Waste Connections Inc., Ontario, announced its earnings results for the second quarter Aug. 4.
Highlights of the results include:
- continued momentum from higher solid waste pricing and volumes, along with tailwinds from higher recovered commodity values, drove outsized results and increased the company’s full-year outlook;
- revenue of $1.53 billion, up 17.5 percent year over year;
- 11.4 percent solid waste price plus volume growth, exceeding outlook;
- net income of $177 million and adjusted earnings before interest, taxes, depreciation an d amortization (EBITDA) of $484.9 million, or 31.6 percent of revenue, exceeding the company’s outlook and up 140 basis points year over year;
- net income and adjusted net income of 68 cents and 81 cents per share, respectively;
- year-to-date net cash provided by operating activities of $848.5 million and adjusted free cash flow of $585.8 million, or 20 percent of revenue and up 18.5 percent year over year; and
- full-year 2021 outlook for revenue of approximately $5.98 billion, net income of approximately $690 million, adjusted EBITDA of approximately $1.88 billion, net cash provided by operating activities of approximately $1.67 billion,and adjusted free cash flow of approximately $1 billion.
"Broad-based strength drove an across-the-board beat in the second quarter, positioning us to raise our outlook for the full year. Revenue and adjusted EBITDA in Q2 increased 17.5 percent and 23 percent, respectively, over the prior year primarily as a result of continued improvement in solid waste pricing and volume growth and strength in recovered commodity values. These trends drove year-to-date adjusted EBITDA margin expansion of 110 basis points and adjusted free cash flow of over $585 million, up 18.5 percent year over year," Worthing F. Jackman, president and CEO of Waste Connections, says. "Given the strength of our results in the first half of the year and expected continuing momentum and margin expansion from these trends, we believe we are on track to report approximately $5.975 billion of revenue and $1.875 billion of adjusted EBITDA in 2021, exceeding our initial outlook provided in February. More importantly, full year adjusted free cash flow is also pacing ahead of initial expectations and is now estimated at approximately $1 billion, or 53 percent of adjusted EBITDA.
"2021 also has the potential to be another outsized year of acquisition activity. Year to date, we have signed or closed 14 acquisitions with total annualized revenue of approximately $115 million, including $75 million of franchise operations in California, Nevada and Oregon expected to close later this year,” Jackman continues. “We continue to see record amounts of seller interest driving elevated acquisition dialogue and, as communicated throughout the year, expect closings related to most of this activity to be more weighted to the second half of the year. Our recently expanded credit facility and continuing balance sheet strength provide the flexibility to fund outsized acquisition activity along with an increasing return of capital to shareholders."
Q2 2021 results
Revenue in the second quarter totaled $1.53 billion, up from $1.31 billion in the year-ago period. Operating income was $266.8 million, which included $6.4 million in fair value accounting changes to equity awards and $6.1 million of impairments and other operating items. This compares with an operating loss of $232.4 million in the second quarter of 2020, which included $437.3 million in impairments primarily related to a decrease in property, plant and equipment at certain oil and gas exploration and production, or E&P, waste landfills. Net income in the second quarter was $177 million, or 68 cents per share on a diluted basis of 261.4 million shares. In the year-ago period, the company reported a net loss of $227.1 million, or 86 cents per share on a diluted basis of 263 million shares.
Adjusted net income in the second quarter was $210.9 million, or 81 cents per diluted share, versus $158 million, or 60 cents per diluted share, in the prior-year period. Adjusted EBITDA in the second quarter was $484.9 million, 31.6 percent of revenue, as compared with $394.3 million and 30.2 percent of revenue in the prior-year period. Adjusted net income, adjusted net income per diluted share and adjusted EBITDA primarily exclude impairments and acquisition-related items.
Year-to-date results
For the six months ended June 30, revenue was $2.93 billion, up from $2.66 billion in the year-ago period. Operating income, which included $7.3 million primarily related to fair value accounting changes to equity awards and $6.7 million in impairments and other operating items, was $505.2 million as compared with operating loss of $15.4 million for the same period in 2020, which included $445.2 million primarily related to impairments and other operating items.
Net income for the six months ended June 30 was $337.4 million, or $1.29 per share on a diluted basis of 262.3 million shares. In the year-ago period, the company reported net loss of $84 million, or 32 cents per share on a diluted basis of 263.4 million shares.
Adjusted net income for the six months ended June 30 was $396.3 million, or $1.51 per diluted share, compared with $328.5 million, or $1.25 per diluted share, in the year-ago period. Adjusted EBITDA for the six months ended June 30 was $918.1 million and 31.3 percent of revenue, up from $802.8 million and 30.2 percent in the prior-year period.
Updated 2021 outlook
Waste Connections also updated its outlook for 2021, which assumes no change in the current economic environment or underlying economic trends, including as a result of or related to impacts from the COVID-19 pandemic or the Delta variant of the coronavirus. 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 $5.98 billion as compared with the original revenue outlook of approximately $5.8 billion.
- Net income is estimated to be approximately $690 million, and adjusted EBITDA is estimated to be approximately $1.88 billion, or about 31.4 percent of revenue, as compared with the company’s original adjusted EBITDA outlook of $1.8 billion, or 31 percent of revenue.
- Capital expenditures are estimated to be approximately $675 million as compared with its original capital expenditures outlook of approximately $625 million.
- Net cash provided by operating activities is estimated to be approximately $1.67 billion as compared with its original outlook of $1.58 billion, and adjusted free cash flow is estimated to be approximately $1 billion, or about 16.7 percent of revenue, as compared withthe company’s original adjusted free cash flow outlook of approximately $950 million, or 16.4 percent of revenue.