Waste Connections gains momentum in Q2

The recovery in raw material prices and the return in volumes contributed to a strong Q2 for Waste Connections, Inc. (TSX / NYSE: WCN).

Second-quarter 2021 revenue reached $ 1.534 billion, up 17.5%, or $ 1.306 billion year-over-year (YOY). Solid waste pricing, volume growth and recovery of raw material value contributed to the company’s success in the second quarter.

CEO Worthing Jackman said the trends have led to an increase in adjusted EBITDA margin of 110 basis points since the start of the year. Second quarter adjusted EBITDA was $ 484.9 million, or 31.6% of revenue, compared to $ 394.3 million and 30.2% of revenue year-over-year.

“Given the expected continued momentum and margin expansion resulting from these trends, we are able to raise our annual outlook for revenue, Adjusted EBITDA, Adjusted EBITDA margin and cash flow. adjusted free cash flow, ”he said.

The acquisition activity should make 2021 a “disproportionate year”. Waste Connections has completed 14 acquisitions to date totaling $ 115 million in annualized revenues. About $ 75 million is attributed to franchise operations in California, Nevada and Oregon, which are expected to close later in 2021.

Jackman said, “We continue to see record amounts of seller interest leading to a high acquisition dialogue, and as communicated throughout the year, we expect closeouts related to most of this activity will be more weighted in the second half of the year, which will provide further benefits, our improved outlook for the year and strong carryover growth through 2022. “

Operating income reached $ 266.8 million in the second quarter of 2021. Second quarter net income was $ 177 million. Last year, Waste Connections reported a second quarter net loss of $ 227.1 million. Adjusted net income for the second quarter was $ 210.9 million, compared to $ 158.0 million the previous year.

The price of solid waste in the second quarter exceeded expectations, increasing 11.4% or nearly 150 basis points as higher than expected volumes due to the recovery that began in the first quarter continued. Landfill tonnes and transportation activities have returned to pre-pandemic levels or above.

Total core price rose 4.9%, up 70 basis points sequentially, above the prospect of a 4.7% core price hike.

“Due to additional price increases that we have already implemented to offset some cost pressures, reported volume growth of 6.5% in the second quarter reflects a sequential increase of approximately 1,000 basis points from in the first quarter and was led by regions where markets were hit hardest during the pandemic, including the northeastern United States and Canada, ”said Jackman. All regions showed sequential improvement from the first quarter and all reported positive second quarter volumes. “

Due to continued growth, Waste Connections has released updated forecast for the year 2021:
Revenue is now estimated at $ 5.975 billion, up from $ 5.8 billion previously.
Adjusted EBITDA, a non-GAAP measure, is estimated at $ 1.875 billion, or 31.4% of revenue, up from the previous figure of $ 1.8 billion.
The company expects a net profit of approximately $ 690 million.
Adjusted free cash flow is estimated at $ 1 billion, or about 16.7% of revenue, up from the previous figure of $ 950 million.
Free cash flow from operating activities will be approximately $ 1.666 billion, revised by $ 1.575 billion.
Capital expenditures are expected to reach $ 675 million compared to the previous estimate of $ 625 million.

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