01—Abstract
Summary
Summary of the 10-Q filed July 25, 2024. Cited figures are marked; the original filing is the authoritative source.
Waste Connections, Inc. reported second-quarter 2024 revenues of $2.248 billiona, up from $2.021 billion a year earlier, and net income attributable to Waste Connections of $275.5 million, or $1.07 per diluted share, versus $209.2 million, or $0.81, in the prior-year quarter.
For the six months ended June 30, 2024, revenues were $4.321 billionb and net income attributable to the company was $505.5 million, or $1.96 per diluted share. The filing attributes the revenue growth to price increases, acquisitions and higher landfill gas and E&P waste activity, partially offset by volume losses from the shedding of low-margin municipal contracts. Operating income rose to $424.7 million for the quarter, and adjusted EBITDA was $731.8 million compared with $628.9 million a year earlier.
The balance sheet expanded materially during the period. Total assets grew to $19.30 billionc from $17.92 billion at December 31, 2023, and long-term debt and notes payable rose to $7.70 billion from $6.72 billion. The company spent $1.44 billion on acquisitions in the first half, funded largely by borrowings under a new Revolving Credit Agreement, which had $1.77 billion drawn at June 30, 2024.
Management also issued $750.0 milliond of 5.00% Senior Notes due 2034 and CAD $500.0 million of 4.50% Senior Notes due 2029, and used proceeds to retire the 2021 Revolving and Term Credit Agreement and the 2022 Term Loan Agreement. The filing highlights significant litigation and regulatory exposure at the Chiquita Canyon Landfill in California, where an elevated temperature landfill event has led to numerous regulatory notices, a stipulated abatement order, and over 2,800 civil plaintiffs as of July 24, 2024. Management states it cannot determine the likely penalties or the outcome of these matters.
A separate Jefferson Parish, Louisiana odor litigation is set for a merits trial beginning August 12, 2024. The company also declared a quarterly dividend of $0.285 per share, payable August 22, 2024.
02—Key points
Key Highlights
- Revenues rose 11.2% to $2.248 billion in Q2 2024, and net income attributable to Waste Connections increased to $275.5 million ($1.07 per diluted share) from $209.2 million ($0.81) a year earlier.
- Operating income increased 23.4% to $424.7 million in Q2 2024, with operating margin rising to 18.8% from 17.0%.
- Net price increases at existing operations were $131.2 million in Q2 2024, while volume losses totaled $54.2 million, largely from shedding low-margin municipal contracts.
- Total long-term debt and notes payable increased to $7.70 billion from $6.72 billion at December 31, 2023, driven by the new $3.0 billion Revolving Credit Agreement (with $1.77 billion drawn) and new senior notes.
- First-half acquisition payments were $1.44 billion across 14 solid waste businesses and two E&P waste businesses, and total assets grew to $19.30 billion.
- Adjusted free cash flow for the six months was $727.4 million, compared with $630.0 million a year earlier.
- Chiquita Canyon Landfill elevated temperature event has generated approximately 218 SCAQMD notices of violation, multiple regulatory orders, and over 2,800 civil plaintiffs; management cannot yet determine potential penalties.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, Waste Connections kept $0.12.
- Revenue$2.25B100.0%
- Cost of revenue−$1.30B57.9%
- Gross profit$947.1M42.1%
- Operating costs−$522.4M23.2%
- Operating income$424.7M18.9%
- Interest, other & tax−$149.3M6.6%
- Net income$275.4M12.2%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed July 25, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $2.25B$2.02B | +11.2% |
| Cost of Revenue | $1.30B$1.20B | +8.7% |
| Gross Profit | $947.10M$823.75M | +15.0% |
| SG&A Expenses | $228.85M$216.38M | +5.8% |
| Operating Income | $424.70M$344.13M | +23.4% |
| Net Income | $275.40M$209.17M | +31.7% |
| EPS (Basic) | $1.07$0.81 | +32.1% |
| EPS (Diluted) | $1.07$0.81 | +32.1% |
| Shares Outstanding (Basic) | 257.99M257.60M | +0.2% |
| Shares Outstanding (Diluted) | 258.57M258.11M | +0.2% |
05—Questions
Frequently Asked Questions
How did Waste Connections perform in the second quarter of 2024?
Revenues were $2.248 billion, up from $2.021 billion, and net income attributable to Waste Connections was $275.5 million, or $1.07 per diluted share, compared with $209.2 million, or $0.81, in the second quarter of 2023. Operating income was $424.7 million, versus $344.1 million a year earlier.
What drove the revenue growth?
The filing attributes the increase primarily to $135.7 million of core price increases in the quarter, $123.4 million from acquisitions closed during or after the second quarter of 2023, and higher E&P waste and recyclable commodity revenues. These were partly offset by $54.2 million of volume losses, mainly from lower residential collection volumes tied to the shedding of certain low-margin municipal contracts.
How is the company financing its growth and acquisitions?
In February 2024 the company entered into a Revolving Credit Agreement maturing February 27, 2029, with $1.77 billion drawn at June 30, 2024, and used proceeds to repay its 2021 Revolving and Term Credit Agreement and 2022 Term Loan Agreement. It also issued $750.0 million of 5.00% Senior Notes due 2034 and CAD $500.0 million of 4.50% Senior Notes due 2029 in June 2024. The filing states the company was in compliance with all covenants at June 30, 2024.
What are the main legal and regulatory risks disclosed?
The most significant disclosed matter involves the Chiquita Canyon Landfill in Los Angeles County, where an elevated temperature landfill event has led to about 218 SCAQMD notices of violation, Water Board and DTSC violations, an EPA Finding of Violation, and over 2,800 civil plaintiffs as of July 24, 2024. The company states it cannot determine the likely penalties or outcomes. Separately, the Jefferson Parish, Louisiana odor litigation has a 14-day merits trial for 13 Addison plaintiffs scheduled to begin August 12, 2024.
Is the dividend changing?
The quarterly cash dividend is $0.285 per share, the rate set in October 2023 when it was increased from $0.255. On July 24, 2024, the Board approved another regular quarterly dividend of $0.285 per share, payable August 22, 2024 to shareholders of record on August 7, 2024.
06—Continue