Waste Connections increases second quarter revenue

Waste Connections Inc., The Woodlands, Texas, has announced its results for the second quarter of 2018.  Revenue in the second quarter totaled $1.24 billion, up from $1.176 billion last year. 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 acquisition of Canadian company Progressive Waste, and $5.6 million in acquisition-related costs. This compares to $206.9 million in the second quarter of 2018, 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 52 cents per share on a diluted basis of 264.3 million shares. In second quarter last year, the company reported net income attributable to Waste Connections of $123.7 million, or 47 cents 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 65 cents per share, versus $145.5 million, or 55 cents per share, in the second quarter of 2017. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the second quarter was $395.5 million and 31.9 percent of revenue, as compared to adjusted EBITDA of $373.6 million and 31.8 percent of revenue last year.

"Continued strength in solid waste pricing growth, E&P (earnings and profits) 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," Ronald Mittelstaedt, CEO and chairman, says.

"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,” Mittelstaedt says. “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."

Revenue was $2.38 billion in the second quarter as compared to revenue of $2.267 billion last year. 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 second quarter of 2017, which included $159 million of expenses primarily related to both goodwill impairment against the company's E&P segment resulting from the early adoption of the Financial Accounting Standards Board’s (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 second quarter was $263.6 million, or $1 per share on a diluted basis of 264.5 million shares.  In the second quarter of 2017, the company reported net income attributable to Waste Connections of $138.5 million, or 52 cents per share on a diluted basis of 264 million shares.

Adjusted net income attributable to Waste Connections for the second quarter was $320.9 million, or $1.21 per share, compared to $275.5 million, or $1.04 per share, in 2017. Adjusted EBITDA for the second quarter was $752.4 million and 31.6 percent of revenue, as compared to $706.4 million and 31.2 percent of revenue in the prior year period.

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 for 2018 includes:

• Revenue is estimated to be approximately $4.880 billion, as compared to the company’s 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 percent of revenue, as compared to its original adjusted EBITDA outlook of $1.55 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 percent of revenue, as compared to the company’s original adjusted free cash flow outlook of approximately $850 million.
• Capital expenditures are estimated to be approximately $530 million, as compared to the company’s original capital expenditures outlook of approximately $500 million.