Item 7.01 Regulation FD Disclosure.
During our earnings conference call on October 29, 2020, we highlighted the following outlook for the fourth quarter 2020.
(Dollar amounts are approximations)
For the fourth quarter of the year, we estimate our revenue to be approximately $1.335 billion. We expect solid waste price to be approximately 4.0% and volume growth to be approximately negative 6.0%. Net income attributable to Waste Connections is estimated to be approximately $136.8 million. Adjusted EBITDA, as reconciled below, is estimated to be approximately $400 million.
Q4 2020 OUTLOOK
NON-GAAP RECONCILIATION SCHEDULE
(in thousands of U.S. dollars, except where noted)
Reconciliation of Adjusted EBITDA:
| | | | | | | |
| Q4 2020 Outlook |
| Estimates | | Observation |
Net income attributable to Waste Connections | $ | 136,750 | | | | | |
Plus: Income tax provision | | 35,300 | | | | | Approximately 20.5% effective rate |
Plus: Interest expense, net of interest income | | 40,000 | | | | | |
Plus: Depreciation and depletion | | 151,700 | | | | | Approximately 11.4% of revenue |
Plus: Amortization | | 32,500 | | | | | Approximately 2.4% of revenue, or $0.09 per diluted share net of taxes |
Plus: Closure and post-closure accretion | | 3,750 | | | | | |
Adjusted EBITDA | $ | 400,000 | | | | | Approximately 30.0% of revenue |
These estimates assume no significant change in underlying economic trends. They also exclude any impact from additional acquisitions that may close during the remainder of the year, and expensing of transaction-related items during the period.
We also provided preliminary thoughts for full year 2021, which assume no change in the current economic environment. We believe that 2021 likely sets up for solid waste price growth to range between about 3.5% and 4%, with volumes expected to turn positive after we anniversary the start of the pandemic. Price-led organic growth and high flow thru from improving volumes should drive underlying margin expansion in solid waste collection, transfer and disposal in spite of the hopeful return of certain discretionary expenses we either reduced or eliminated this year due to the pandemic, or the normalization of other expenses that declined as a result of the shutdowns. In addition, depending on the level of activity between now and year end, we could enter 2021 with more than 2% in revenue growth in place from completed acquisitions.
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. Management uses adjusted EBITDA as one of the principal measures to evaluate and monitor the ongoing financial performance of our operations. We define adjusted EBITDA as net income attributable to Waste Connections, minus net loss attributable to noncontrolling interests, plus income tax provision, plus interest expense, less interest income, plus depreciation and amortization expense, plus closure and post-closure accretion expense, plus or minus any loss or gain on impairments and other operating items, plus other expense, less other income. We further adjust this calculation to exclude the effects of other items management believes impact the ability to assess the operating performance of our business. This measure is not a substitute for, and should be used in conjunction with, GAAP financial measures. Other companies may calculate adjusted EBITDA differently.
The information furnished in Item 7.01 is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, is not subject to the liabilities of that section, and is not deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.
