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By the numbers
Net income: $180.3M
Up 15.9% year over year
Annualized revenue from recent acquisitions: $175M
- Economic picture: CEO Worthing Jackman said during a Wednesday earnings call the company is “extremely pleased” with its first quarter results despite inflationary pressures and supply chain and labor challenges. He predicts the company will stay on target to meet or exceed its 2022 financial outlook due to factors such as solid waste pricing growth and investment in employee retention and training, plus an anticipated increase in E&P waste treatment, recovery and disposal activity.
- M&A activity: Jackman highlighted what he anticipates to be another “above average” year of M&A activity, with $175 million in annualized revenues closed year to date and a “robust pipeline” for the rest of the year. Waste Connections acquired four businesses in the first quarter in both the U.S. and Canada, including an ongoing expansion in Massachusetts. The company spent $355.2M on those deals. Meanwhile, acquisitions completed since this time last year contributed about $112 million in revenue, or $110 million net of divestitures, said Chief Financial Officer Mary Anne Whitney. Jackman suggested M&A activity in progress could include “transactions we’ve been chasing for a couple decades” but hinted that most were likely smaller acquisitions not large enough “to draw DOJ concerns.”
- Surcharge and price increases: Solid waste pricing grew 7.1% in the quarter, and Waste Connections expects a sequential increase in both core price and surcharges in the second quarter "to reflect our purposeful approach to addressing the headwinds” such as inflation, Jackman said. Solid waste price growth could be up to 8.5% in the next quarter.
- Resource recovery revenues: Waste Connections benefited from a 35% increase in revenue from its resource recovery sector, which includes recycled commodities, landfill gas and renewable energy credits. However, some of that revenue was offset by unexpected costs such as surging fuel prices. Diesel costs went up about 12% in the quarter, and overall were up 30% compared to this time last year, Whitney said.
- Recycling capacity: Waste Connections is building two recycling facilities that Whitney said are expected to open before the end of next year. But in response to an analyst question about possible plans to grow recycling revenues as a percentage of the overall business, Jackman said that, beyond the new facilities, growth would likely be left up to commodity values, and “the pace of acquisition activity will continue to keep that in check as percent of the total.”
- Volumes steady: Volumes improved in the first quarter this year by 1.3%. Landfill tons were up 4% this quarter, mainly due to a 12% increase in special waste coming from markets such as Colorado, Illinois and Minnesota. Commercial collection revenue was up 12% year over year. Volumes are expected to stay flat or decrease slightly in the second quarter, due in part to expiring contracts, Whitney said.
