Positive pricing, volumes and recovered commodity values drive strong results for Waste Connections
Waste Connections, Inc. has announced its results for the second quarter of 2021 citing a 17.5% year over year increase in revenue, 11.4% solid waste price and volume growth, driven primarily by strong solid waste pricing, volume growth, and commodity values.
"Broad-based strength drove an across the board beat in the second quarter, positioning us to raise our outlook for the full year," said Worthing F. Jackman, President and Chief Executive Officer. "Revenue and adjusted EBITDA in Q2 increased 17.5 percent and 23.0 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(b) of over $585 million, up 18.5 percent year over year."
"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."
Mr. Jackman continued, "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. 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 $1.534 billion, up from $1.306 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 to 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 E&P waste landfills.
Adjusted net income in the second quarter was $210.9 million, or $0.81 per diluted share, versus $158.0 million, or $0.60 per diluted share, in the prior year period. Adjusted EBITDA in the second quarter was $484.9 million and 31.6 percent of revenue, as compared to $394.3 million and 30.2 percent of revenue in the prior year period.
Six Months Year to Date Results
For the six months ended June 30, 2021, revenue was $2.930 billion, up from $2.658 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 to 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.
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.
Highlights from the outlook provided below.
- Revenue is estimated to be approximately $5.975 billion, as compared to our original revenue outlook of approximately $5.800 billion
- Net income is estimated to be approximately $690 million, and adjusted EBITDA is estimated to be approximately $1.875 billion, or about 31.4 percent of revenue, as compared to our original adjusted EBITDA(b) outlook of $1.800 billion or 31.0 percent of revenue
- Capital expenditures are estimated to be approximately $675 million, as compared to our original capital expenditures outlook of approximately $625 million.
- Net cash provided by operating activities is estimated to be approximately $1.666 billion, as compared to our original outlook of $1.575 billion, and adjusted free cash flow is estimated to be approximately $1 billion, or about 16.7 percent of revenue, as compared to our original adjusted free cash flow(b) outlook of approximately $950 million or 16.4 percent of revenue.