Waste Connections surpasses earnings expectations for Q4

Toronto-based Waste Connections Inc. reports that it achieved better-than-expected earnings results for the fourth quarter of 2022.

According to the company’s fourth-quarter earnings report, it achieved revenue of $7.212 billion in fiscal year 2022, up 17.2 percent from its revenue achieved in fiscal year 2021. The company reports net income of $835.7 million, or $3.24 per share, and adjusted net income of $985.3 million, or $3.82 per share, for its 2022 fiscal year, up 18.3 percent when compared with its 2021 fiscal year.

Additionally, Waste Connections says it achieved adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $2.221 billion in its 2022 fiscal year, up 15.7 percent compared with 2021.

“Q4 topped off an extraordinary year for Waste Connections, highlighted by continuing outperformance during the period and providing a higher entry point and enhanced visibility for 2023,” says Worthing F. Jackman, president and CEO of Waste Connections. “Strong operational execution and over 10 percent solid waste pricing, along with acquisitions closed during the period, once again provided for better-than-expected results. We more than offset inflationary pressures and commodity-related headwinds to expand adjusted EBITDA margin by 30 basis points, excluding the margin dilutive impact of acquisitions completed since the year-ago period.”

Jackman adds that double-digit percentage growth in both revenue and adjusted EBITDA, along with adjusted EBITDA margin expansion excluding the impact of acquisitions, helped to differentiate Waste Connections’ 2022 fiscal year results.

“We overcame elevated wage, fuel and inflationary pressures and a 70 percent drop in recycled commodity values in the second half of the year, with an acceleration in pricing during the year providing momentum for higher core pricing in 2023,” Jackman says. “Moreover, we reported full-year 2022 adjusted free cash flow of $1.165 billion, or 16.2 percent of revenue, while navigating continuing uncertainties regarding timing of manufacturer fleet deliveries and related payments.”

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Waste Connections reports its revenue in the fourth quarter of 2022 totaled $1.869 billion, up from $1.624 billion in the fourth quarter of 2021. Operating income was $312 million in the fourth quarter of 2022 and included $4.7 million primarily in transaction-related expenses. Net income in the fourth quarter was $194.4 million, or 75 cents per share on a diluted basis of 258 million shares.

According to the company’s earnings report, Waste Connections’ adjusted net income in the fourth quarter was $229.8 million, or 89 cents per diluted share, up from $217.1 million, or 83 cents per diluted share, in the prior-year period. Adjusted EBITDA in the fourth quarter was $563.6 million, as compared with $495.4 million in the prior-year period.

M&A advances and 2023 outlook

Waste Connections’ 2022 acquisition activity “also outpaced expectations,” Jackman says. The company achieved approximately $640 million in acquired annualized revenues in its 2022 fiscal year, which also provides acquisition contribution of 5 percent to 2023.

Some of the acquisitions the company made in fiscal year 2022 include Texas-based Lone Star Disposal and Oregon-based Rogue Waste Inc.

Looking ahead to its 2023 fiscal year, Waste Connections has provided the following estimates:

• revenue at approximately $8.050 billion;
• net income at $961 million;
• adjusted EBITDA at $2.500 billion;
• net cash provided by operating activities at $2.120 billion;
• capital expenditures at $925 million, including $50 million in delayed fleet deliveries from the prior year and proceeds from disposal of assets at $30 million; and
• adjusted free cash flow of $1.225 billion.

Jackman adds, “Our 2022 results are a testament to the culture of accountability that has been integral to Waste Connections’ 25-year history of outperformance and value creation. The tireless efforts of our over 22,000 dedicated employees have positioned us for double-digit revenue growth and additional adjusted EBITDA margin expansion in 2023 in spite of an expected 100 basis points margin headwind at current recovered commodity values, with upside from any improvement in these values or inflationary pressures, as well as any additional acquisition activity.”