Waste Connections reports Q2 results

Waste Connections, Ontario, Canada, announced its second quarter results on Aug. 6. According to the company, revenue in the Q2 totaled $1.306 billion, as compared to $1.370 billion in the year ago period.

"Strong operational execution and continued recovery in solid waste volumes drove better than expected results in the second quarter,” said Worthing Jackman, president and CEO of Waste Connections. “…These results reflect the resilience of our underlying solid waste business as well as the dedication and commitment of our employees, who have maintained a focus on the health, safety and welfare of their colleagues, service continuity, expense management and community support, all while enduring the many challenges and hardships resulting from the pandemic."

Jackman added, "At the onset [of COVID-19], we believed our preparedness and execution during this pandemic would leave us better positioned when we emerged from it.  Although only in the early stages of a recovery, we already are pleased to provide our outlook for the full year above the preliminary expectations we had communicated in May. We remain encouraged by the pace of acquisition dialogue and are on track for another solid year of acquisition activity."

Q2 2020 results

Operating loss was $232.4 million, which included: $437.3 million in impairments and other operating items, due primarily to $417.4 million related to a decrease in property, plant and equipment at certain E&P landfills in the Bakken, Eagle Ford and Powder River basins as a result of the company's impairment testing and $16.8 million in adjustments to contingent liabilities associated with acquisitions closed in prior years. 

This operating loss compares to operating income of $222.1 million in the second quarter of 2019, which included $11.3 million primarily related to transaction-related expenses.  

Net loss attributable to Waste Connections in the second quarter was $227.1 million, or $0.86 per share on a diluted basis of 263.0 million shares.  In the year ago period, the Company reported net income attributable to Waste Connections of $148.8 million, or $0.56 per share on a diluted basis of 264.5 million shares.

Adjusted net income attributable to Waste Connections in the second quarter was $158.0 million, or $0.60 per diluted share on an adjusted diluted basis of 263.3 million shares, versus $181.3 million, or $0.69 per diluted share, in the prior year period.  Adjusted EBITDA in the second quarter was $394.3 million, as compared to adjusted EBITDA of $425.3 million in the prior year period.

Financial impact from COVID-19

During the second quarter of 2020, Waste Connections says the company was impacted by COVID-19 due to a reduction in revenue. These effects were felt primarily in solid waste commercial collection and solid waste transfer and disposal resulting from a slowdown in activity associated with shelter-in-place or other closure restrictions or requirements imposed in response to the pandemic.

Commercial collection activity also slowed down in certain markets due to service reductions or suspensions by customers whose business activity was curtailed by such measures, with third party transfer and disposal volumes and roll-off activity typically following similar patterns.

Waste Connections reported about 53 percent of solid waste commercial customers and 42 percent of associated revenue in competitive markets that had suspended or reduced service had reached out for a resumption in service or increase in frequency, up from 12 percent and 9 percent, respectively, in early May. In addition, volumes in all of the company’s solid waste regions exceeded expectations, resulting in solid waste revenue down 5.3 percent year over year on a same store basis in the second quarter, about 70 basis points better than the preliminary expectations provided in May.

“The ultimate impact of the COVID-19 outbreak on our business, results of operations, financial condition and cash flows will depend largely on future developments, including the duration and spread of the outbreak in the U.S. and Canada, its severity, the actions to contain the novel coronavirus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume,” Waste Connections said in a release.

2020 outlook

Waste Connections also provided its outlook for 2020, which assumes no significant change in 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.  

• Revenue is estimated to be approximately $5.325 billion.
• Net income attributable to Waste Connections is estimated to be approximately $184 million, and adjusted EBITDA is estimated to be approximately $1.610 billion, or about 30.2 percent of revenue.
• Capital expenditures are estimated to be approximately $550 million.
• Net cash provided by operating activities is estimated to range between $1.344 billion and $1.374 billion and adjusted free cash flow is estimated to range between $805 million and $835 million, or between approximately 50.0 percent and 52.0 percent of adjusted EBITDA.