Transcript WASTE CONNECTIONS INC.

Imperial Capital Global Opportunities Conference
September 18, 2014
SAFE HARBORS STATEMENT
Statements made during the course of this presentation that state the
Company’s or management’s intentions, hopes, beliefs, expectations or
predictions of the future are forward looking statements intended to qualify
for the safe harbors from liability established by the Private Securities
Litigation Reform Act of 1995, including statements related to our financial
outlook, return of capital to shareholders and acquisition opportunities. It is
important to note that the Company’s actual results could differ materially
from those projected in such forward looking statements. Additional
information concerning factors that could cause actual results to differ
materially from those in the forward-looking statements is contained from
time to time in the Company’s SEC filings. Copies of these documents may
be obtained by contacting the Company or the SEC. Shareholders, potential
investors and others are urged to consider these factors carefully in evaluating
the forward-looking statements and are cautioned not to place undue reliance
on such forward-looking statements. The forward-looking statements made
herein are only made as of the date of this presentation, and the Company
undertakes no obligation to publicly update such forward-looking statements
to reflect subsequent events or circumstances.
2
WCN: INVESTMENT HIGHLIGHTS

Third largest solid waste and leading oilfield waste company in the U.S.




Differentiated strategy

Only company focused on secondary and exclusive markets

Expanding presence in niche segments such as E&P waste

Solid waste predictability + oilfield waste growth potential
Differentiated results

Sector-leading EBITDA, EBIT and free cash flow margins

Sector-leading conversion of EBITDA to free cash flow
Well positioned for additional strategic opportunities


$5 billion in assets and 7,000 employees
Investment grade rated => tremendous access to low cost growth capital
Proven management team creating substantial stockholder value
3
WCN: FINANCIAL HIGHLIGHTS
4
SOLID WASTE: A DIFFERENTIATED STRATEGY
5
SOLID WASTE: 85% OF REVENUE
Almost 3 million customers across 30 states
6
SOLID WASTE INDUSTRY TENETS

$55 billion revenue => still consolidating
 ~50% publicly traded companies / remainder private and municipalities
 ~40% concentrated in two largest companies

Solid waste is a commodity business
 Lowest price provider wins
 Basic level of service expectation by customers

Scale matters locally
 Market share = route density

Success is driven by:
 Market selection
 Asset and contractual positioning
 Execution at the local level
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OUR DIFFERENTIATED STRATEGY

Exclusive markets
 Vertically integrated, or
 Non-integrated

Competitive markets
 Secondary markets with
 High market share and
 Vertically integrated or disposal neutral

What we wish to avoid:
 Urban markets
 #3 or worse position in a market
 Collection-only position in a competitive market with competitorcontrolled disposal
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TARGETING ATTRACTIVE MARKETS
Integrated Operations
Non-Integrated Operations
-#1 EBITDA margin
-#3 EBITDA margin
-#2(tie) EBIT margin
-#2 FCF margin
-#2 ROA
90% of WCN
Solid Waste
Exclusive Markets:
-#1 EBIT margin
-#1 FCF margin
-#1 ROA
-#2 EBITDA margin
Competitive Markets:
-#2(tie) EBIT margin
-#3 FCF margin
-#3 ROA
-#4 EBITDA margin
-#4 EBIT margin
-#4 FCF margin
-#4 ROA
Note: Rankings reflect relative attractiveness to WCN
9
STRATEGIC IMPLICATIONS

Consistent pricing

Lower customer churn rates
 Comparably better core price + volume growth

Higher margins and free cash generation

Greater visibility and predictability

Attractive returns on invested capital

Our success: not dependent on behavior or execution of other national players

Our strategy: resilient in a weak economy; levered to improving economy
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E&P WASTE: MARKET LEADER IN
TREATMENT, DISPOSAL & RECOVERY
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E&P WASTE: 15% OF REVENUE
Strong asset positioning across diverse oil-rich basins
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E&P WASTE HIGHLIGHTS

Market leader in higher growth oilfield waste treatment, recovery and disposal
industry
 Diversity across multiple oil-rich basins, including Permian, Bakken &
Eagle Ford
 Strong asset positions within targeted basins => almost 40 facilities
 Pursuing permits for several greenfield development opportunities

Solids disposal-oriented business => strong cash flows

Major sector growth drivers:
 Increased drilling in unconventional areas => higher waste intensity per well
 Heightened customer awareness of waste stream management
 Potential increasing environmental regulations and enforcement
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14
1H 2014 HIGHLIGHTS

Revenue: $1.0 billion, up 7.1% YoY
 Solid Waste Price + Volume Growth of 4.8%
2.8% Price
 2.0% Volume => MSW landfill tons up 7%


E&P Revenues above expectations – up almost 23% YoY
Q2 revenues up almost 26% YoY and up 15% sequentially from Q1
 All basins up year over year


Adjusted EBITDA: $346.6 million, or 34.4% of revenue, up 9.9% YoY
 Up 80 bps YoY on higher E&P activity

Adjusted free cash flow: $208.6 million, or 20.7% of revenue, up 18.8% YoY
 Paid down over $135 million of debt and reduced leverage to 2.75x

Announced acquisition of two development stage landfills in Q1’14
 Expect both facilities to open before year-end
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Q3 2014 OUTLOOK (as of July 21st)

Revenue: $530 million - $535 million, up 5% to 6% YoY


Solid Waste Price + Volume growth between 3.5% and 4.0%
E&P growth of 15%

Adjusted EBITDA: $186 million - $187 million, or about 35% of revenue
 Assumes 30 bps drag from lower recycled commodity prices

Operating Income: 22.8% of revenue

Expect increased M&A activity and capital return to shareholders during 2H ‘14
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PEER COMPARISONS – 2013 AND 2014 (e)
% Price Increase
Adj. EBITDA Margin *
3.0%
36.0%
34.0%
2.5%
32.0%
30.0%
2.0%
28.0%
26.0%
1.5%
24.0%
1.0%
22.0%
2013
2014e
WCN
WM
RSG
2013
BIN
2014e
WCN
WM
RSG
BIN
Adj. FCF Margin Before Cash Taxes *
Adj. Free Cash Flow Margin *
18.0%
24.0%
16.0%
20.0%
14.0%
16.0%
12.0%
10.0%
12.0%
8.0%
8.0%
6.0%
4.0%
4.0%
2013
2014e
WCN
WM
RSG
BIN
2013
2014e
WCN
WM
RSG
BIN
_________________________________________________________________
* Non-GAAP measures; as defined by companies. Source: Company filings
2014(e) based on analyst estimates and Company guidance as of as of July 2014.
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FINANCIAL TAKE-AWAYS

Unique combination of industry-leading margins (EBITDA, EBIT and free cash
flow) and growth from:
 Price + increasing MSW volumes => levered to improving economy;
 Changes to or enforcement of E&P waste regulations;
 Potential newly permitted E&P waste facilities;
 Potential MSW and E&P waste acquisitions; and
 Return of capital to stockholders.

Strong conversion of EBITDA to free cash flow

Current priority for deployment of excess capital:
 Acquisitions and construction of newly permitted E&P waste facilities;
 Share repurchases; and
 Debt reduction.

Track record for increasing quarterly cash dividends every October
 Dividends account for less than 20% of our free cash flow
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18
LONG-TERM OBJECTIVES

8%-10% annual revenue growth balanced between organic and acquisitions
 Maintain disciplined growth

Core solid waste price increase spread of 50-100bps over CPI

15-30 bps EBITDA margin expansion per year, excluding acquisitions and
changes in recycled commodity prices
 Potentially greater margin expansion depending on growth in E&P waste
activity
 Slightly greater EBIT margin expansion given DD&A leverage

Double digit annual EPS and FCF/share growth

Maintain strong balance sheet as the right acquisitions are opportunistic

Increasing cash dividend and opportunistic share repurchases to return capital
19
NON-GAAP RECONCILIATION SCHEDULES
20
NON-GAAP RECONCILIATION SCHEDULE
(in thousands, except share and per share amounts)
Adjusted EBITDA*
Net Income
Plus: Income tax provision
Plus: Interest Expense
Plus: Depreciation and Amortization
Plus: Closure and post-closure accretion
Loss/(Gain) on disposal of assets
Less/Plus: Other income, net
Gain from litigation settlement
Adjustments:
Plus: Acquisition-related costs
Plus: Corporate relocation expenses
Plus: Loss of prior office leases
Plus: NEO equity grants
Adjusted EBITDA*
Revenues
Adjusted EBITDA* as % of Revenues
Six months ended
June 30,
2013
2014
85,674
112,122
55,408
74,470
37,940
32,851
119,064
126,378
1,514
1,739
3,122
(1,465)
965
(137)
2009
110,811
64,565
49,161
130,758
2,055
(481)
6,138
2010
146,335
89,334
40,134
147,456
1,766
571
(3,420)
2011
166,171
106,958
44,520
167,100
1,967
1,657
(587)
2012
159,660
105,443
53,037
193,584
2,581
1,627
(1,993)
(3,551)
2013
196,005
124,916
73,579
243,864
2,967
2,853
220
3,987
2,081
1,744
83
6,415
8,031
1,946
750
9,902
806
422
10,498
648
657,002
315,413
346,606
1,839
368,833
424,257
489,613
3,585
528,419
1,191,393
1,319,757
1,505,366
1,661,618
1,928,795
939,272
1,006,402
31.0%
32.1%
32.5%
31.8%
34.1%
33.6%
34.4%
_________________________________________________________________
*Adjusted EBITDA, a non-GAAP financial measure, is provided supplementally
because it is widely used by investors as a performance and valuation measure in the
solid waste industry. Other companies may calculate differently.
NON-GAAP RECONCILIATION SCHEDULE
(in thousands, except share and per share amounts)
Six months ended
June 30,
2013
2014
255,523
279,681
(90)
18
3,622
5,863
Adjusted Free Cash Flow*
Net cash provided by operating activities
Plus/Less: Change in book overdraft
Plus: Proceeds from disposal of assets
Plus: Excess tax benefit associated with equitybased compensation
Less: Capital Expenditures
Less: Distributions to noncontrolling interests
Adjustments:
Payment of contingent consideration recorded
in earnings
Payment for termination of corporate lease
Corporate office relocation
Tax effect
Adjusted Free Cash Flow*
2009
303,637
7,802
5,061
2010
328,396
279
6,659
2011
388,170
(227)
4,434
2012
416,327
398
2,741
2013
484,061
(110)
11,019
4,054
(128,251)
11,997
(134,829)
4,763
(141,924)
(675)
5,033
(153,517)
(198)
3,765
(209,874)
(198)
2,667
(87,541)
(198)
7,096
(83,679)
(371)
192,303
212,502
254,541
8,031
(3,056)
275,759
5,059
9,690
2,159
(3,992)
301,579
1,832
(161)
175,654
208,608
Revenues
1,191,393
1,319,757
1,505,366
1,661,618
1,928,795
939,272
1,006,403
109,825
135,104
165,239
159,093
195,655
85,523
111,679
16.1%
175.1%
16.1%
157.3%
16.9%
154.0%
16.6%
173.3%
15.6%
154.1%
18.7%
205.4%
20.7%
186.8%
120,506,162
116,894,204
113,583,486
121,824,349
124,165,052
123,993,311
124,781,097
Net income attributable to Waste Connections
Free Cash Flow* as a % of Revenues
Free Cash Flow* as a % of Net Income
Diluted shares outstanding
Free Cash Flow* Per Share
$
1.60 $
1.82 $
2.24 $
2.26 $
2.43
$
1.42 $
1.67
______________________________________________________________________________________________
*Adjusted free cash flow, free cash flow as a % of revenue, and free cash flow per share, non-GAAP
financial measures, are provided supplementally because they are widely used by investors as
valuation and liquidity measures. Other companies may calculate these metrics differently.
CORPORATE HEADQUARTERS
3 Waterway Square Place, Suite 110
The Woodlands, TX 77380
(832) 442-2200
INVESTOR RELATIONS
Worthing Jackman, EVP CFO
Phone: (832) 442-2266
[email protected]
Mary Anne Whitney, VP Finance
Phone: (832) 442-2253
[email protected]
http://wasteconnections.investorroom.com