Waste Connections sees positive Q2 results

Waste Connections, The Woodlands, Texas, experienced a positive second quarter with total revenue of $2.02 billion, up 11.3 percent year over year and far above its prior outlook.

“We are extremely pleased by the strength of operational execution during the quarter for a solid beat on revenue and adjusted EBITDA to deliver margins 30 basis points above our outlook,” says Ronald Mittelstaedt, president and CEO of Waste Connections. He adds that solid waste core pricing growth of 9.8 percent positioned the company to expand underlying solid waste collection, transfer and disposal margins by one hundred basis points during the period.

This largely helped the company overcome ongoing headwinds from year-over-year declines in recovered commodity values and continued inflationary pressures, Mittelstaedt says.

With recent acquisitions and reduced headwinds from fuel and other commodity-related impacts, Waste Connections has increased its full-year outlook for adjusted EBITDA to approximately $2.52 billion, expanding its adjusted EBITDA margin to 31.5 percent (up 40 basis points from the company’s initial outlook and up 70 basis points as compared to the prior year).

Revenue in Q2 totaled $2.02 billion, up from $1.81 billion in the year-ago period. Operating income was $344.1 million, which included $27.8 million, primarily in executive separation costs, impairments and other operating items and transaction-related expenses. This compares to an operating income of $329.6 million in Q2 2022, which included $6.8 million for similar expenses.

Net income in Q2 was $209.2 million, or $0.81 per share on a diluted basis of 258.1 million shares. Adjusted net income in Q2 was $262.3 million, or $1.02 per diluted share.

For the six months that ended June 30, revenue was $3.922 billion, up from $3.463 billion in the year-ago period. Operating income, which included $32.1 million primarily attributable to executive separation costs, impairments and other operating items and transaction-related expenses, was $658.8 million, as compared to operating income of $603.4 million in the prior year period.

“The strength of our results reflects our focus on [the] quality of revenue through the shedding of low margin volumes and furthered by strategic acquisitions, including [Perry County, Alabama-based] Arrowhead [Environmental Partners], a $100 million revenue integrated transportation and disposal network with rail access providing enhanced internalization opportunities to our operations across the Northeast,” Mittelstaedt says. “Already having completed acquisitions with over $160 million in annualized solid waste revenue year to date, we see plenty of runway and opportunity for continued activity throughout the balance of the year.”

According to Arrowhead’s website, the company owns a large-capacity, Subtitle D landfill in Perry County. The 1,345-acre site has approximately 60 million cubic yards of permitted airspace and can receive up to 15,000 tons of waste per day. 

Direct daily service from major Class I rail lines allows Arrowhead Landfill to “efficiently accept waste for disposal from communities and customers east of the Mississippi River including Northeast, Mid-Atlantic and Southeast states as well as Oklahoma and Texas,” the company says.

In addition to a strong portfolio of assets, Mittelstaedt says he is encouraged by improving trends in safety and employee retention, noting that Waste Connections plans to “double down on human capital” in its decentralized operating model through a realignment of the company’s organizational structure and with the addition of a sixth region and refinements to the corporate operational structure.

“We look forward to driving outsized margin expansion in the second half of 2023 and into 2024,” he says.