Waste Connections Exceeds Expectations in Q3 2021, Revises Outlook

Stefanie Valentic, Editorial Director

October 28, 2021

2 Min Read

Solid waste pricing to address inflationary pressures led Waste Connections (TSX/NYSE: WCN) to exceed its revenue expectations in Q3 2021.

The company released its earnings report, citing higher recycled commodity values and acquisitions during the period as additional contributing factors.

"More importantly, quality of revenue drove 60 basis points year-over-year adjusted EBITDA margin expansion in the quarter, overcoming an estimated 40 basis points impact from margin dilutive acquisitions and hurricanes, putting us firmly on track to exceed the updated full year 2021 outlook we provided in August," announced Worthing F. Jackman, president and CEO.

Wage and other cost pressures amounted to a 7.3 percent increase in price point growth. The company anticipates another sequential increase in price in Q4 of about 5.5 percent.

Jackman added that the reported 2.2 volume growth was better than expected. New York City in particular saw a 11 percent volume growth due to a return in commercial business. Commercial collection revenue increased 12 percent overall on strong pricing. 

Despite interruptions due to Hurricane Ida, Waste Connections' E&P waste business experienced higher activity levels in the third quarter, up $11 million year over year and 12% from Q2. Elevated crude oil pricing levels set higher activity expectations for 2022. 

Q3 revenues from recovered commodities excluding acquisitions were up 110 percent year over year due to higher commodity values by old corrugated containers, Jackman indicated.

"As noted earlier, all lines of business outperformed their outlook in the period along with acquisition activity, as expected, picked up in third quarter," he said.

Closed acquisition activity amounted to $240 million in annualized revenue with another $100 million to $150 million in the pipeline through the end of 2021. Jackman acknowledged the blockbuster year the solid waste industry is having in terms of M&A activity, but that the company continues to be selective in its approach.

Waste Connections updated its 2021 outlook as it continues to exceed expectations. Full-year revenue is now estimated at $6.110 billion, up from August's projection of $5.975 billion. 

The company anticipated net income at $633 million and adjusted EBITDA at $1.9 billion, compared to the previous outlook of $1.875 billion. Capital expenditures are estimated to reach $700 million, up $25 million from the previous outlook.

Net cash is expected to reach $1.689 billion, and adjusted free cash flow is estimated at $1.025 billion, or about 16.8% of revenue.

 "As anticipated, the strength of our operating performance, free cash flow generation and balance sheet positioned us for another double-digit increase in our quarterly cash dividend, our eleventh straight year, demonstrating once again our ability to fund our differentiated growth strategy and outsized acquisition activity, along with an increasing return of capital to shareholders," Mr. Jackman said.

Q3 2021 Highlights

  • Revenue: $1.597 billion, up 14.9% YOY

  • Adjusted EBITDA: $505.6 million

  • Adjust Free Cash Flow: $825.8 million

  • Operating Income: $285.1 million

  • Net Income: $114.4 million

  • Full-year Revenue Outlook:  $6.110 billion

About the Author(s)

Stefanie Valentic

Editorial Director, Waste360

Stefanie Valentic is the editorial director of Waste360. She can be reached at [email protected].


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