By the numbers
Q3 adjusted EBITDA: $787.4M
A margin of 33.7%, up slightly year over year
Q3 net income: $308M
Up 34.5% year over year
- Financial picture: During a Thursday earnings call, Waste Connections CEO Ron Mittelstaedt touted continued improvements in employee retention and voluntary turnover as well as improvements in solid waste volumes. Mittelstaedt said the strong results helped overcome margin dilution from acquisitions it closed during the quarter, as well as impacts at the end of the quarter from multiple hurricanes.
- Results: Core price was 6.8%, ranging from about 5% in its exclusive markets in the Western regions, to about 7.5% in its competitive regions. The Western region also saw total volumes up 3% year over year, “which would be a strong quarter even in a high growth environment,” CFO Mary Anne Whitney said. That increase was led by a 20% increase in special waste activity in that region. Overall landfill tons were down “nominally” year over year, with MSW tons up about 5%, offset by a 10% decrease in special waste volumes.
- Record M&A spending: Waste Connections has signed or closed deals worth over $700 million in annualized revenue, which Mittelstaedt says is on track to be a company record. Solid waste businesses continue to be the main focus, though Mittelstaedt said the acquisitions also include “new competitive markets, E&P waste facilities and several tuck-ins” near its current footprint.
- 2025 M&A: The estimated 30 to 35 acquisitions expected in 2024 should also provide about 2% or more in acquisition rollover contribution in 2025, he added. Looking ahead into 2025, Mittelstaedt expects acquisition activity to exceed the company’s “traditional” spending range of $150 million to $250 million. “We continue to believe that M&A will be elevated,” in 2025, he said.
- New York commercial waste zone updates: One recent deal was the acquisition of Royal Waste Services in New York City, where Waste Connections was recently awarded 12 zone contracts and one citywide contract. Mittelstaedt said the initial rollout of that zone system is going “better than we expected,” and noted future opportunities for growth and operating efficiencies. The net effect of this acquisition is that Waste Connections now has 15 zone contracts in the city.
- RNG progress: Waste Connections opened three renewable natural gas facilities at its landfills so far this year, the rollout of which had been delayed for several months due to both logistics and permitting issues. A fourth is expected to come online later this year. Mittelstaedt said “larger” RNG projects aren’t expected to come online until the end of 2025 and into 2026. Meanwhile, Whitney said revenues from landfill gas sales were up 15% in Q3, mainly due to higher volumes and higher values for renewable energy credits.
- Chiquita Canyon updates: Mittelstaedt said the company has made “substantial progress” on managing ongoing odor complaint issues at its Chiquita Canyon Landfill in Castaic, California. The company expects to complete a geosynthetic cap over the relevant area within the next month. It has also added about 240 wells, as well as numerous submersible pumps and other remedies meant to manage leachate. Mittlestaedt said the U.S. EPA recently turned the regulatory oversight committee back over to local regulators, which he says is an indication that mitigation measures “are proceeding along their expectations.”
- Revised 2024 outlook: Waste Connections raised its outlook for 2024 due to strong operating and financial results. Revenue is estimated to be about $8.9 billion, up $150 million from the original outlook. Adjusted earnings before interest, depreciation and amortization are estimated to be approximately $2.91 billion, up $50 million. Net income is estimated to be about $1.082 billion.
- 2025 preview: Mittelstaedt said the company would provide a formal 2025 outlook in February, but his early “high-level” estimate is that the company is “positioned for high single-digit adjusted EBITDA growth in 2025”, as well as “mid to high” single-digit revenue growth.
