01—Abstract
Summary
Summary of the 10-K filed February 16, 2023. Cited figures are marked; the original filing is the authoritative source.
Waste Connections, Inc. reported record-level operating results for fiscal 2022, with revenues of $7.212 billiona, up 17.2% from $6.151 billion in 2021, and net income attributable to Waste Connections of $835.7 million, up 35.2% from $618.0 million.
Adjusted EBITDA rose 15.7% to $2.221 billionb, though its margin eased to 30.8% from 31.2%, reflecting the dilutive effect of acquisitions and inflationary pressures. Price-driven solid waste growth was the main driver, with solid waste internal growth of 7.4% and pricing growth of 9.2%, partially offset by a 1.1% volume decline. The company spent heavily on growth in 2022, completing 24 acquisitions for a net fair value of $2.334 billion and capital expenditures of $912.7 million.
Net cash provided by operating activities rose 19.1% to $2.022 billion, and adjusted free cash flow increased to $1.165 billionc. Leverage rose to 2.93x at year-end from 2.50x, versus a stated target range of 2.5x to 3.0x total debt to EBITDA, with total indebtedness of $6.963 billion and cash of $78.6 million.
Shareholder returns remained a priority: the company distributed $668.0 milliond through dividends ($243.0 million) and share repurchases ($425 million), and the board approved a quarterly dividend of $0.255 per share in February 2023. Key risks flagged in the filing include competitive bidding and contract losses, inflation pass-through limits, recycled commodity and RIN price volatility, landfill permitting, and the ongoing Jefferson Parish, Louisiana odor litigation, for which the company cannot determine the likelihood of outcome.
02—Key points
Key Highlights
- Revenue grew 17.2% to $7.212 billion in 2022; excluding acquisitions, revenue increased 8.3%, driven by solid waste pricing growth of 9.2%.
- Net income attributable to Waste Connections rose 35.2% to $835.7 million; diluted EPS was $3.24 versus $2.36 in 2021.
- Adjusted EBITDA increased 15.7% to $2.221 billion, while adjusted EBITDA margin declined from 31.2% to 30.8%, a 0.40 percentage point decrease.
- Acquisition spending was significant: 24 acquisitions for consideration with a net fair value of $2.334 billion, and cash paid for acquisitions of $2.207 billion.
- Leverage Ratio increased to 2.93x at December 31, 2022, from 2.50x, with total indebtedness of $6.963 billion and cash of $78.6 million.
- Shareholder returns totaled $668.0 million in 2022, including $243.0 million of dividends and $425 million of share repurchases; the quarterly dividend was raised 10.9% to $0.255.
- Jefferson Parish, Louisiana landfill odor litigation advanced after a November 2022 general causation ruling; the company says it cannot determine the likelihood of outcome.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Waste Connections kept $0.12.
- Revenue$7.21B100.0%
- Cost of revenue−$4.34B60.1%
- Gross profit$2.88B39.9%
- Operating costs−$1.63B22.7%
- Operating income$1.24B17.2%
- Interest, other & tax−$406.2M5.6%
- Net income$836.0M11.6%
Where FY2022 revenue went
$7.21B- Cost of revenue: $4.34B, 60% of revenue
- Other operating costs: $937.2M, 13% of revenue
- Net income: $836.0M, 12% of revenue
- SG&A: $696.5M, 9.7% of revenue
- Interest, other & tax: $406.2M, 5.6% of revenue
Kept 12% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 16, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $7.21B$6.15B | +17.2% |
| Cost of Revenue | $4.34B$3.65B | +18.7% |
| Gross Profit | $2.88B$2.50B | +15.2% |
| SG&A Expenses | $696.47M$612.34M | +13.7% |
| Operating Income | $1.24B$1.04B | +19.5% |
| Interest Expense | $202.33M$162.80M | +24.3% |
| Net Income | $836.00M$618.49M | +35.2% |
| EPS (Basic) | $3.25$2.37 | +37.1% |
| EPS (Diluted) | $3.24$2.36 | +37.3% |
| Shares Outstanding (Basic) | 257.38M261.17M | −1.4% |
| Shares Outstanding (Diluted) | 258.04M261.73M | −1.4% |
05—Questions
Frequently Asked Questions
How did Waste Connections' revenue and profitability change in 2022?
Revenues increased 17.2% to $7.212 billion from $6.151 billion. Net income attributable to Waste Connections rose 35.2% to $835.7 million, and operating income increased 19.5% to $1.242 billion. Growth was driven mainly by solid waste price increases, acquisitions and higher E&P waste activity, partly offset by lower recycled commodity values.
Is the company's margin improving?
Not on an adjusted EBITDA basis. Adjusted EBITDA margin decreased from 31.2% in 2021 to 30.8% in 2022, a 0.40 percentage point decline. The filing attributes 0.50 percentage points to the margin-dilutive impact of acquisitions, while price-led organic growth and higher E&P activity offset lower recycled commodity values and inflation. Cost of operations rose to 60.1% of revenue from 59.4%.
How is the company funding its growth and capital returns?
Net cash from operations was $2.022 billion, but investing outflows of $3.087 billion, including acquisitions and $912.7 million of capital expenditures, exceeded that amount. The gap was funded mainly by net long-term borrowings of $1.745 billion. The company had $1.194 billion of remaining revolver capacity under its Credit Agreement, which matures in July 2026, and the 2023 capital expenditure plan is $895 million.
What are the main risks to the business highlighted in the filing?
Key risks include competitive bidding and contract losses (about 362 contracts, representing 3.0% of annual revenues, come up for expiration or renewal by December 31, 2023), limits on passing inflation through to customers, volatility in recycled commodity and RIN prices, difficulty obtaining landfill permits, rising interest costs as variable-rate debt transitions from LIBOR and CDOR, and environmental and PFAS regulation. Litigation includes the Jefferson Parish odor cases and the Los Angeles County Chiquita Canyon matter.
What is the outlook for shareholder returns?
The board approved a quarterly dividend of $0.255 per share in February 2023, payable March 15, 2023, and the company has a long-term objective of increasing the dividend. A normal course issuer bid allows repurchases of up to 12,859,066 shares through August 9, 2023, but the filing states that the timing and amounts of future repurchases and dividends are not assured.
06—Continue