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Waste Connections reports 2017 results and provides 2018 outlook

Waste Connections reports 2017 results and provides 2018 outlook

Waste Connections, Inc. has announced financial results for 2017, and predictions for 2018.





Waste Connections, Fourth Quarter 2017 Highlights:
-          Revenue of $1.157 billion, exceeding outlook
-          Reports 4.3% solid waste price + volume growth, exceeding outlook 
-          Net income attributable to Waste Connections of $315.1 million, or $1.19 per share 
-          Adjusted net income attributable to Waste Connections* of $137.0 million, or $0.52 per share, up 13.0% per share
-          Adjusted EBITDA* of $360.7 million, or 31.2% of revenue 

Full-Year 2017 Highlights 
-          Revenue of $4.630 billion 
-          Reports 4.4% solid waste price + volume growth 
-          Net cash provided by operating activities of $1.187 billion 
-          Adjusted free cash flow* of $763.9 million, or 16.5% of revenue 

Looking at 2018 
-          Expects revenue of approximately $4.825 billion, excluding additional acquisitions 
-          Expects adjusted EBITDA* margin expansion of 60 basis points YoY 
-          Expects net cash provided by operating activities of approximately $1.350 billion, or 28.0% of revenue 
-          Expects adjusted free cash flow* of approximately $850.0 million, or 17.6% of revenue 

Waste Connections results for the fourth quarter of 2017
Revenue in the fourth quarter totaled $1.157 billion, up from $1.049 billion in the year ago period.  Operating income, which included $15.2 million of impairments, primarily related to the Company's termination of a back-up landfill development project no longer deemed necessary, and $7.0 million of acquisition-related costs, was $175.0 million.  This compares to $139.2 million in the year ago period, which included $23.0 million of impairments and other operating items and $16.0 million of acquisition-related costs. 

Net income attributable to Waste Connections in the fourth quarter, which included a $209.4 million benefit to the income tax provision primarily resulting from enactment of the Tax Cuts and Jobs Act of 2017 (the "Tax Act"), was $315.1 million, or $1.19 per share on a diluted basis of 264.6 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $85.6 million, or $0.32 per share on a diluted basis of 263.9 million shares. Shares and per share numbers reflect a three-for-two share split completed in June 2017. 

Adjusted net income attributable to Waste Connections in the fourth quarter was $137.0 million, or $0.52 per share, versus $120.3 million, or $0.46 per share, in the prior year period.  Adjusted EBITDA* in the fourth quarter was $360.7 million, as compared to adjusted EBITDA* of $325.4 million in the prior year period.  Adjusted net income attributable to Waste Connections, adjusted net income attributable to Waste Connections per diluted share and adjusted EBITDA, all non-GAAP measures, primarily exclude the impact of the Tax Act, acquisition-related items and impairments and other operating items, as reflected in the detailed reconciliations in the attached tables. 

"Q4 capped off another exceptional year for Waste Connections, with better than expected solid waste volume growth and E&P waste activity once again driving financial results in the period above expectations.  Adjusted free cash flow* for the full year of approximately $764 million or 16.5% of revenue and 52.3% of adjusted EBITDA continues to reflect the results of our differentiated strategy and purposeful focus on both quality of revenue and free cash flow generation," said Ronald J. Mittelstaedt, Chief Executive Officer and Chairman.  "We are extremely pleased that adjusted free cash flow per share increased more than 20% in 2017, while the number of safety-related incidents in the year declined more than 20%." 

Mr. Mittelstaedt added, "Recently completed acquisitions with total annualized revenue of approximately $70 million provide a strong start to what could be another year of above average acquisition activity.  In early 2018, we acquired Bay Disposal, LLC and Hampton Roads Recovery Center, LLC (collectively, "Bay Disposal & Recycling").  Bay Disposal & Recycling is an integrated provider of solid waste collection, recycling, transfer and disposal services to almost 70,000 customers in southeastern Virginia and northeastern North Carolina through four collection operations, five recycling facilities, one transfer station and a C&D landfill.  We've also completed tuck-in acquisitions in New York and Texas.  Our strong financial profile provides us the flexibility to fund this potential above average amount of acquisition activity while continuing to increase the return of capital to shareholders." 

For the year ended December 31, 2017, revenue was $4.630 billion, as compared to revenue of $3.376 billion in 2016.  Operating income, which included $189.2 million of expenses primarily related to both goodwill impairment against the Company's E&P segment resulting from the early adoption of FASB's recent accounting pronouncement simplifying the test for goodwill impairment, and impairments and other operating items mostly related to the divestiture or expected divestiture of certain assets acquired in the Progressive Waste acquisition, was $627.1 million.  This compares to operating income of $452.3 million in the prior year, which included $146.0 million of expenses primarily related to the Progressive Waste acquisition and the expected divestiture of certain assets acquired in the Progressive Waste acquisition. 

Net income attributable to Waste Connections in 2017, which included a $205.6 million benefit to the income tax provision primarily related to the Tax Act, was $576.8 million, or $2.18 per share on a diluted basis of 264.3 million shares.  In 2016, the Company reported net income attributable to Waste Connections of $246.5 million, or $1.07 per share on a diluted basis of 231.1 million shares.  

Adjusted net income attributable to Waste Connections* in 2017 was $570.7 million, or $2.16 per share, compared to $395.2 million, or $1.71 per share, in the prior year. Adjusted EBITDA* in 2017 was $1.461 billion, as compared to $1.071 billion in the prior year.  Adjusted net income attributable to Waste Connections, adjusted net income attributable to Waste Connections per diluted share and adjusted EBITDA, all non-GAAP measures, primarily exclude the impact of the Tax Act, acquisition-related items and impairments and other operating items, as reflected in the detailed reconciliations in the attached tables.  

2018 OUTLOOK 

Waste Connections also announced its outlook for 2018, which assumes no change in the current economic environment.  The Company's outlook excludes any impact from additional acquisitions that may close during the year, and expensing of transaction-related items.  The outlook provided below is forward looking, and actual results may differ materially depending on risks and uncertainties detailed at the end of this release and in our periodic filings with the Securities and Exchange Commission and the securities commissions or similar regulatory authorities in Canada. Certain components of the outlook for 2018 are subject to quarterly fluctuations. 

• Revenue is estimated to be approximately $4.825 billion. 
• Net income attributable to Waste Connections is estimated to be approximately $570.0 million. 
• Adjusted EBITDA* is estimated to be approximately $1.550 billion, or about 32.1% of revenue. 
• Net cash provided by operating activities is estimated to be approximately $1.350 billion, or 28.0% of revenue. 
• Adjusted free cash flow* is estimated to be approximately $850.0 million, or about 17.6% of revenue.
* A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule. 

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