Waste Connections, Inc.: Waste Connections Reports First Quarter 2023 Results

• Price-led organic growth, strong operational execution, and continuing acquisition activity drive strong start to 2023
• Revenue of $1.901 billion, up 15.4%
• Net income^(a) of $197.8 million and adjusted EBITDA^(b) of $566.9 million
• Net income and adjusted net income^(b) of $0.77 and $0.89 per share, respectively
• Net cash provided by operating activities of $442.4 million and adjusted free cash flow^(b) of $274.0 million
• On track to achieve full year outlook as provided in February, with potential upside from any additional acquisitions, increases in recycled commodities and renewable fuels values, or reduction of inflationary pressures

TORONTO, April 26, 2023 /PRNewswire/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the first quarter of 2023.

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

638,728

$

526,229

Book overdraft

15,645

21,067

Deferred revenue

325,002

336,613

Accrued liabilities

431,247

390,195

Current portion of operating lease liabilities

35,170

34,078

Current portion of contingent consideration

60,092

64,489

Current portion of long-term debt and notes payable

6,759

10,513

Total current liabilities

1,512,643

1,383,184

Long-term portion of debt and notes payable

6,890,149

6,921,839

Long-term portion of operating lease liabilities

165,462

169,051

Long-term portion of contingent consideration

21,323

21,333

Deferred income taxes

1,013,742

1,041,152

Other long-term liabilities

417,640

451,571

Total liabilities

10,020,959

9,988,130

Commitments and contingencies

Equity:

Common shares: 257,211,175 shares issued and 257,145,716 shares outstanding at
December 31, 2022; 257,547,090 shares issued and 257,487,434 shares outstanding at
March 31, 2023

3,271,958

3,274,564

Additional paid-in capital

244,076

238,484

Accumulated other comprehensive loss

(56,830)

(60,572)

Treasury shares: 65,459 and 59,656 shares at December 31, 2022 and March 31, 2023,
respectively

-

-

Retained earnings

3,649,494

3,781,519

Total Waste Connections' equity

7,108,698

7,233,995

Noncontrolling interest in subsidiaries

4,946

4,969

Total equity

7,113,644

7,238,964

Total liabilities and equity

$

17,134,603

$

17,227,094

WASTE CONNECTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2022 AND 2023 (Unaudited) (in thousands of U.S. dollars)
		Three months ended March 31,
		2022			2023
Cash flows from operating activities:
Net income		$	180,368		$	197,836
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on disposal of assets and impairments			2,090			1,910
Depreciation			179,950			204,059
Amortization of intangibles			37,635			39,282
Deferred income taxes, net of acquisitions			38,378			28,229
Current period provision for expected credit losses			3,022			2,247
Amortization of debt issuance costs			1,195			1,621
Share-based compensation			14,635			18,469
Interest accretion			4,448			4,884
Adjustments to contingent consideration			(52)			(637)
Other			382			(2,937)
Net change in operating assets and liabilities, net of acquisitions			(21,154)			(52,605)
Net cash provided by operating activities			440,897			442,358
Cash flows from investing activities:
Payments for acquisitions, net of cash acquired			(355,212)			(144,611)
Capital expenditures for property and equipment			(152,318)			(175,786)
Proceeds from disposal of assets			15,012			1,260
Other			2,637			1,378
Net cash used in investing activities			(489,881)			(317,759)
Cash flows from financing activities:
Proceeds from long-term debt			1,305,288			336,649
Principal payments on notes payable and long-term debt			(505,597)			(320,027)
Payment of contingent consideration recorded at acquisition date			(3,571)			(1,319)
Change in book overdraft			87			5,421
Payments for repurchase of common shares			(424,999)			-
Payments for cash dividends			(59,391)			(65,788)
Tax withholdings related to net share settlements of equity-based compensation			(17,236)			(22,966)
Debt issuance costs			(4,382)			-
Proceeds from issuance of shares under employee share purchase plan			1,554			1,841
Proceeds from sale of common shares held in trust			305			765
Net cash provided by (used in) financing activities			292,058			(65,424)
Effect of exchange rate changes on cash, cash equivalents and restricted cash			595			(54)
Net increase in cash, cash equivalents and restricted cash			243,669			59,121
Cash, cash equivalents and restricted cash at beginning of period			219,615			181,364
Cash, cash equivalents and restricted cash at end of period		$	463,284		$	240,485

ADDITIONAL STATISTICS
(in thousands of U.S. dollars, except where noted)

Solid Waste Internal Growth:The following table reflects a breakdown of the components of our solid waste internal growth for the three months ended March 31, 2023 :

		Three months ended March 31, 2023
Core Price			11.0 %
Surcharges			0.8 %
Volume			(1.3 %)
Recycling			(1.9 %)
Foreign Exchange Impact			(0.9 %)
Total			7.7 %

Revenue Breakdown: The following table reflects a breakdown of our revenue for the three month periods ended March 31, 2022 and 2023:

		Three months ended March 31, 2022
		Revenue			Inter-company Elimination			Reported Revenue			%
Solid Waste Collection		$	1,199,452		$	(2,883)		$	1,196,569		72.7	%
Solid Waste Disposal and Transfer			517,722			(213,019)			304,703		18.5	%
Solid Waste Recycling			63,094			(2,573)			60,521		3.7	%
E&P Waste Treatment, Recovery and Disposal			43,555			(2,732)			40,823		2.5	%
Intermodal and Other			45,693			(2,054)			43,639		2.6	%
Total		$	1,869,516		$	(223,261)		$	1,646,255		100.0	%

		Three months ended March 31, 2023
		Revenue			Inter-company Elimination			Reported Revenue			%
Solid Waste Collection		$	1,434,647		$	(5,514)		$	1,429,133		75.2	%
Solid Waste Disposal and Transfer			616,954			(262,445)			354,509		18.7	%
Solid Waste Recycling			31,301			(623)			30,678		1.6	%
E&P Waste Treatment, Recovery and Disposal			51,759			(3,624)			48,135		2.5	%
Intermodal and Other			38,212			(164)			38,048		2.0	%
Total		$	2,172,873		$	(272,370)		$	1,900,503		100.0	%

Contribution from Acquisitions: The following table reflects revenues from acquisitions, net of divestitures, for the three month periods ended March 31, 2022 and 2023:

		Three months ended March 31,
		2022			2023
Acquisitions, net		$	110,007		$	132,109

ADDITIONAL STATISTICS (continued)
(in thousands of U.S. dollars, except where noted)

Other Cash Flow Items: The following table reflects cash interest and cash taxes for the three month periods ended March 31, 2022 and 2023:

		Three months ended March 31,
		2022			2023
Cash Interest Paid		$	32,159		$	55,131
Cash Taxes Paid			17,389			11,326

Debt to Book Capitalization at March 31, 2023:49%

Internalization for the three months ended March 31, 2023 : 56%

Days Sales Outstanding for the three months ended March 31, 2023 : 39 (23 net of deferred revenue)

Share Information for the three months ended March 31, 2023 :

Basic shares outstanding		257,372,942
Dilutive effect of equity-based awards		616,029
Diluted shares outstanding		257,988,971

NON-GAAP RECONCILIATION SCHEDULE
(in thousands of U.S. dollars, except where noted)

Reconciliation of Adjusted EBITDA:

Adjusted EBITDA, a non-GAAP financial measure, is provided supplementally because it is widely used by investors as a performance and valuation measure in the solid waste industry. Management uses adjusted EBITDA as one of the principal measures to evaluate and monitor the ongoing financial performance of Waste Connections' operations. Waste Connections defines adjusted EBITDA as net income attributable to Waste Connections, plus or minus net income (loss) attributable to noncontrolling interests, plus income tax provision, plus interest expense, less interest income, plus depreciation and amortization expense, plus closure and post-closure accretion expense, plus or minus any loss or gain on impairments and other operating items, plus other expense, less other income. Waste Connections further adjusts this calculation to exclude the effects of other items management believes impact the ability to assess the operating performance of its business. This measure is not a substitute for, and should be used in conjunction with, GAAP financial measures. Other companies may calculate adjusted EBITDA differently.

		Three months ended March 31,
		2022			2023
Net income attributable to Waste Connections		$	180,324		$	197,813
Plus: Net income attributable to noncontrolling interests			44			23
Plus: Income tax provision			48,839			54,389
Plus: Interest expense			41,324			68,353
Less: Interest income			(137)			(2,715)
Plus: Depreciation and amortization			217,585			243,341
Plus: Closure and post-closure accretion			4,096			4,520
Plus: Impairments and other operating items			1,878			1,865
Plus/(Less): Other expense (income), net			3,466			(3,174)
Adjustments:
Plus: Transaction-related expenses(a)			4,540			2,081
Plus: Fair value changes to equity awards(b)			161			373
Adjusted EBITDA		$	502,120		$	566,869
As % of revenues			30.5 %			29.8 %

____________________________
(a)	Reflects the addback of acquisition-related transaction costs.
(b)	Reflects fair value accounting changes associated with certain equity awards.

NON-GAAP RECONCILIATION SCHEDULE (continued)
(in thousands of U.S. dollars, except where noted)

Reconciliation of Adjusted Free Cash Flow:

Adjusted free cash flow, a non-GAAP financial measure, is provided supplementally because it is widely used by investors as a liquidity measure in the solid waste industry. Waste Connections calculates adjusted free cash flow as net cash provided by operating activities, plus or minus change in book overdraft, plus proceeds from disposal of assets, less capital expenditures for property and equipment and periodic distributions to noncontrolling interests. Waste Connections further adjusts this calculation to exclude the effects of items management believes impact the ability to evaluate the liquidity of its business operations. This measure is not a substitute for, and should be used in conjunction with, GAAP liquidity or financial measures. Other companies may calculate adjusted free cash flow differently.

		Three months ended March 31,
		2022			2023
Net cash provided by operating activities		$	440,897		$	442,358
Plus: Change in book overdraft			87			5,421
Plus: Proceeds from disposal of assets			15,012			1,260
Less: Capital expenditures for property and equipment			(152,318)			(175,786)
Adjustments:
Cash received for divestitures(a)			(5,671)			-
Transaction-related expenses(b)			23,404			1,249
Pre-existing Progressive Waste share-based grants(c)			76			(2)
Tax effect(d)			(1,110)			(519)
Adjusted free cash flow		$	320,377		$	273,981
As % of revenues			19.5 %			14.4 %

___________________________
(a)	Reflects the elimination of cash received in conjunction with the divestiture of certain operations.
(b)	Reflects the addback of acquisition-related transaction costs and the settlement of an acquired tax liability.
(c)	Reflects the cash settlement of pre-existing Progressive Waste share-based awards during the period.
(d)	The aggregate tax effect of footnotes (a) through (c) is calculated based on the applied tax rates for the respective periods.

NON-GAAP RECONCILIATION SCHEDULE (continued)
(in thousands of U.S. dollars, except per share amounts)

Reconciliation of Adjusted Net Income attributable to Waste Connections and Adjusted Net Income per Diluted Share attributable to Waste Connections:

Adjusted net income attributable to Waste Connections and adjusted net income per diluted share attributable to Waste Connections, both non-GAAP financial measures, are provided supplementally because they are widely used by investors as valuation measures in the solid waste industry. Management uses adjusted net income attributable to Waste Connections and adjusted net income per diluted share attributable to Waste Connections as one of the principal measures to evaluate and monitor the ongoing financial performance of Waste Connections' operations. Waste Connections provides adjusted net income attributable to Waste Connections to exclude the effects of items management believes impact the comparability of operating results between periods. Adjusted net income attributable to Waste Connections has limitations due to the fact that it excludes items that have an impact on the Company's financial condition and results of operations. Adjusted net income attributable to Waste Connections and adjusted net income per diluted share attributable to Waste Connections are not a substitute for, and should be used in conjunction with, GAAP financial measures. Other companies may calculate these non-GAAP financial measures differently.

		Three months ended March 31,
		2022			2023
Reported net income attributable to Waste Connections		$	180,324		$	197,813
Adjustments:
Amortization of intangibles(a)			37,635			39,282
Impairments and other operating items(b)			1,878			1,865
Transaction-related expenses(c)			4,540			2,081
Fair value changes to equity awards(d)			161			373
Tax effect(e)			(11,092)			(11,024)
Adjusted net income attributable to Waste Connections		$	213,446		$	230,390
Diluted earnings per common share attributable to Waste Connections' common shareholders:
Reported net income		$	0.69		$	0.77
Adjusted net income		$	0.82		$	0.89

____________________________
(a)	Reflects the elimination of the non-cash amortization of acquisition-related intangible assets.
(b)	Reflects adjustments for impairments and other operating items.
(c)	Reflects the addback of acquisition-related transaction costs.
(d)	Reflects fair value accounting changes associated with certain equity awards.
(e)	The aggregate tax effect of the adjustments in footnotes (a) through (d) is calculated based on the applied tax rates for the respective periods.

SOURCE Waste Connections, Inc.