By the numbers
Net income: $236.9M
Annualized revenue from M&A transactions this year: $570M
Includes $35M of deals expected to close by the end of 2022 or early 2023
- Economic outlook: During a Thursday earnings call, Waste Connections CEO Worthing Jackman characterized the quarter as “better than expected” mainly due to solid waste pricing rising to 10.1% and core pricing of 8.3%. Higher activity in E&P waste treatment services — up 52% from last quarter — also contributed to strong results. Those conditions helped balance out headwinds such as high fuel costs, labor constraints, foreign currency volatility and inflation, along with “precipitous” declines in recycled commodity prices, especially for OCC, he said.
- M&A activity: Waste Connections’ acquisition activity continued to pace “well above historic levels” in the third quarter, Jackman said. Recent activity included the purchase of solid waste franchises in California and Oregon, as well as integrated market expansions in Arizona and Texas. Waste Connections also entered new markets in Pennsylvania, British Columbia and Quebec, and completed several tuck-ins and market expansions within Massachusetts, a relatively new region for the company. Jackman highlighted the West Coast as a potential region for even more M&A activity in the near future.
- Pricing strategy: Sequential price acceleration throughout the year has helped the company course-correct from the steep decline in commodities prices, which were down 35% year over year, Chief Financial Officer Mary Anne Whitney said. During the quarter, price was about 5.5% in the Western region, but was 10% to 13% in more competitive regions. Jackman added that he expects pricing to “remain at elevated levels” throughout the rest of the year and into 2023, averaging out to between 8% to 9%. The pricing strategy, along with rollover contributions from acquisitions closed so far in 2022, could help drive double-digit revenue growth for 2023, a prediction Jackman first made last quarter.
- Volumes: Overall volumes in the quarter were down 70 basis points. Commercial collection revenue was up about 15%, due mostly to price, and roll off revenue was up about 11%. Landfill rates per ton were up over 9%, but landfill tons were down 6%. Special waste tons were down 16% in the period, but revenue from that material was up nominally year over year, Jackman said during the call. MSW tons were down 4%, and C&D tons were up 3%.
- Looking ahead: Waste Connections raised its 2022 outlook again. The new revenue estimate is about $7.19 billion, compared to the previous $7.125 billion estimate. The company also adjusted its outlook for net income and other metrics.
