WCN - Earnings call transcript Q3 2018 | Waste Connections, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Waste Connections Third Quarter 2018 Earnings Conference Call.

During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, Tuesday, October 30, 2018. to conference like to now would turn over the Mr. I and Chairman of Mittelstaedt, CEO. the Ronald Board Please go ahead, sir.

Ronald J. Mittelstaedt

to senior quarter you, Whitney, Mary I’d detailed this everyone other call morning like several Thank outlook our to our management Okay. operator, quarter. of Jackman, members welcome CFO; to and for the by this and I’m provide Worthing results Anne and XXXX good team. fourth morning. discuss our a third joined conference President; our

waste than solid along plus This and commodity recycled release, toughest up in earnings XXX sequential waste year-on-year the our in in waste with values noted quarter. points pricing XXX E&P the in pressures. quarterly volume activity, basis As comparison continuing growth, the strength solid certain year cost price-led improvement expected enabled for points continued overcome basis us drove better results to

of or More XX.X% of cash million importantly, adjusted free EBITDA. year-to-date, remained strong $XXX revenue and over at XX.X% flow adjusted

bring company of us states which track close the dividend, announced million acquisition acquisition to approximately that percentage largest activity year and and transactions as million already capital puts activity. above-average growth continued July. revenue year-to-date, increase annualized operations us of we pace again XXXX, these providing plus growth performance in full acquisitions total quarterly quarter return recently to revenue along with position expansion signed shareholders, additional This with year-end, by to annualized is three well-positioned from collection-oriented The we of to is closed, further firmly any in multi-market growth. $XXX including demonstrating X% price-led between another approximately in a expected communicated XXXX. the increase continuing while or fund third markets. double-digit our margin to with exceed Moreover, acquired remains contribution increased to for Rollover new to cash on we deal Our we in two with remain revenue for organic expectations XX% once $XXX the in our meet acquisition, expected already deals elevated,

much housekeeping disclaimer more call Anne the turn Mary other forward-looking and for into detail, let get items. our over we Before me to

Mary Anne Whitney

morning. Actual XXXX, in Ron, cause you, Private are and due in today’s results within to including risks made similar those made during information good Safe of and of release or U.S. Litigation could Factors forward-looking greater XX results on in The Harbor earnings in call U.S. October materially Exchange differ differ forward-looking discussion Reform Thank statements applicable commissions pursuant various from uncertainties. and could includes provisions and discussed Securities of Act Securities to the the securities statement forward-looking the the the actual laws. Canadian page meaning such securities that Commission Connections’ Waste authorities of Canada. filings and with in to both the regulatory X detail cautionary statements our

are undue be should we immaterial, there that we which and which reliance on presently as are believe aware statements have place forward-looking not an that circumstances adverse events additional revise date. may forward-looking no change We today’s information our or and make to any reflect order impact statements business. to or in may currently information, You could not or commitment after on update risks

measures and may our of adjusted over and for call will Waste these Ron. back operations. the Other calculate most measure. EBITDA, dollar Connections basis will measures on per the share, a the such Management performance diluted free non-GAAP adjusted non-GAAP differently. to measures non-GAAP uses to the comparable ongoing financial cash GAAP certain Please flow. evaluate to both now monitor to our companies as I a such we attributable adjusted and measures On turn of reconciliation income net earnings call, non-GAAP refer discuss releases to

Ronald J. Mittelstaedt

prior and Okay. our X.X%, of year-over-year surcharges. reflects basis was core upper up in the Thank In from with Once X% pressures, on points markets of points overcoming basis negative more QX expected end XX XXX line you, recycling or quarter, Anne. the in in fuel growth basis slightly increase points XXX third the headwinds X% pricing in XX the fuel. expectations, XX upwards between more sequential the on our our Western basis basis regions. from pricing Pricing range. about in end strength material to down the Reported competitive the waste sequentially the exclusive volume quarter, solid and Mary economy, of XX at our our high and points, and pricing points and including again, above certain basis improvement points in cost differentiation model, of our market was underlying our region reflecting growth XX-basis-point focus a a tone range of up of

legacy X.X% from up in price-volume of transfer decreased Department basis points, stations with New third quarter, to Looking On from resulting operations in due following; the Southern shedding the certain XX were volume our about continued points of due timing purposeful at shedding; by points the XX in X.X% basis our and contract across activity, the strong offset Hurricane a York XXX activity the disposal another volumes from ramp tradeoff marine lower-quality were City terminal driven and and Canada that and revenue comps a Progressive of consolidated to to and Sanitations’ to Western tough down of the including Harvey; to Central basis markets. X%, of a party environment XX QX. over basis, regions, basis about a Waste while primarily prior-year regions in purposeful markets, volume macro of region by points increases disposal impact X% were the in activity

XX occurred basis volumes about better slightly first that points QX. total with the expected that than continue second was to Therefore, points the year the activity half, volumes QX. XXX reported the landfill expect quarter better basis in Some QX of to we fourth in should in than half

pull at mostly increases. X%, increased by Looking X.X% due increased quarter, decreased same-store the collection basis revenue primarily In per increase line this by price Canada, X.X%, increased was pulls shedding business of up pull X.X%. revenue per an of commercial the third on pulls day revenue and approximately accepted per X%. day results lower-quality by tradeoff, volume approximately U.S., in due about by per an to price purposeful year-over-year approximately by to essentially in a In and revenue X%. the all Roll-off of decrease of offset revenue with

than rounded Chiquita or old X% declined on the especially value and acquisitions, markets special the increases to paper to changes mixed range. We is both pickup values from up Texas. $XX was Mixed recovered resulting in ton was year-over-year down QX in excluding and averaged timing markets. of lower QX. containers changes better-than-expected down in or due per in both year-over-year revenue, about about EBITDA that quarter, from waste Special the Northeast, due $XX the including the Colorado, C&D to and ton, higher XX%, activities in in that which tons, processing X% increased prior-year difficult XX% earlier. in certain the half activity to some fiber, Florida, the acquisitions, XX% QX, million per approximately $X.XX for for anniversarying recycled almost The and continued believe down of due saw Landfill of excluding share period QX. Recycling and tons Solid an flow-through values of permit primarily EPS the remaining and XX% combination to to the about remain MSW third demand from OCC a paper. detrimental margins Prices waste due the recycle million special per were fiber $XX the year-over-year $X in in similar about recycling in as corrugated up million to decrease about tonnage of $X waste in year-ago X%, several about the in related impact in we comparisons revenue $XX sequentially decline of of waste costs, XX% on declines in increases the with Canyon landfill approximately down a tons, tons year-over-year X.X%, and we noted was QX were less which revenue,

Looking year reported activity and at of waste but from E&P shows year-over-year, smaller a in last up could quarters activity QX we waste year. saw again revenue XX% up $XX.X see a waste quarter, We QX. million to E&P activity. increase from this third seasonal E&P the that waste sequentially due E&P slight in typically prior we still decline the in X% ramp

increased a revenue the until drilling the see Basin meaningful We most Permian come above basins, run in rate other our facilities without our anticipate step-up Bakken majority online. continue and activity of in to in or additional notably the don’t

including new landfills three fourth As which Basin, noted are we plus two the quarter, of River Permian, by second new Wyoming’s should a project half many Powder last in in XXXX. of contribute pursuing projects the

at Looking activity activity. divestiture acquisition and

the we annualized two acquisition, an million, due acquisition close dictate a taking bringing timing for of taxes including rates over of one and already a to since year-end, strength approximately the which period activity, annualized result interest potential years. of of inception. we that agreement which seller proceeds. many reform, the by pipeline the activity interest as As next anticipated a earlier, factors, seller-driven third This tax activity a place company favorably continued recently same often we believe collection-oriented to rising the to with of This of year factors these level acquired busiest our acquisition $XXX underlying over add company’s The of business, could million, be signed expect revenues result for could focus remains outsized noted sellers multi-market and year over three are few of key clarity with We transactions an dialogue around on the tuck-in. M&A drive pace total of this by acquisition, reinvesting new sellers additional outsized $XXX above-average revenues will robust as their and heightened M&A multiple to markets years. viewed is

In opportunistic return with originally we we of markets we free cash divestitures, annual are on Together, the of authorized including wrap a acquisition $XX expected the two for as that tremendous of one the had market like our our dividend capital undertook by less about share remains finally, sold in divestitures final in Waste. to double-digit cash a more yesterday, final our since the QX. our with the increase of in And divestiture and XX% I this dividend, increase, will Regarding board total the Progressive outlook of expect quarter. complete we we QX, XX.X% growth program to shareholders, flow, this Mary and then third repurchases. of further financial highlights our the consecutive also fund Even identified to million up that to connection call pass to And percentage track in to announced these regular to annualized eighth the commencing quarterly sell revenue. the I’d increase Anne our provide two year-end strategy review XXXX. and providing now, increase dividend Q&A. into in-depth than heading flexibility before quarter detailed directors

Mary Anne Whitney

about compared Debt others primarily from from to divestitures. completed divestitures up a XX period. in accounting Thank the million total was million about million from a were expense enabled was due XX%, associated the E&P easier. the was when XX QX as the despite EBITDA year-over-year benefit basis excluding of and QX in and an from Interest to well year-ago amortization up in $X.X the up price-led margins of approximately Ron. expense quarter. lower $XX.X and was revenue retirement over to our which the cash and in recycled outlook. waste XX.X% increased and basis percentage to about drag estimated outlook to higher at XX or of about with as as quarter extent QX. operating revenue fully for and from margins sequentially up meaningful was in Adjusted growth quarter, with which to We resulting Investors our rate contributed driving balances, $X.X the above points approximately million and acquisitions to in QX, revenue, from period our from from in from the third $XX.X points since margin-dilutive, EBITDA further debt about period earnings gallon outlook, further to year-over-year do may sources revenue XX floating expected interest the as growth, which, period quarter, prior-year year-ago results expense of BaaX $X.XX had third changes depreciation our begin recycling overcome we line on XX-basis-point of the $XX recycling, hit with period the decreased up expense the $X.XX invested the Acquisitions revenue period not for and our of along EBITDA that approximately the $XX.X the with million. of prior-year $XX Year-to-date, quarter-end million the prior-year as acquisitions million, margin was was us to way period basis were in about borrowings expand per solid ratio, outstanding points decline relative due about about Fuel period impact demonstrating above with last as from which, of the have fixed a in reconciled net the declined due credit as of in basis due up down which recycling $X.X recycling, by million, year-over-year. our include optical quarter, optionality expense the the diesel our X.X% expansion, reminder, to $XX.X to since us you, balances. for of greater $XXX.X to $XX to were with recognition. leverage revenue headwinds XX-basis-point in down averaged higher from for about and XX.X% investment-grade prior-year revenue, above. million year. QX, margins E&P billion, offsetting $X.XX year-ago in Service, of closed Depreciation quarter along Net $X.XX below rate. we was rating from other related the defined net was to times existing $XX.X interest Adjusted higher EBITDA And over margin In slightly note, get Incremental provides noted agreement, received X.X our capital. year-over-year income XX% million cash commodities million notes points investment-grade comparisons abate release, billion, the were leverage consider than waste, S&P solid should of our of from By an ratings Fitch, diversification One QX Moody’s period. since

to of Our we to of estimates was companies related third effective the Adjusted items, awards their refinement tax equity to Tax mostly income estimate in $X.XX give and estimates pronouncements net in from share certain rate primarily were for primarily adjusted believe impact the through the of changes QX and intangibles, GAAP Tax refinements. in to Tax respectively impact the to until per items quarter the value our Accounting other the period to excludes related finalize Act third and the the quarter. diluted $X.XX XX.X%, Act. or Act. the acquisition-related we’re and XX.X% of the fair refinements impact income net net now amortization of the and year-end the

that the exceed now outlook growth XXXX or and fourth million, our outlook will million to earlier, or higher spite flow beyond. of quarter first adjusted about XXXX. meet new track due in revenue. year free outlays Adjusted per of I a cash noted acquisitions the remain the to will share adjusted nine about and CapEx As free review for was our of net from $XXX.X QX. recycling to diluted the benefit of cash drag on impact our months of flow $XXX in XX.X% of full-year income upwardly-revised in We projects was $X.XX

Before again to authorities carefully. our I these We in like everyone and securities on and in statement to do, we’d significantly filings Harbor once vary review Canada. the actual risks made we’ve investors similar regulatory factors based remind and or that with the results outlined encourage may SEC commissions Safe uncertainties

any the the change during in economic close period. $X.XXX the outlook no additional assumes expensing It is or the transaction-related that of operating may items QX remainder approximately be Revenue environment. acquisitions current of divestitures Our to impact also during and and in billion. year from estimated excludes

We is of is of with amount, third in amortization approximately negative to be to approximately growth the net $XX.X terminal is which to our Adjusted about fourth year-over-year. York effective Depreciation estimated expect or of party. of waste estimated back first a approximately half to is income year-over-year. due turn Department that estimated call over EBITDA And XX.X% City in about X.X% million, is to X%, up QX impact be be or XX.X% to quarter the to is $X.XX QX variability. price or in $XXX tax be intangibles with per subject in full-quarter approximately XX estimated operations solid remarks net to and of for of volume million contract about of to for diluted expense, about be marine for XX.X% the New approximately QX the of about Interest XX.X%, Operating of be income, up in QX be basis basis final some estimated is revenue. about expense points before now, million, quarter XX And the estimated revenue Q&A. amortization $XXX points Of Sanitations’ taxes. let share $XX some finally, in million. interest Ron QX of revenue rate me to

Ronald J. Mittelstaedt

a price-led performance, our from given we’ve Again, expansion the overcome percentage headwinds growth more able Anne. margin pressures through that to Mary flow we’re drive growth. you, Thank free and significant cost certain cash Okay. been and double-digit with pleased recycling particularly extremely than year-to-date to

meet combined track the potential for which remain outlook, well-positioned July. largest exceed we communicated activity we increased company’s should continued results, in We by our history, year-end, just us full-year put in as fourth we to with QX acquisition ahead. outlook the announced year-to-date on or look the acquisition Our and close above-average

percentage In announced dividend. addition, another cash we regular our increase quarterly of double-digit

of waste the the in purposeful waste most E&P reported contribution indicated and the trends continue, we growth current with and quality revenue we recycling believe above-average lower on our As acquisition waste solid favorable up setting pricing, of for provided expansion, and associated that solid as shedding and margin headwinds call, is thoughts XXXX abate. should negative growth volume activity for preliminary primarily July for current revenues XXXX should we that our

continue margin this revenue but reduce $XXX But basis on the any from acquisition to acquisitions should X% margin acquisitions typical margins expansion X%, expansion in XXXX, basis operations, We to XX year-end be we to million the X% waste solid revenues. throughout recently-signed collection-oriented to XXXX with points contribution in that revenue And basis by free growth to acquisitions this XXXX. since an have believe structurally or closed, of points, expected in price-led result growth. with additional with together revenue already excluding for XX% collection-oriented lower what drive said double-digit of growth acquisitions, X% plus points, this on of between additional the XX fully-integrated consistent completed higher flow basis XX July, per growth cash organic would for signed an approximately excluding and potential impact XX to deals from share our and XXXX other EBITDA points and should

formal expansion, the We additional influence expected that now for that on on your this visibility We updates Operator? will all in questions. up over operator your potential any will I provide the have call which we magnitude of recycling, for of expect outlays time February, the the turn will lines and further this outlook the to to timing open acquisition at and margin today. upcoming year time. to appreciate better

Operator

proceed comes Thank question from Please of question. you. [Operator with Instructions] line Mazari Hamzah Our first the Macquarie with your Capital.

Hamzah Mazari

the doing that why really you over a helps go about system. your think is is, prior the guys above well My company as why the If XXXX pricing. were first help cannot is of probably look or consolidated maybe morning. if you pricing more like mix. feels on sector pricing Canada the can levels? you surpass you now. Good long-term? It XXXX, the pricing takes X%. inflation in out or back the believe question lot us think And Maybe you surpass peak puts levels There’s question prior peak to just I and

Ron Mittelstaedt

as XXXX, both we we’ve labor, seen said. housing pricing XXXX think level accelerate Well, at the if other different we’ve it to you opportunities north could our little stay the reported first cost we now. XXXX, Every XXXX economy as was led it right as increases to to number is see If X.X%, throughout currently in as just of CPI off, Obviously, I you probably lift don’t But being see cannot or so. cycle hot that said in Hamzah, fuel, continued there’s almost drivers continues seen which and a well. beyond, it and do bit is a to what as double then X% the environment steel, approaching relates different. well continue we’ve we’re and throughout is that X% business,

there’s to which we if had now tied XX% to number more of to So that different that peak, back XX%, prior that tends would price about a that And CPI, be peak. it was in XX%. from governor, achieving disallow XX% to you our and fact, structurally company go of the in prior revenue nothing is

in is, the price So is than timeframe. we back more latitude we XXXX have reality that in did

So if cycle there’s is the XXXX. pace it that throughout it why the really no reason at wouldn’t continues

Mary Anne Whitney

our that pricing And that was saw prior driving of you add peaks that then portion was big would XXXX those and that following to I you would about the peak a spikes. thought pushing we’re we where if price, markets averaging when legacy and you fuel I look offer that markets in when fuel you Progressive see had you’d are also already XXXX price. our X.X% I where guess

us that what what growth and in X% see to this anything organic the environment thinking on at we’ve we certainly with we’re said don’t is already being confidence X% changing XXXX So gives expectations and that we’ve price-led. historical being that’s a growth levels communicated that basis. about in the And high organic

Ron Mittelstaedt

Yeah. structure to That’s as closer high range. Mary X.X% and now Anne. you. perspective, in got for back an it’s And X% Thank our to of fuel just to then, X% as point, Hamzah, excellent that cost

there a material price. and differential that’s spread yet is that a not So, big on

So that’s I think an excellent point.

Hamzah Mazari

That’s helpful very Great. color.

M&A. question is on second The just

You’ve talked about outsized pipeline.

You a like for deal. there cash cash U.S. just how given returns mid-term do And And or just elections any did large frame of maybe are catalyst us high? on on the valuations look will with believe your on in be then, either terms change a do M&A? a you slowdown M&A

Ron Mittelstaedt

cash-on-cash return. question, downward. low-teen of mean, not that structure Hamzah, any rate transaction, turns certain costs manner Again, your downwards. our moved type on three over And has has to cost for a Tax we’re years. last integrated the looking as stand-alone return has a material using I a Cost moved But Well, that large multiple low-double-digit, and a moved X.X on changed. proxy, of we about moved look for other IRR have downward. has an large first has in moved probably debt or downward

change So, seeing not you’re any protracted over basis, of time. any period on return meaningful a

Mary Anne Whitney

Mid-term.

Ron Mittelstaedt

change acceleration House, the the If take it because to Mid-term, the I Democrats the brings way, of political the as uniformity you either been there just tax look not do would window I law, prediction hold their of going think the of that Republicans a more you look, for provides two also see in potentially we’re could a that have illustratively, that later be wholesale and because with little if obviously think on. same see I what’s say to maybe and acceleration House people even companies. and business. a that something could reversal then be a to a sellers years predictor there

either So M&A time. at situation think derails I this point in the activity don’t

Hamzah Mazari

much. Thank Great. Okay. you very

Operator

comes line proceed of from Murray Chris Capital. your the question. Our with with Please AltaCorp next question

Chris Murray

morning. Thanks, folks. Good

Ron Mittelstaedt

Morning.

Chris Murray

a I the was most should particularly you into about. in of terminal Progressive XXXX? you would can we little that be the talk pace shedding talk bring Just about think how the turning to about that? of shedding, purposeful mean, have you can thought thinking as that back But enter I as bit about something done. the the to Waste But did of the from pacing we operations marine just

Ron Mittelstaedt

Yeah. got But mean, drop a percentage is to a length, five the XXXX. number that Well, contract commercial the remember to years. why not That’s continued average commercial is average as done. it’s of gone contract three be whether to the you is as all I contract throughout of it it’s average one, years, we’ve done. seven it most to five municipal contract,

the So years the we’re through through that or two-and-a-half three-year we which halfway mostly municipal puts the it and into us those so that say on contracts, inherited. cycle commercial

done. that going when in if we continue. But I’d the going we looking needed you and re-priced the we’re we be change XX% $XXX - tell for our a told up you a come with. to approach to XX% it. agreements or still are There’s to - And certainly another to come million to there time not footprint business, lot. $XXX that renewal be So, the change million strategic Chris, was estimate lot our we had vast that is majority, price $XXX vast majority is done, to when there did I I’m that continue would all that million to across either say of did the Progressive to fit

Chris Murray

Okay.

Ron Mittelstaedt

And million that $XXX is we XX% that strategic, day. our done through way then $XX basket. we’re that and said should our - have quarter. worked way working remains any We will probably close this other million by call, the So actually XX% through. that wasn’t there We here we’re still the probably on the

Chris Murray

Okay.

approach you from those increases? those along pieces those all, to back market of are piece of what’s some just churn I them? So, changed? in able there’s that you pricing price first Progressive seeing the actually is have And are that think the of reception as those going of guess the how changed about keep who you’re for I then mean, even I customers are or getting customers also your to mean, has guess customers question. two looking this second lines, increased you you I you

Ron Mittelstaedt

whether mean would I tell I contracts. much change But north a got or rebid we’ve the that if we vast is it first majority geography contract municipal. how commercial I the municipal through. of to again, we our price it’s customers. collection customers, mean, it’s and those go vast by retain retention on XX% renegotiation you on mean, that a I rate different off depends Well, of rebid majority little retain of a the those on that’s

retaining of we’re majority So those. vast the

for right of we processing price on its own, As about price. thought what and differently of that how mean, we’re all approach that the recycling the it. has is, that. higher I entire how And how having affecting the cost we commodity far having price, to say user. thought a is say municipal sector we And about that is approach. materially the stand shifting look, approach I I now. that’s the to are much or we that whole mean would by changing doing sector customer hundreds there to differently municipal are how customers, pricing as end these in It’s the I’d risk And is

hundreds higher recycling. municipal charge a In reflect contracts have out redone the been are of through an that by elimination of yesterday industry last quarter recycling fact, came for there over dramatically or the industry, thousands our to not if

is that rather our so, else. biggest approach anything than change the in And

Chris Murray

of I on Fair acquisitions looking outlook of may, the enough. both from what for and Okay. then the just impact million comes expectation out figure balance parts XXXX, I’m if is we just to then just the out assume the your QX but back $XX in the trying Should at additions positive that. number? And just growth on to your that the moving then divestitures?

Mary Anne Whitney

Yeah.

impact completed So, QX of net at had the about so QX divestitures. specifically [ph] already of impact rollover acquisitions million, net was just Chris - that (XX:XX), looking was for to the but the $XX been

Chris Murray

the assume should in is divestiture quarter? And the $XX we the million

Mary Anne Whitney

No.

million associated So, the was annualized $XX total divestitures. those with revenue

in million number, that divestitures. net was you, it’s when $X So, I a about gave

that’s... So,

Chris Murray

Okay. Great.

Mary Anne Whitney

contribution. of in about million $XX ...net acquisition

Ron Mittelstaedt

this last And have quarter. transaction assume that January in That that does that close not does X. that assume closes we not is and assumes that night about that that announced the for that morning, in talked the

Chris Murray

right. All Fantastic. guys. you, Thank

Ron Mittelstaedt

Yes.

Operator

Maguire with Our Brian Goldman question. proceed next Sachs. your Please comes line of the from question with

Brian Maguire

Hi. Good morning, everyone.

Ron Mittelstaedt

morning. Good

Brian Maguire

Ron. Hey,

markets? other franchise Just about versus them, [ph] to you markets, bit whether more what follow a do of hoping just up acquire you could there talk little think could but as of just could getting of But be tuck-in on you seeing kind any acquisition think since lower Or these it markets turns you’re would you’re about that and transaction, you in? on opportunities internalization new disposal details (XX:XX). talk opportunity margin get bring get to franchise wanted it. then And some about kind Don’t little opportunities in just you have and open you you if in also some or since tons those just to terms those assets into the probably what there? are into, know might gets of assume not bit won’t a states

Ron Mittelstaedt

off, specifically fully Brian, who yet respect first all sellers the have we customers. to and employees their Well, with can’t met of really provide not deal their more the on Sure. lot a out

want process But this interrupt don’t footprint. will competitive get very and skis with So, because is our is you in both customers. market employees a process, footprint, sensitive what a deal to not franchise market and that that tell I over a that’s

opportunities will you I of the us. tell I is So tell for you market in internalization two three will there that. available areas, that

market presence in a adjacencies disposal is them one assets internalization that we the in we too. tuck-in And a of opportunities becomes if this other have market it’s to have market. tuck-in we potential And the strong have and a One a longer-term. and in

So this XX%-type call what of more margin a number. a in on number pre-internalization very collection at range. strong That’s pre-synergy transaction a that and comes typical I

couple the arguably number We extremely will an most asset market and akin private the remaining their quality. outstanding companies position company, ago group did in this one improve management a largest that in high one market of phenomenal XX assets, private over time. of we management position, or to it’s in quality quality very probably markets, industry, quality. and of and But that high the of terms of two a years Again, is

So, this that’s specifically. I transaction say about really can all

us specifics, a our would regarding let’s several of I XX% range your example, was hit our I of non-exclusive And will The percentage just in us in in rate. would question while have Without will of on us second franchise XXXX transactions. approximately of into greater those again And based you over that was versus we expect close than there tell historical that our an part use I getting period some any as markets. expect building quarters. backlog franchise exclusive to in transactions keep time, had of a

Brian Maguire

Thank helpful. Very Okay. you.

switch just to ago know industry of view change Ron, that over gears model to I time. one not a Just to back giving conference of too you at more an were long how needs business recycling. kind

need you I in come economical of line of to said recycling bottom prices addition the to think was current basically the make think it costs to fees. I getting levels some down

that’s that quantify talk much but and think you’re maybe lower. on maybe if Just how in could fees, of of the your quarter-over-quarter. about some fees can any as getting you X.X% dollar-amounted where that’s relates within you go? wondered out kind talked guess, recycling seeing And it know to there the some gains fees surcharges, just or from the costs coming have getting? if break others you’re of I industry much possible of then, progress how I

Ron Mittelstaedt

been the minimis [ph] Well, far. in off, been the It’s poorly piece fee core (XX:XX) de quarter. XX of Yeah. price of the current basis price points first of on so the that’s about recycling, a portion

to been a industry actually far. we be and to would multi-year substantial as getting think number starting to to a these discussions I achieved would quite But that that long is So, accelerate expect us is a Again, process. and the make both that’s continue I improvement This the process. to is so go this forward. contracts redone.

of don’t As It’s a processing of has not up. have mean, if know cost ton - number is I’m it add add we’re And cannot down. in I reality labor, some far said markets, of the little majority China to having is, as moved number that to processing, to, to ton, slow reality from round, having you coming $XXX down for do probably China been we’re the equipment. is going a is that, $XX just that. the having moved $XXX to is, going could we’re that that to may recycling to has out cost, when export to the taken a when and north to $XXX I we context.

get over Now, down again non-recyclable we of renegotiate the as cost municipal time I think we screen out come that single contracts. as material will

that get mail, structure But negotiation time. to would to back make will I again, beyond because, that municipalities, protracted get get we back and these get negotiations. really cost progress that that on as expect we us with glass, of that plastics XXXX and down junk some as we certain we are over start see in magazines, is So, as these happening, bring that as the out

Brian Maguire

much. Thanks very Okay.

Operator

Hoffman Our line next Please question comes from proceed with of your with question. Stifel. Michael the

Mike Hoffman

questions, Mary for housekeeping, rate the for A of XXXX? Tax Ron. quick, taking couple Anne. very Thank you. assumption Thanks

Mary Anne Whitney

more Down like XX%. to slightly from XXXX, XX.X%

Mike Hoffman

would taxes? that of cash And that be percent

Mary Anne Whitney

Percent of about in it that XX% cash that way the the XX% think to to is range. taxes, would be

Mike Hoffman

move so debt what what Okay. your then, And can interest rate understand we a you is, rate variable remind can means? X.XX us point

Mary Anne Whitney

Yeah.

X.X%. about at We’re

Mike Hoffman

clear, X% Okay. quarter, is solid And the business, fuel. waste for of be X.X% to just fourth that’s the X.X% then, the

fuel, you price surcharge. don’t You

So, we’re that’s to just it? think - how so about

Mary Anne Whitney

Well, surcharges. we fuel do have

they of price reported. we said, we in basis that QX, points As total for the accounted XX

Progressive utilized of business, was had And more other have recapture Canada some that year. and the in you actually some typically of following in more parts CPI-linked the of it. competitive of in markets, we we our There lag As so that our know, price country markets, then, surcharges. a we and fuel in legacy in

Mike Hoffman

the And ex all volumes Okay. want you just the have be - I then in on to positive model volumes, shedding. business

a this So, waterfall assuming the it’s at X-something back in point if for divestitures, shedding, and work you for on back X with I’m add started we’re add total. created minus and backwards and number X, a at this

Mary Anne Whitney

Well, at look said, you as it cleanest way is we it. look if to don’t in markets which the that noise have those -

our which So, X.X% in pretty indicative. that’s business. markets, you think In have we our high to franchise market I saw Central have Certainly region, we and again Western Central X% the regions, all share.

strength. really noise in underlying the all other the So, that’s indicative is those markets. And of

north say basis certainly fair to points it’s underlying think volumes in seeing. it’s the we’re of I So XXX

Ron Mittelstaedt

regions two those any into legacy of operations them. Progressive neither Michael, And, Yeah. brought had

other reason those are markets. the that’s those So, use as Connections to legacy Waste

shedding, shows what is. no underlying there’s you that So, where volume

Mike Hoffman

And... Okay.

Mary Anne Whitney

with continuing and in though, I purposeful tradeoff pushing make the okay thing of we’re we’re I it just other would to clear and think some keep mind that volume. Michael, price okay that losing to do a harder with

and seen Given expect to in change. to that I seeing cost we continue the see wouldn’t in XXXX, business we trend that we’ve in the expect pressures XXXX

Ron Mittelstaedt

point, X% X% X.X% price day the us second told one have long. price you X.X% good I Mary to Anne. mean, we that’s a And to and and taking volume, And can volume, or to Yeah. I if X.X% look, would that, say X% all we’re

with lately. X.X%, margins evidenced X% You’re up is as not price, moving

Mike Hoffman

that I what’s that. things business volumes telling the get your statement - into lead right that at of I not where what’s X.X%, the two And was was economy was us are about it markets U.S. X%, a is those fine, mix. climate, more more the combination are the just

Ron Mittelstaedt

seeing you’re year economic year-in or streams that. anything sixth a Are these think Yeah. seeing it’s there special down little? contracting. in now would a No, that I stepping to as year-over-year, seeing the that statement, of seventh and mean, course though even Mike, expect or increase year-out the really the any underlying again is that. some quarter-over-quarter, of of waste waste that us is contraction on. of anywhere expansion fair magnitude I that you not going telling are I of that such Yes, C&D, Nothing’s we

Mike Hoffman

given Waste what sellers Industries, too And purchase then of last above-average an the they GFL any consequences? negative there I’m me. expectation And paid? for are one Is complicated, post making knock-on apparent having it

Ron Mittelstaedt

have always the potential done. multiple, deals. we’re transactions Well, pay public, comes that go has no worked large for where has conversation. short-term very or backed, certainly pay. on But high Industries day, question. on That the GFL-Waste private-equity it it very, to change us. be are to it what be the deals going look, And end gets as appears deal, seller’s wishing deal of such large, they the effect to to cycles to We’ve do visible multiple what going never whatever whether that it that we’re has few you visible the some seen ability a when a at a has been And But at attention, they is, and inhibited companies buyers, to get our through or this. we��ve there very many are very

You just done. we fourth Waste Industries. we’ve X pay the to And saw ever within announce of X largest the deal multiple turns didn’t us GFL of

a to very to do. the GFL. a GFL, And lot deal So reality it’s that of needed Industries I’m not bring makes is what is to going for exceptional we’re Waste going strategic for affect company sense an that’s infrastructure sure. is, good them

that it in for and cost the world this for of begrudge valuation. have GFL. So mean, a lot would all It punch. doing probably to them. on else world true. a them. do the to I have knockout the no see isn’t got Waste someone material and then that normalized $X become I numbers in makes which I capital they appears is, sense made you understand deal for why But a of sense have, it’s going couldn’t within a the all different expect them, makes it We number for it. If a of probably one we mean, Industries we’re billion to business not billion like for them sense that don’t $X.X those that in to

parties. a makes it and just deal So one-off this sense for is both

Mike Hoffman

and it’s is positive, Okay. even the quarter because In gotten environment, where there And so good economic volume you’re of in we I the a given saved X.X% one swing one. XXXX, shedding? if a see on structure you’ve economy a last is good the to would through

Mary Anne Whitney

as to keep said. have we is DOS in thing we’ll one the of mind impact contract Well, ramp the

quarter QX. is see full first The we

that So least XX-basis-point and headwind to QX QX and in then you expect QX abate in at starting and through fully QX, QX. should or

not I to So reiterate would Also, that this report factor we’re to in. just volumes. necessarily that approaching positive you have

accept volume tradeoff. to price going that We’re purposeful

know So I’d when be time which that positive to at there’s say reluctant next we year. in report we’ll a point

X% believe it to to X.X%, underlying I that you continue We to in basis just should economy way. Canada, would that to think the volumes us an encourage about to weaker at underlying the lead U.S. slightly and in

Ron Mittelstaedt

And Yeah. in aggregate...

Mike Hoffman

Yes. Okay. That helps.

Ron Mittelstaedt

Yeah. That’s a fair answer.

Mike Hoffman

Okay. Thanks.

Operator

Raymond from Our line James. Tyler proceed comes with Brown question your of next the Please question. with

Tyler Brown

everyone. Good morning, Hey.

Ron Mittelstaedt

Good morning, Tyler.

Mary Anne Whitney

Hey, Tyler.

Tyler Brown

maybe weather, Hey. broadly, just I quarter. so in geographically I’m are what Northeast, can maybe the large operations about West, the a a apologize. little bit et region the under But transaction, South, you could nice pry Ron, cetera? on talk I Hey. if

Ron Mittelstaedt

What markets. we’ve said they’re exclusive No. not is

West that not tells you Colorado. So, to it’s

Tyler Brown

Okay.

market. out in specifically, think for is run point, to this $XX constrained that of million that is guide X% at very revenue XXXX? do But is good capacity what E&P that you into maybe And higher. in if And side, Okay. Takeaway can well maybe Permian? activity little the E&P bit more in rate a could a really about talk That’s I moving I a count mean, you turn is to the DUC then little helpful. the the XX% bit specifically?

Ron Mittelstaedt

Yeah.

XXXX an there today our acceleration a same, million, I a us think, revenue or of mean, an assumption business first assuming the either in run-rate-type $XXX is the approximately waste $XXX it’s is thoughts. for on guide business that in that million preliminary E&P I which basis. stays we’re off, QX in not

So, in Tyler, around to we’re million in $XX it assuming QX... stays revenue number, your

Tyler Brown

Okay.

Ron Mittelstaedt

some normal in those around with stays ...and seasonality XXXX, numbers.

run up excuse two some on me, to second coming even, approximate XXXX, it second have it million half $XX those in in do XXXX. to the of - rate. step $XX the Now, to the run relative $XX we the facilities half will of new facilities that million that being just Permian in million through a initially things will new And take all rate, a three

Tyler Brown

Okay.

Mary Anne Whitney

other add, just before, companies the we takeaway in we when would in as have said and activity and the and to constraints basins that Because see what right is we or in a Permian, about Tyler, other too without where received And is, coming there the play. you that step-up competition addition competition. doing are know talk in pursuing Permian, beyond don’t now are we’re to permits I increased we

E&P to right of that revenue for XX% our kind now of in the hard the see So we it’s and is level think we beyond Permian. about get Permian

bring the near specifically anywhere light peaks. most Bakken takes it prior to coming again, So, us to

Ron Mittelstaedt

or define exact New that, And sites. mean Tyler, XX to today perspective what Permian, give Mexico, permits landfill on Texas Permian in in the are we and some I both there you as the

of have permits is to by And expected be We end the five of XXXX. those. four there new

We are two those. of

today. of So we’re XX X permits

We X of permits will be at XX of XXXX. the end

at a stays the XX% permit basis it a So basis. on number that and than more on share

anticipating share we’re not So any degradation.

In sites. on share as believe higher fact, we’ll take that we additional we bring these

Tyler Brown

mean of really my question. here, this the it do get near And market’s with mean, in that future? speaks oversaturated to capacity to other to I I going kind very to blunt intermediate you disposal Okay. worry be

Ron Mittelstaedt

pulls two of the radius If drives of are and transport basis water can down fuel because both a original up, trucking a you constrained. the also Again, it’s look, And from always affected to mean, by that Tyler. your is capacity comment, moves travel. those latter very material volume the costs that basis takeaway volume-driven and and have and the potential And exists, to this also that understand I a solids. it pipeline crude business business.

does happens if capacity it to up. So assume, look, pricing crude only takeaway have you That competitive, more increase for materially. if volumes capacity and trucking much moves to improves, improves, it get that

that. overly we’re not about So concerned

Tyler Brown

Okay.

Okay. one. And maybe then my last

Anne, through looking I the Q was So, this morning. Mary

at point fuel Maybe are think one as as that exposed ever. this you could I to you’re hedge. fuel you argue to down

I’m change mean, And you are just know But any to enough the fuel? fuel think quotes hedging, robust curious? that do offset is got Now from rise here. potential natural that surcharges hedge strategy I’m in you’ve going fuel to to your use you and I surcharges. a I air any there have E&P in the

Mary Anne Whitney

No. Tyler, I Good you question, and know this I before. have and talked about

contracts of where do XX% it’s locked in for already As hedges field the and aggregate out that the see at have the know, of level, this price you’d field. you a we Q combination and hedges And we fixed year. the may our actually are XX%, about in fuel then financial below XXXX

continuing at we’re So look and of to hedges. local that mindful

won’t you see in again, so, And this our Q.

Tyler Brown

Yes. Excellent. I Okay. appreciate it. guys. Thanks,

Operator

question the next your with Our Noah with Please from of question. comes line proceed Oppenheimer. Kaye

Noah Kaye

for taking questions. the is part talking that when think heading E&P to out sales Talking for we build E&P you spending Thanks going CapEx run XXXX, we of into were about kind How CapEx but understand elevated morning. this trail earlier. that as Good the that year, assets a of start about do CapEx, and so off? percentage does to of the much about assets

Mary Anne Whitney

in as to be if third - that, terms I would most surprised. million it continue of $XX the I projects of talked will be good proxy think incremental then CapEx of it And the of in beyond about, you for So, look should the at expect as there timing over, CapEx, what a this the some the rolled be wouldn’t E&P, be will revenue that of some - But that increase of spent look XX.X% to year, in XXXX. we’ll we that continue. a

Noah Kaye

Okay. Great.

Second question.

far and entries, characterize fits size now And congratulations acquisition. that so the the You’ve entered those with how revenues multiple year-to-date. you footprint? your on With this new potential others markets deal would of the

Ron Mittelstaedt

of revenues? size The potential acquisition opportunity

Noah Kaye

acquiring Yeah. the Potentially revenues.

Ron Mittelstaedt

no, $X.X I’m to we’ve year-to-date. that you, $X it’s tell million $XXX Again, so I’d billion acquired, Yeah. rounding, in range. far billion

again, million visibility organically have will more, that puts year be the X% billion that or billion $X.X a us we do. probably $X on growing thereabout. and is didn’t deals to we it year at where other $XXX now in So states But, X% to

So that it changed really much. hasn’t

Noah Kaye

you Okay. much. Perfect. Thank so

Operator

proceed of Our next line question Please Spronck the comes with RBC. question. your with Derek from

Derek Spronck

for Thanks my taking Great. questions.

offset Is remaining cost as your than more rational retention the and are the and, in how pricing to regard, competitive on of headwinds pressures of you’re pricing the offset cost environment recycling. rates trending? that pressures, some from these customer Just you’re pricing, some to

Ron Mittelstaedt

rates Well, customer churn are overall, down.

would improving. you rates that retention are So, tell that

pressures, or balance similar to whether think companies how is labor, fuel, you cost that structures, driven are through investor publics the similar and anything is privates, public and again, economy with that of recycling, cost I or similar indicative be it expectations, else. steel, understand, or everybody, similar sheet And strong faced the or structures. have have

in private they’re a similarly to commodities, actually Number is That their now companies on The relative a public burden have Number one, the usually they the structure the gone. have So companies, going flow typically derived two, they what lower be amount disproportionate to public they companies. cost of from Xx operate Xx margins. have. disproportionate to right cash rational.

haven’t real So raising quite some pressure material in they we seeing to be time. price. very aggressive cost have in And a they that are privates them seen

having raise So you price. together for and the of differential sort have perfect private to public both storm reasons

people loaders full to spare - I strength full. ongoing have I sitting due think everybody’s you is not the parked trucks and economy, - around. boxes is the thing There’s roll-off of system at just mean, other and don’t front The are capacity. have systems

those lead under of rates lot to the are supporting all legs a growing, sustainable, and churn why price things dropping. of table is is of So,

Derek Spronck

opportunities. strong from you know your opportunities? Okay. That’s the I classify perspective? an of you color. on acquired M&A would the just How And finding then, Ron. you are overall is point? Are quality any opportunities the Thanks, at M&A of you’re very M&A quickly said the great about in And looking additional companies to that and billion. advanced companies at you $X availability this finally, discussions size the individually still quality? revenue billion How around $X.X with the still

Ron Mittelstaedt

discussions lot with a always of the last advanced for part, Well, we’re companies. in

time. one’s in don’t or just first an look, about or quarter long quarter a talking been answer. the easy in the deals I for that closing next fourth XXXX, mean, or of we’ve half now we start this about talking So, quarter we’re one in and to

there of those from either million. small So, again, million stages amount of at companies And a negotiate diligence $X.X to Derek, large is to tuck-ins north pipeline of million or to our companies range dollars a of various offer deals $XXX couple to in offer. due

again, look, closing. million to million, means $XXX of billion-plus offers made year $X And sizes. that I’m to all of a tell of you on companies to get point got of to to going $XXX we’ve So have this we’ve revenue

it to has probably has you we’ve XXX-plus year. of to changed, That’s to of with get average million, the tells to made grown. a $X type that $XX result, transaction offers an that this and not so, what And a has this size million end be pipeline

Derek Spronck

good And opportunities you’re finding still there? quality out

Ron Mittelstaedt

absolutely. this have of talk ever once done. may that and about the Oh, we fully mean, morning, positions the one we announced it’s I deals can market best quality deal asset we

the of that And mean at to the Fork an look in companies I sort of Fork earlier Carolina. this so, North preeminent Southern yes, integrated of We North year. acquired dominates one Virginia, company North and market south

minds their through system and full get balance but in sheet sort a you’ve years window low that tax a rates neutral a because amount different few them rising think very get a a for hurt Again, clarity strong in they in I the we this helped economy got get, seller’s you they gear. find yes, many proceeds, deals reinvested economy, years, good okay, which companies. of might continue interest window, very, didn’t very could have have pent-up So, in sort was to that a think to where of of done

think might. XXXX. who about the sector. And played things of perfect how it create so, in then, through we sort the again of probably election. those our We of approaching knows? thought It’s just storm M&A out beginning of And I at next sort it the all called this of out sort And plays that for

Derek Spronck

great. Thanks, that’s Mary Thanks, Anne. No, Ron. Okay.

Operator

next from Feniger comes your Our Bank with America. line the question with proceed of question. Michael of Please

Michael Feniger

Hey, my guys. taking question. for Yeah. Thanks

point just kind to out. Just the it first of flesh

cost. prices the into how when side you everyone (XX:XX) you You of XXXX. that raise the you’re just at [indiscernible] to higher equation a full see how how capacity, I’m backdrop mentioned, mentioned with strong supply curious seeing is, everyone’s

some guys spent You clearly have CapEx.

are they the on I’m But side. spending to trucks the they small-, more have to routes. players medium-sized and E&P seeing that’s trucks guys, and national routes? you’re expanding adding on Now more the too been the CapEx if adding aggressively curious are their the routes

Ron Mittelstaedt

Yeah.

get to that times That’s the as how backlog is, new where that particularly pre-negotiated of trucks, have you think buy reality for quantities, that six- if they a national one the agreements can have certain is or where about the ourselves, national configured most to can can today. a get I manufacturers are. in Michael, large vehicles, a such they like in I way mean company truck of talking medium-sized you be now, want challenges eight-month doesn’t right players a lead small-

as if of right to bit medium-sized new large inhibition I going to The of Advanced, agreements supply going with recycling they is even so the equipment players. in know the to and on suppliers to we or transfers, iron contract definitely standing And Waste tight for longer Yellow equipment, have is a challenge Yellow well. do, a they heavy now do or I challenge But little difficult. facilities. that’s bid for for because doing lead times anything for, more start equipment. days Management, get don’t in they even be certainly think the need XX or they others some players that are and Republic, national landfills, sort small- orders. a more have particular to all and a of could be iron

Michael Feniger

you XXXX do could think it’s terms that it’s overall, around so knock-on if effect there that business. of impacts That’s in see about great. growth the we for six, do a the step-down do competition? just, really you things had high curious with out And think But guys, maybe seven just think that housing you part all seeing the how but of I’m you I market now of in talked color. levels strong how if from event? more these of a the I last understand obviously, with XXXX and appreciate XX% have C&D, tons next we smaller guys I it’s or years, right really we’re a play year,

Ron Mittelstaedt

comment Yeah. to to a earlier, Well, made comfort. and I you investors first give Michael, off some

of If And to XXXX not was XXXX. that grown, housing quite where what us. business a part X X.X the to of At lines. housing is we percentage year, diversified double new XXXX industry company or XXXX was roll-off period, it’s is only the is in of back starts. construction But of and has to back starts temporary to averaging that today it X.X you the it we’re time, for C&D up in related million the as million were revenue XX% a to housing go million other to almost part geographically is,

not So a back big a it’s probably little It’s more half risk a risk that the percentage as go of you the it if than of business. XX% was just - half, decade. the

Michael Feniger

Got it. Thank you, guys.

Operator

Please [Operator with to Instructions] back or are Mr. questions your call there will continue turn at I you. this now time. Mittelstaedt, remarks. presentation the closing no further

Ronald J. Mittelstaedt

our we entire and there in if your we applicable questions Canada. Well, next under cover Regulation are conferences Worthing, call management in look or no team, operator. of behalf our listening to are to speaking answer available earnings and direct investor with FD, to any laws interest at you we our Regulation I you, on Thank Okay. further call. to questions, not Mary that are appreciate Anne, upcoming again securities answer you allowed forward we on Thank G, today. and did and

Operator

Ladies that disconnect ask that and please gentlemen, you today. We line. your call your conference for you the participation does and conclude thank for

Ronald J. Mittelstaedt	Chairman & Chief Executive Officer
Mary Anne Whitney	Senior Vice President & Chief Financial Officer
Hamzah Mazari	Analyst, Macquarie Capital (NYSE:USA), Inc.
Chris Murray	Analyst, AltaCorp Capital, Inc.
Brian Maguire	Analyst, Goldman Sachs & Co. LLC
Michael E. Hoffman	Analyst, Stifel, Nicolaus & Co., Inc.
Patrick Tyler Brown	Analyst, Raymond James & Associates, Inc.
Noah Kaye	Analyst, Oppenheimer & Co., Inc.
Derek Spronck	Analyst, RBC Dominion Securities, Inc.
Michael Feniger	Analyst, Bank of America Merrill Lynch

Waste Connections (WCN) 30 Oct 182018 Q3 Earnings call transcript