By the numbers
Q1 net income: $230.1M
Up 14.8% year over year
- Financial picture: Waste Connections started the year ahead of expectations in spite of severe weather in several key markets, including Oregon and Alaska. The company saw margins for its adjusted earnings before interest, taxes, depreciation and amortization expand to 31.4% as it targets an “industry-leading” margin of 32.7%. About half of that expansion was attributed to improving commodity prices and fuel credits and half was attributed to the underlying solid waste business. Adjusted free cash flow was $324.8 million, and acquisitions continued to add to the company’s bottom line. CEO Ron Mittelstaedt said that the strength in the latter category would continue to fuel the company’s performance heading into the second quarter and that he was “extremely pleased by the strong start to the year” in a release announcing the results.
- Q1 volume: Volumes were down 3.8%, which Mittelstaedt said was in line with expectations during the company’s Thursday earnings call. Much of that, about 1 percentage point, was due to the extreme weather, though the business continued to shed contracts it deemed unattractive. On a more granular level, the company saw landfill tonnage decrease by 6%, driven by 15% declines in special waste and C&D waste year over year. MSW tonnage remained approximately flat year over year. Though Waste Connections didn’t offer an update to its full-year guidance, Mittelstaedt said he expected volumes to improve each quarter throughout the year, in part as weather improves and acquisitions add to the underlying business.
- Safety: The company reported that safety incidents are at three-year lows after falling 7% in 2023, despite adding about 3,000 employees over the same period. Mittelstaedt attributed that to Connections’ “decentralized operating model and our commitment to a culture of accountability" in the earnings release.
- Recruitment and retention: Turnover also continues to fall. Mittelstaedt reported open headcount fell 46% year-over-year. Voluntary turnover was at about 15%, and the company is targeting 10-12% by the end of the year. “We're well more than halfway to our target from where we were 12 months ago,” Mittelstaedt noted. Waste Connections also continues to invest in its training academies for commercial driver’s license certification and diesel technicians. Mittelstaedt said his goal was to ensure a third of the company’s employees were coming from the schools, and he characterized the program as a defensive play to ensure access to talent even if the economy struggles.
- Acquisitions: Overall, Mittelstaedt said 2024 could be a “record year” for M&A, with letters of intent signed in every region in which it does business in the U.S. and Canada. Mittelstaedt said Waste Connections would also continue to look for opportunities in the South and along the eastern seaboard to take advantage of capacity at the Arrowhead Landfill, which it acquired last year. During the first quarter, Waste Connections also acquired the assets of Waste-Away Group, based in Elkhart, Indiana. Mittelstaedt said the deal allowed his company to enter a new market in which it already plans to expand with additional acquisitions.
- RNG: Waste Connections continued to make progress on building out its portfolio of landfill-gas-to-renewable-natural-gas assets, despite what Mittelstaedt described as “industry-wide delays related to equipment and utility installations.” The company anticipates opening three RNG facilities this year and deploying $150 million in capital expenditures. By the time the company completes its capital campaign for RNG facilities, it expects an additional $200 million in incremental adjusted EBITDA.
- PFAS: Mittelstaedt said new regulations recently finalized by EPA for per- and polyfluoroalkyl substances offered mostly upside to large, publicly traded companies like Waste Connections. He anticipates that treating leachate on site would add little in the way of increased capital costs, and he expects any increased costs can be passed on to customers. Mittelstaedt further expected that over time, PFAS regulations will create new M&A opportunities. “Traditionally, uniform new incremental federal regulation such as this is very good in both the short and long term,” Mittelstaedt said. “Those with the access to capital and the infrastructure to take advantage of it are able to do so.”
