01—Abstract
Summary
Summary of the 8-K filed February 13, 2024. Cited figures are marked; the original filing is the authoritative source.
Waste Connections, Inc., a corporation organized under the laws of Ontario, Canada, furnished this Form 8-K (Items 2.02 and 7.01) to announce its fourth quarter and full year 2023 results and its full year 2024 outlook.
Fourth-quarter revenue was $2.036 billiona, up 8.9% year over year, and net income attributable to Waste Connections was $126.8 million, or $0.49 per diluted share, compared with $194.4 million a year earlier. Adjusted EBITDA was $656.0 million, up 16.4%, with an adjusted EBITDA margin of 32.2% of revenue, up 200 basis points. Q4 operating income of $224.5 million included $169.6 million in impairments, primarily tied to adjustments to landfill closure and post-closure costs.
For full year 2023, revenue was $8.022 billionb, up 11.2%, adjusted EBITDA was $2.523 billion (31.5% of revenue, up 70 basis points), and adjusted free cash flow was $1.224 billion. Net cash provided by operating activities was $2.127 billion. For 2024, management guides to revenue of approximately $8.750 billion, net income of approximately $1.096 billion, adjusted EBITDA of approximately $2.860 billion (32.7% of revenue, up 120 basis points), and adjusted free cash flow of $1.200 billion.
Capital expenditures are estimated at $1.150 billionc, including $150 million for renewable natural gas facilities, and adjusted free cash flow includes $75 million in closure-related outlays at the Chiquita Canyon Landfill. Management says the normalized adjusted free cash flow, excluding those RNG and Chiquita outlays, would be $1.425 billion. The outlook excludes the effect of additional acquisitions that may close during the year.
The company also completed acquisitions with about $215 milliond of total annualized revenue in 2023 and disclosed the acquisition of Secure Energy's E&P waste disposal assets in Western Canada, which closed February 1, 2024, with about $225 million (US$) of revenue. The company expects about $325 million of 2024 acquisition revenue contribution.
The release also states that employee turnover and safety incident rates exited 2023 at multi-year lows. The company will host an earnings call on February 14, 2024, and will file an 8-K before market open that day with its first quarter 2024 outlook.
02—Key points
Key Highlights
- Q4 2023 revenue of $2.036 billion, up 8.9% year over year; adjusted EBITDA of $656.0 million, up 16.4%, at a 32.2% margin (up 200 basis points).
- Full year 2023 revenue of $8.022 billion, up 11.2%; adjusted EBITDA of $2.523 billion, up 13.6%, at a 31.5% margin (up 70 basis points).
- Full year 2023 adjusted free cash flow of $1.224 billion (15.3% of revenue); net cash provided by operating activities of $2.127 billion.
- Q4 2023 GAAP net income attributable to Waste Connections fell to $126.8 million ($0.49 per diluted share) from $194.4 million, reflecting $169.6 million in Q4 impairments, mainly tied to landfill closure and post-closure cost adjustments.
- 2024 outlook: revenue of about $8.750 billion, adjusted EBITDA of about $2.860 billion (32.7% margin, up 120 basis points), and adjusted free cash flow of $1.200 billion.
- 2024 capital expenditures estimated at $1.150 billion, including $150 million for RNG facilities; adjusted free cash flow includes $75 million of Chiquita Canyon Landfill closure outlays.
- Acquisition of Secure Energy's E&P waste disposal assets in Western Canada (about $225 million (US$) of revenue) closed February 1, 2024; expected 2024 acquisition revenue contribution is about $325 million.
03—Questions
Frequently Asked Questions
How did Waste Connections perform in the fourth quarter of 2023?
Revenue rose 8.9% year over year to $2.036 billion, and adjusted EBITDA rose 16.4% to $656.0 million, a 32.2% margin. GAAP net income attributable to the company was $126.8 million, or $0.49 per diluted share, lower than the prior year's $194.4 million, because of $169.6 million in impairments in the quarter.
What is the company's 2024 financial outlook?
The company estimates 2024 revenue of about $8.750 billion, net income of about $1.096 billion, adjusted EBITDA of about $2.860 billion (32.7% of revenue), net cash from operations of about $2.350 billion, and adjusted free cash flow of $1.200 billion. The outlook excludes the impact of additional acquisitions that may close during the year.
What one-time or non-recurring items affected results?
In Q4 2023, impairments and other operating items of $169.6 million were primarily associated with adjustments to landfill closure and post-closure costs. For full year 2023, the company reported $238.8 million of such items, $10.7 million of transaction-related expenses, and $14.4 million tied mainly to executive separation costs and fair value changes to equity awards. Non-GAAP adjusted measures exclude these items.
What acquisition activity did the company disclose?
The company completed acquisitions with about $215 million of total annualized revenue in 2023. It also announced the acquisition of E&P waste disposal-oriented assets from Secure Energy in Western Canada, with about $225 million (US$) of revenue, which closed February 1, 2024. Management expects acquisitions to contribute about $325 million of revenue in 2024, and says dialogue is ongoing.
What is the company's expected capital spending and cash flow profile for 2024?
Capital expenditures are estimated at $1.150 billion for 2024, including $150 million for renewable natural gas facilities. Adjusted free cash flow of $1.200 billion includes $150 million in RNG-related capex and $75 million in closure-related outlays at the Chiquita Canyon Landfill. Normalized for those RNG and Chiquita outlays, adjusted free cash flow is estimated at $1.425 billion.
04—Continue