01—Abstract
Summary
Summary of the 10-K filed February 14, 2024. Cited figures are marked; the original filing is the authoritative source.
Waste Connections, Inc. reported revenues of $8.022 billiona for 2023, up 11.2% from $7.212 billion in 2022.
Excluding $407.3 millionb of incremental revenue from acquisitions, revenues increased 5.6%, led by solid waste internal growth of 6.2%, with pricing up 9.0% and volumes down 2.0%. Net income attributable to Waste Connections decreased 8.7% to $762.8 million, principally due to impairments and other operating items that rose to $238.8 million from $18.2 million, including a $159.5 million charge to adjust a closure and post-closure liability at a non-active landfill area. Adjusted EBITDA rose 13.6% to $2.523 billion, and adjusted EBITDA margin improved to 31.5% from 30.8%.
Adjusted free cash flow increased to $1.224 billionc from $1.165 billion. The company completed 13 acquisitions in 2023 for consideration with a net fair value of $752.8 million, versus 24 acquisitions for $2.334 billion in 2022. Total debt was $6.812 billion, and the leverage ratio declined to 2.60x from 2.93x at year-end 2022.
The company expects 2024 capital expenditures of $1.15 billiond, including approximately $150 million for renewable natural gas facilities. The quarterly dividend was raised to $0.285 per share in October 2023, and the company announced another $0.285 quarterly dividend on February 13, 2024.
Key risks disclosed include the Jefferson Parish, Louisiana odor litigation, the Chiquita Canyon Landfill elevated temperature event and South Coast Air Quality Management District notices of violation, with the company stating it cannot yet determine the likelihood or amount of outcomes. Grant Thornton LLP issued an unqualified opinion on both the financial statements and internal control over financial reporting.
02—Key points
Key Highlights
- Revenue grew 11.2% to $8.022 billion, with 5.6% organic growth excluding acquisitions of $407.3 million in incremental revenue.
- Net income attributable to Waste Connections fell 8.7% to $762.8 million, driven by impairments and other operating items of $238.8 million.
- Adjusted EBITDA rose 13.6% to $2.523 billion; adjusted EBITDA margin expanded to 31.5% from 30.8%.
- Solid waste pricing growth of 9.0% offset volume declines of 2.0%, which the company attributed partly to intentional shedding of lower-quality revenue.
- Leverage ratio improved to 2.60x from 2.93x, with total debt of $6.812 billion at December 31, 2023.
- 2024 capital expenditure plan of $1.15 billion, including approximately $150 million for renewable natural gas facilities.
- Ongoing litigation and regulatory matters, including Jefferson Parish odor claims and Chiquita Canyon Landfill notices of violation, carry uncertain outcomes that the company has not quantified.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Waste Connections kept $0.10.
- Revenue$8.02B100.0%
- Cost of revenue−$4.74B59.1%
- Gross profit$3.28B40.9%
- Operating costs−$2.04B25.4%
- Operating income$1.24B15.4%
- Interest, other & tax−$473.5M5.9%
- Net income$762.8M9.5%
Where FY2023 revenue went
$8.02B- Cost of revenue: $4.74B, 59% of revenue
- Other operating costs: $1.24B, 15% of revenue
- Net income: $762.8M, 9.5% of revenue
- SG&A: $799.1M, 10.0% of revenue
- Interest, other & tax: $473.5M, 5.9% of revenue
Kept 9.5% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 14, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $8.02B$7.21B | +11.2% |
| Cost of Revenue | $4.74B$4.34B | +9.4% |
| Gross Profit | $3.28B$2.88B | +14.0% |
| SG&A Expenses | $799.12M$696.47M | +14.7% |
| Operating Income | $1.24B$1.24B | −0.5% |
| Interest Expense | $274.64M$202.33M | +35.7% |
| Net Income | $762.83M$836.00M | −8.8% |
| EPS (Basic) | $2.96$3.25 | −8.9% |
| EPS (Diluted) | $2.95$3.24 | −9.0% |
| Shares Outstanding (Basic) | 257.55M257.38M | +0.1% |
| Shares Outstanding (Diluted) | 258.15M258.04M | 0.0% |
05—Questions
Frequently Asked Questions
What drove the decline in net income despite revenue growth?
The filing attributes the 8.7% decline in net income attributable to Waste Connections to impairments and other operating items, which increased to $238.8 million in 2023 from $18.2 million in 2022. The largest component was $159.5 million of charges to adjust a closure and post-closure liability at a non-active area of a landfill site.
How did pricing and volume contribute to solid waste internal growth?
Solid waste internal growth was 6.2%, reflecting pricing growth of 9.0% (core pricing up 9.5%, offset by 0.5% from materials and environmental surcharges). Volumes decreased 2.0%, due primarily to intentional shedding of lower-quality revenue, including non-renewal of certain residential hauling contracts.
What are the company's main debt and liquidity metrics?
Total indebtedness was $6.812 billion at December 31, 2023. The Leverage Ratio decreased to 2.60x from 2.93x, against a target range of approximately 2.5x to 3.0x. The company had $1.357 billion of remaining borrowing capacity under its Credit Agreement, which matures in July 2026, and net cash provided by operating activities was $2.127 billion.
What legal and environmental exposures does the filing highlight?
The filing discusses the Jefferson Parish, Louisiana landfill odor litigation, with a merits trial for the first 13 Addison plaintiffs scheduled to begin August 12, 2024, and the Chiquita Canyon Landfill, where the company has received approximately 122 SCAQMD Rule 402 notices of violation since May 2023 related to an elevated temperature landfill event. The company states it cannot currently determine the likelihood of any outcome or the amount of penalties.
06—Continue