Waste Connections Posts 15.4 Revenue Growth in Q1 2023

Waste Connections  (TSX/NYSE: WCN) reported double-digit Q1 2023 revenue growth just days after announcing Ronald J. Mittlestaedt's return as CEO.

The Texas-based company also remained optimistic about its full-year outlook despite unfavorable weather conditions that impacted West Coast acquisitions. During the investor call, the returning CEO said operations in California were disrupted due to more than a dozen atmospheric rivers.

"We're executing on a playbook that has served us well over the past quarter century and looking ahead to the next 25 years," Mittlestaedt stated. "We want to assure you that the leadership team in place to continue to drive the industry-leading results that are the hallmarks of Waste Connections."

Q1 2023 revenue reached $1.9 billion up from $1.646 billion, or 15.4 percent year over year (YOY). Solid waste pricing growth drove results as well as efficient operational execution and acquisition activity. Acquisitions completed since Q1 2022 provided $133 million of revenue for the quarter, stated Mary Anne Whitney, Waste Connections VP/CFO. 

Operating income reached $314.7 million, up from $273.9 million in Q1 2022. Net income grew to $197.8 million, up from $180.3 million YOY. Adjusted net income increased to $230.4 million in Q1 2023, up from $213.4 in the previous year's period. Waste Connections reported adjusted EBITDA of $566.9 million in Q1 2023, up from $502.1 million YOY.

"Q1 was recognized to be a difficult year-over-year comparison given the precipitous decline in resource recovery values during the second half of 2022, and results in the period were further affected by weather-related impacts to solid waste roll-off activity and landfill volumes, particularly on the West Coast," Mittlestaedt said. "Underlying adjusted EBITDA margins were in line with our expectations, but acquisitions completed since the year-ago period were 30 basis points dilutive to reported margins, or more than 20 basis points higher than expected, given the disproportionate weather-related impacts on West Coast acquisitions." 

Mittestaedt cited pricing visibility, improving labor trends and "normalization of weather patterns" as factors that position Waste Connection to achieve its forecasted full-year outlook, which was released in February 2023. 

"And as we also noted then, upside potential to this outlook remains from any additional acquisitions, increases in recycled commodities and renewable fuels values, or reduction of inflationary pressures," he said, adding that the company has completed $45 million of acquired revenue year-to-date, a trend that is expected to continue.

Following Mittlestaedt's remarks, Whitney provided insight into the company's Q2 outlook, noting that estimated revenue in Q2 2023 at $2 billion.

"This includes solid waste price plus volume growth of about 8 percent with core price of about 10 percent," Whitney reported. "Recovered commodity values are expected to remain largely in line with recent publishing. Adjusted EBITDA in Q2 is estimated at approximately 615 million or 13.8 percent. This reflects continued headwinds from recovered commodity values in the year-ago period and some margin dilution from acquisitions completed in a year ago period."

Q1 2023 Highlights:

Revenue: $1.901 billion 
Operating Income: $314.7 million
Net Income: $197.8 million
Adjusted Net Income: $230.4 million
Adjusted EBITDA: $566.9 million