste organic growth, exploration and production (E&P) waste activity and acquisition contribution.  We are also extremely pleased with our results for the full year, as adjusted earnings before interest, tax, depreciation and amortization (EBITDA) as a percent of revenue expanded 30 basis points, and adjusted free cash flow increased 15.2 percent.  Increases in both solid waste pricing growth, which was up 130 basis points year-over-year to 4.5 percent, and E&P waste activity enabled us to overcome the precipitous decline in recycled commodity values and certain cost pressures noted during the year," Mittelstaedt says.  "The strength of these results continues to reflect the benefits of our purposeful culture, differentiated strategy and disciplined execution.

"2018 was also noteworthy for the continuing elevated pace of acquisition activity.  Our acquisition of American Disposal in the fourth quarter brought total annualized acquired revenue to more than $360 million for the year, with rollover revenue contribution of approximately $200 million in 2019.  Along with continued strong pricing growth, this already positions us for high single-digit revenue growth and another 30 basis points adjusted EBITDA margin expansion in 2019, with any growth in solid waste volumes, E&P waste activity or additional acquisitions providing further upside.  We have increased adjusted free cash flow per share at a compounded rate of more than 15 percent per year over the past several years, and expect continuing double-digit per share growth in the upcoming year.  Our strong financial profile continues to afford the flexibility to fund outsized acquisition activity, an increasing cash dividend and opportunistic share repurchases."

Fourth quarter 2018 highlights include:

-revenue of $1.262 billion, exceeding outlook

-solid waste price and volume growth of 4.9 percent, exceeding outlook

-net income attributable to Waste Connections of $132.5 million, or $0.50 per share

-adjusted net income attributable to Waste Connections of $166.2 million, or $0.63 per share, up 21.2 percent per share

- Adjusted EBITDA of $397.2 million, or 31.5 percent of revenue

Full-year 2018 highlights include:

-revenue of $4.923 billion, up 6.3 percent

-net income attributable to Waste Connections of $546.9 million, or $2.07 per share

-adjusted net income attributable to Waste Connections of $667.3 million or $2.52 per share, up 16.7 percent per share

-adjusted EBITDA of $1.566 billion, or 31.8 percent of revenue, up 7.3 percent and 30 basis points year over year

-net cash provided by operating activities of $1.411 billion, up 18.9 percent

-adjusted free cash flow of $879.9 million, or 17.9 percent of revenue, up 15.2 percent

 Looking ahead to 2019, Waste Connections says it expects:

-revenue of approximately $5.310 billion, excluding additional acquisitions

-adjusted EBITDA margin expansion of 30 basis points year over year

-net cash provided by operating activities of approximately $1.525 billion and double-digit adjusted free cash flow per share growth

Full fourth quarter 2018 results

Net income attributable to Waste Connections in the fourth quarter was $132.5 million, or $0.50 per share on a diluted basis of 264.5 million shares.  In the prior year period, the company reported $315.1 million, or $1.19 per share on a diluted basis of 264.6 million shares; this included a $209.4 million benefit to the income tax provision primarily resulting from enactment of the Tax Cuts and Jobs Act of 2017 (the Tax Act).

Adjusted net income attributable to Waste Connections in the fourth quarter was $166.2 million, or $0.63 per share, versus $137.0 million, or $0.52 per share, in the prior year period.  Adjusted EBITDA in the fourth quarter was $397.2 million, as compared to adjusted EBITDA of $360.7 million 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 primarily exclude the impact of the Tax Act, fair value accounting changes to certain equity awards and acquisition-related items.

Full year 2018 results

For the year ended December 31, 2018, revenue was $4.923 billion, as compared to revenue of $4.630 billion in 2017.  Operating income, which included $40.7 million of impairments and other operating items; fair value accounting changes to certain equity awards; and other acquisition-related costs were $832.2 million.  This compares to operating income of $627.1 million in the prior year, which included $189.2 million of expenses primarily related to 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 impairments and other operating items mostly related to the divestiture or expected divestiture of certain assets acquired in the Progressive Waste acquisition.

Net income attributable to Waste Connections in 2018 was $546.9 million, or $2.07 per share on a diluted basis of 264.4 million shares.  In 2017, the company reported net income attributable to Waste Connections of $576.8 million, or $2.18 per share on a diluted basis of 264.3 million shares; this included a $205.6 million benefit to the income tax provision primarily related to the Tax Act.

Adjusted net income attributable to Waste Connections in 2018 was $667.3 million, or $2.52 per share, compared to $570.7 million, or $2.16 per share, in the prior year. Adjusted EBITDA in 2018 was $1.566 billion, as compared to $1.461 billion in the prior year.  Adjusted net income attributable to Waste Connections, adjusted net income attributable to Waste Connections per diluted share and adjusted EBITDA primarily exclude the impact of the Tax Act, acquisition-related items and impairments and other operating items.

2019 Outlook

Waste Connections also announced its outlook for 2019, which assumes no change in the current economic environment.  The company's outlook excludes any impact from additional acquisitions that may close during the year and expensing of transaction-related items.  Certain components of the outlook for 2019 are subject to quarterly fluctuations.

  • Revenue is estimated at approximately $5.310 billion.
  • Net income attributable to Waste Connections is estimated at approximately $636.0 million.
  • Adjusted EBITDA is estimated at approximately $1.705 billion, or about 32.1 percent of revenue.
  • Net cash provided by operating activities is estimated to be approximately $1.525 billion.
  • Adjusted free cash flow is estimated to be approximately $950.0 million.