Financial report: Waste Connections revenue up 17.7 percent in third quarter of 2022

Waste Connections, Inc. has released its results for the third quarter of 2022 and updated its outlook for 2022.

"Strong execution once again provided for better than expected results, driven in the third quarter by continued acceleration of solid waste pricing to 10.1 percent and higher E&P waste activity, along with acquisitions closed during the period. Most notably, we overcame 50 basis points in incremental headwinds, primarily from the precipitous decline in recycled commodity values in September, to beat our outlook and expand adjusted EBITDA margin both sequentially and on a year-over-year basis, excluding the dilutive impact from acquisitions completed since the year ago period," says Worthing F. Jackman, president and chief executive officer of Waste Connections. 

"As anticipated, acquisition activity continues to run well above historical levels, with $535 million in annualized revenue closed in 2022 plus an additional $35 million under definitive agreement expected to close by year end or early in 2023," Jackman adds. "These transactions include multi-market solid waste franchises in California and Oregon; integrated market expansions in Arizona and Texas; new market entries in Pennsylvania, British Columbia and Quebec; and multiple tuck-ins and market expansions within our recently established footprint in Massachusetts.

"The strength of our balance sheet, operating performance and free cash flow generation positioned us for another double-digit increase in our quarterly cash dividend, once again demonstrating our capacity for outsized acquisition activity while continuing to fund our differentiated growth strategy and increasing return of capital to shareholders.

"Our outperformance through the third quarter and acquisitions closed year to date enhance our visibility for expected double-digit revenue growth in 2023, led by pricing expected to remain at elevated levels, plus rollover contribution from acquisitions already signed or closed year to date. In addition, we expect underlying margin expansion to overcome headwinds from recent decreases in recycled commodity values."

Q3 2022 results

Revenue in the third quarter totalled $1.880 billion, up from $1.597 billion in the year-ago period. Operating income was $326.8 million, which included $25.1 million primarily in impairments and other operating items and transaction expenses. This compares to the operating income of $285.1 million in the third quarter of 2021, which included $9.7 million primarily related to transaction expenses and impairments and other operating items. Net income in the third quarter was $236.9 million, or $0.92 per share on a diluted basis of 257.9 million shares, including a $15.3 million net of tax benefit, or $0.06 per share, primarily as a result of the impact from changes in foreign currency exchange rates on certain debt in the period. In the year-ago period, the company reported a net income of $114.4 million, or $0.44 per share on a diluted basis of 261.1 million shares, including a net tax loss on debt extinguishment associated with the prepayment of senior notes of $84.2 million or $0.32 per share.  

Adjusted net income in the third quarter was $284.9 million, or $1.10 per diluted share, versus $233.1 million, or $0.89 per diluted share, in the prior year period. Adjusted EBITDA in the third quarter was $588.1 million, as compared to $505.6 million in the prior year period. Adjusted net income, adjusted net income per diluted share and adjusted EBITDA, all non-GAAP measures, primarily exclude impairments and acquisition-related items.

Nine months year to date results

For the nine months that ended September 30, 2022, revenue was $5.343 billion, up from $4.527 billion in the year-ago period. Operating income, which included $38.5 million primarily attributable to impairments and other operating items and transaction-related expenses, was $930.2 million, as compared to operating income of $790.3 million in 2021, which included $23.7 million in impairments, fair value changes in equity awards and transaction expenses.

Net income for the nine months ended September 30, 2022, was $641.3 million, or $2.49 per share on a diluted basis of 258.1 million shares, including an $18.9 million net tax benefit, or $0.07 per share, primarily as a result of the impact from changes in foreign currency exchange rates on certain debt. In the year-ago period, the company reported a net income of $451.7 million, or $1.72 per share on a diluted basis of 261.9 million shares, including a net tax loss on debt extinguishment associated with the prepayment of senior notes of $84.2 million or $0.32 per share. 

Adjusted net income for the nine months ended September 30, 2022, was $755.5 million, or $2.93 per diluted share, compared to $629.5 million, or $2.39 per diluted share, in the year-ago period. Adjusted EBITDA for the nine months ended September 30, 2022, was $1.657 billion, as compared to $1.424 billion in the prior year period.