01—Abstract
Summary
Summary of the 10-Q filed October 24, 2024. Cited figures are marked; the original filing is the authoritative source.
Waste Connections, Inc. reported strong third-quarter 2024 results.
Revenues for the three months ended September 30, 2024 were $2.338 billiona, up from $2.065 billion a year earlier, and nine-month revenues were $6.659 billion, up from $5.986 billion. Operating income rose to $475.3 million for the quarter from $353.0 million, and net income attributable to Waste Connections was $308.0 million, or $1.19 per diluted share, compared with $0.89 a year earlier. The filing attributes the revenue growth mainly to price increases, acquisitions, and higher recyclable commodity and E&P waste revenues, partly offset by volume losses from shedding low-margin municipal contracts.
The balance sheet expanded significantly as the company spent $2.01 billionb on acquisitions in the nine months, funded largely by borrowings. Long-term debt rose to $8.16 billion from $6.72 billion at year-end 2023, driven by $2.23 billion drawn under a new Revolving Credit Agreement and issuance of $750 million of 5.00% Senior Notes due 2034 and CAD $500 million of 4.50% Senior Notes due 2029. Operating cash flow was $1.660 billion for the nine months, and adjusted free cash flow was $1.044 billion.
The company had a working capital deficit of $398.9 millionc and reported compliance with all covenants under the Revolving Credit Agreement. Legal matters remain significant. The Chiquita Canyon Landfill faces an elevated temperature landfill event, roughly 275 SCAQMD Rule 402 notices of violation, and about 3,300 plaintiffs in civil lawsuits as of October 23, 2024.
The company states it cannot determine the likelihood or amount of outcomes. Under the Los Angeles County conditional use permit, absent approval of a modified permit, the landfill's maximum annual tonnage would fall from approximately two million to one million tons beginning January 1, 2025.
The Jefferson Parish landfill odor class action is also ongoing. Subsequent to quarter end, the board raised the quarterly dividend to $0.315d per share from $0.285.
02—Key points
Key Highlights
- Revenues rose 13.3% to $2.338 billion in Q3 2024 and 11.2% to $6.659 billion for the nine months, driven by price increases and acquisitions.
- Net income attributable to Waste Connections was $308.0 million ($1.19 per diluted share) in Q3 2024, versus $229.0 million ($0.89) a year earlier.
- Operating income increased 34.7% to $475.3 million for the quarter; operating margin reached 20.3% versus 17.1%.
- The company spent $2.01 billion on acquisitions in the nine months, while total assets grew to $20.10 billion from $17.92 billion at year-end 2023.
- Long-term debt increased to $8.16 billion, including $2.23 billion drawn on the new Revolving Credit Agreement and new senior notes issued in 2024.
- Chiquita Canyon Landfill faces about 275 air-quality notices of violation, roughly 3,300 civil plaintiffs, and possible tonnage reduction from 2 million to 1 million tons per year starting January 1, 2025 absent an approved modified permit.
- The quarterly dividend was increased to $0.315 per share, announced October 23, 2024, payable November 21, 2024.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Waste Connections kept $0.13.
- Revenue$2.34B100.0%
- Cost of revenue−$1.34B57.5%
- Gross profit$994.4M42.5%
- Operating costs−$519.1M22.2%
- Operating income$475.3M20.3%
- Interest, other & tax−$167.3M7.2%
- Net income$308.0M13.2%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed October 24, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $2.34B$2.06B | +13.3% |
| Cost of Revenue | $1.34B$1.20B | +11.6% |
| Gross Profit | $994.41M$860.14M | +15.6% |
| SG&A Expenses | $222.53M$196.32M | +13.4% |
| Operating Income | $475.34M$352.98M | +34.7% |
| Net Income | $308.05M$229.19M | +34.4% |
| EPS (Basic) | $1.19$0.89 | +33.7% |
| EPS (Diluted) | $1.19$0.89 | +33.7% |
| Shares Outstanding (Basic) | 258.02M257.63M | +0.2% |
| Shares Outstanding (Diluted) | 258.76M258.23M | +0.2% |
05—Questions
Frequently Asked Questions
How did Waste Connections' revenue and profitability change in the third quarter of 2024?
Revenues increased to $2.338 billion from $2.065 billion, and operating income increased to $475.3 million from $353.0 million. Net income attributable to Waste Connections was $308.0 million, or $1.19 per diluted share, compared with $229.0 million, or $0.89, in the prior-year quarter. The filing attributes gains mainly to price increases, acquisitions, higher landfill gas renewable energy credits, and recyclable commodity pricing.
How is the company financing its acquisitions and capital spending?
In the nine months ended September 30, 2024, the company made $2.010 billion of cash acquisition payments and $659.3 million of capital expenditures. It funded these largely through $4.09 billion of long-term debt proceeds, including $2.23 billion outstanding under a new Revolving Credit Agreement maturing February 27, 2029, and $750 million of 5.00% Senior Notes due 2034 plus CAD $500 million of 4.50% Senior Notes due 2029. The company expects 2024 capital expenditures of about $1.150 billion.
What are the main legal and regulatory risks disclosed in the filing?
The most prominent risk involves the Chiquita Canyon Landfill, which has received about 275 SCAQMD Rule 402 notices of violation, additional water board and EPA notices, and about 3,300 plaintiffs in civil lawsuits as of October 23, 2024. The company says it cannot determine the likelihood or amount of penalties or outcomes. The filing also notes that if a modified conditional use permit is not approved, the landfill's annual tonnage capacity would fall from approximately two million to one million tons beginning January 1, 2025. Separately, the Jefferson Parish landfill odor class action continues, with a $4.5 million settlement by the Parish, while the company says it cannot determine its own likelihood of outcome.
How much debt does the company carry and is it in compliance with its covenants?
Total debt and notes payable was $8.24 billion at September 30, 2024, with $8.16 billion in long-term debt, up from $6.72 billion at December 31, 2023. The Revolving Credit Agreement includes a leverage covenant limiting Consolidated Total Funded Debt to Consolidated EBITDA to not more than 3.75 to 1.00 (or 4.25 to 1.00 during material acquisition periods). The company reports that it was in compliance with all applicable covenants as of September 30, 2024.
What shareholder returns did the company provide?
The company paid $221.3 million in cash dividends during the nine months ended September 30, 2024, at $0.285 per quarter. Subsequent to quarter end, on October 23, 2024, the board raised the quarterly dividend by $0.03 to $0.315 per share, payable November 21, 2024. No shares were repurchased under the normal course issuer bid during the nine months ended September 30, 2024, and the renewed NCIB permits repurchases of up to 12,901,981 shares through August 11, 2025.
06—Continue