Waste Connections CEO ‘extremely encouraged’ by continued solid waste recovery

Waste Connections Inc., Ontario, Canada, announced July 9 that it will report financial results for the second quarter on August 6. As part of this announcement, the company also provided commentary on the current operating environment. 

"We are extremely encouraged by the signs of continuing recovery in solid waste activity, as revenue and adjusted EBITDA in the second quarter are expected to exceed the preliminary thoughts we provided in early May based on April results,” Worthing Jackman, president and CEO of Waste Connections, says. Reported revenue, which was originally expected to be down approximately 6 percent, is now expected to be down approximately 4.7 percent year over year, and adjusted EBITDA margin, originally expected to be down approximately 200 basis points, is now expected to be down between 90 basis points and 100 basis points year over year. The improving solid waste trends we noted in May continued throughout the quarter, driving better than expected results in solid waste collection, transfer and disposal. Such solid waste revenue on a same-store basis in the second quarter is now expected to be down approximately 5.3 percent year over year, or down just 1.3 percent excluding Canada and the Northeast U.S., with the associated adjusted EBITDA margin up year over year in spite of the impact of incremental COVID-19-related costs."

"High flow through from sequential improvements in solid waste commercial collection activity and landfill volumes set us up for a higher jumping off point for the balance of the year,” Jackman continued. “We look forward to updating our full-year 2020 outlook on our upcoming call to reflect both the benefit of July results and the expected contribution from recently completed solid waste acquisitions in Washington and Iowa/Nebraska totaling approximately $50 million in annualized revenues."

The company also noted, as further described in its Form 10-Q for the quarterly period ended March 31, the potential for the recognition of impairment charges on its property and equipment and non-goodwill intangible assets associated with its exploration and production (E&P) segment. At such time, and to the extent that the company were to make a determination that the outlook for future oil prices and demand for the company's E&P waste services did not show sufficient improvement, this could result in the recognition of impairment charges. As of March 31, the company's E&P segment had $832.7 million in property and equipment and $59.6 million of non-goodwill intangible assets, including $376.1 million of property and equipment and $2.4 million of non-goodwill intangible assets in the Williston Basin and $62.9 million of property and equipment in the Eagle Ford Basin. The Williston and Eagle Ford Basins have experienced a higher proportion of decline in demand for E&P waste services due to the higher cost of exploration and production in those areas relative to other basins.

As also described in its Form 10-Q for the quarterly period ended March 31, the company noted the finalization of the tax regulations on April 7 under Internal Revenue Code section 267A, which would result in an estimated additional income tax expense related to 2019 of $27.4 million, or an estimated $0.10 per share impact, to be included in the company's quarterly reporting period ended June 30.