Waste Connections started 2021 with a “better than expected” recovery from the pandemic, CEO Worthing Jackman said during the company’s first quarter earnings call on Thursday.
Jackman attributed the positive results to better commodity values, increased roll-off activity, solid waste pricing retention and increased solid waste volumes as more communities continue to recover from the pandemic. Although volumes were still lower than in the first quarter of 2020, the company has seen trends turn positive since March and is actively hiring to accommodate more demand into the summer months.
"We are encouraged by improving macro trends and our strong operating and financial performance," Jackman said in opening remarks.
COVID-19 recovery continues
- Solid waste volumes for the first quarter were down 3.2% year over year, which Jackman said was because Waste Connections had a “strong start” to 2020 with high pre-pandemic volumes. Other factors included the extreme winter weather that affected southern states in February.
- Solid waste volumes increased 2.6% in March 2021 compared to March 2020, and volumes continue to rise into April, even in markets most affected by the pandemic, such as Canada and the Eastern United States, said Chief Financial Officer Mary Anne Whitney.
- The company reported landfill volumes were up 5% for the quarter, as compared to last year, with MSW and C&D both up by 8%. “We’re back to landfill volumes that are above pre-COVID levels,” Jackman said.
- First quarter volumes for recycled commodities, landfill gas and renewable energy credits collectively were up about 55% year over year, due to higher overall commodity values and RIN pricing. Prices for old corrugated containers were particularly strong at about $108 per ton in the first quarter, Jackman said.
Areas for potential growth
- Waste Connections hired more staff in March 2021 than at any other time since September of 2019, due to increased roll-off activity and increased demand for service, Jackman said. Staff turnover also improved between Q4 2020 and Q1 2021.
- The company will need to be mindful of not overstretching workers’ hours on the clock in order to keep workers longer, especially as competition from other labor sectors heats up in the summer months, he said. "Labor is always an issue, labor availability, it’s going to get more acute." Waste Management CEO Jim Fish said during the company's first quarter earnings call this week that he also anticipates a similar labor squeeze.
- When asked for more details on the company’s plans for future landfill gas development, Jackman said Waste Connections was working on four to five projects, with the first projected to be online by the end of 2022 or early 2023. Any plans for additional projects could take time due to permitting factors. Jackman said the company could also plan to reevaluate revenue-sharing models and partnerships on its existing landfill gas projects as contracts expire.
- The company also announced its projected second quarter earnings, including revenue of $1.49 billion and net income of about $173.6 million. Solid waste price plus volume growth is expected to be about 10%, with volume growth of over 5%.
- Waste Connections completed a few small tuck-ins in four states so far this year and estimates the potential for an "outsized year" with more activity in the later half. “The level of dialogue with privately held companies feels like record-level for us, which is no surprise, given the strong recovery in these family-owned businesses.” These deals are likely to stay in the $20 to $40 million revenue range, but larger transactions are also possible.
- Jackman echoed his previous thoughts about the possibility of undertaking more major acquisitions in the near future, saying the ideal focus would be on markets without significant overlap. "Hopefully the process to get through the DOJ is not as cumbersome as what I would call these larger multi-state transactions that our two larger peers did," he said in reference to recent deals by Waste Management and Republic Services.