Waste Connections, Inc. (NYSE:WCN) Q3 2022 Earnings Conference Call November 3, 2022 8:30 AM ET Company Participants Worthing Jackman - President, CEO & Director Mary Anne Whitney - EVP & CFO Conference Call Participants Toni Kaplan - Morgan Stanley Jerry Revich - Goldman Sachs Kyle White - Deutsche Bank Sean Eastman - KeyBanc Capital Markets Michael Hoffman - Stifel Noah Kaye - Oppenheimer Stephanie Moore - Jefferies Walter Spracklin - RBC Capital Stephanie Yee - JPMorgan Operator Good morning, and welcome ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-34370 WASTE CONNECTIONS, INC. (Exact name of registrant as specified in its charter) Ontario, Canada (State or ...

Financial Data and Key Metrics Changes - Revenue for Q2 2022 was $1.816 billion, exceeding the outlook by approximately $30 million and up $282 million or 18.4% year-over-year [29] - Adjusted EBITDA for Q2 was $567 million, about $10 million above the outlook and up $82 million or 16.9% year-over-year, with an adjusted EBITDA margin of 31.2% [30] - Year-to-date adjusted free cash flow was over $638 million, representing 18.4% of revenue, up 9% year-over-year despite a 36% increase in capital expenditures [32] Business Line Data and Key Metrics Changes - Commercial collection revenue increased by about 14% year-over-year, primarily due to pricing [17] - Roll-off revenue rose by about 11%, with revenue per pull up approximately 8.5% [17] - E&P waste revenue reached $50.4 million in Q2, up 24% sequentially and 62% year-over-year, driven by increased drilling activity [23] Market Data and Key Metrics Changes - Solid waste pricing growth was 8.8% in Q2, up from 7.2% in the previous quarter, with total pricing ranging from almost 5% in exclusive markets to between 9.5% and 10.5% in competitive regions [14] - Recovered commodities revenue increased by about 14% year-over-year, attributed to higher values for recycled commodities and RINs [19] - Commodity values showed some weakening late in the quarter, with average prices for OCC at about $158 per ton and RINs averaging about $320 [20] Company Strategy and Development Direction - The company is focused on disciplined capital allocation and market selection to drive value creation, with a robust pipeline for acquisitions expected to close later this year and early next [26][27] - The strategy includes a strong emphasis on core pricing, which is expected to lead to margin expansion as inflationary pressures abate [15][43] - Sustainability initiatives include the development of greenfield recycling facilities and renewable gas facilities, expected to be completed by late 2023 [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving double-digit revenue growth in 2023, supported by solid waste pricing strength and contributions from acquisitions [6][43] - The company anticipates that inflationary pressures have peaked and will moderate, allowing for improved pricing and margin expansion [48][51] - Management highlighted the importance of maintaining a focus on core pricing to navigate the current economic challenges [96] Other Important Information - The company has closed 12 acquisitions year-to-date with annualized revenue of approximately $245 million, significantly above average levels [24] - The balance sheet remains strong with a leverage ratio of about 2.5x on a net debt-to-EBITDA basis, providing flexibility for continued acquisition activity [26] - The company plans to increase its cash dividend by a double-digit percentage later this year [26] Q&A Session Summary Question: Can you provide confidence around pricing for next year? - Management indicated that they are positioned for at least 5% pricing growth in 2023 without additional actions, with expectations that inflationary pressures will moderate [47][48] Question: What trends are being observed in the cost structure? - Management noted that cost pressures have peaked, and pricing has been implemented to recover these costs, with expectations of regular inflation moving forward [49][51] Question: How is pricing categorized internally? - The company focuses on core pricing, with 85% of reported pricing being core, while a small portion is attributed to fuel and material surcharges [59][60] Question: What is the outlook for M&A activity? - The pace of M&A activity remains strong, with a robust pipeline and continued interest from high-quality private company sellers [83][84] Question: How are inflationary pressures impacting margins? - Management expects margin expansion opportunities as inflation decreases, with a focus on core pricing to drive profitability [73][92]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-34370 WASTE CONNECTIONS, INC. (Exact name of registrant as specified in its charter) Ontario, Canada (State or ot ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-34370 WASTE CONNECTIONS, INC. (Exact name of registrant as specified in its charter) Ontario, Canada (State or o ...

Financial Data and Key Metrics Changes - In Q4 2021, revenue was $1.624 billion, exceeding expectations by $44 million and representing a 16% year-over-year increase [21] - Adjusted EBITDA for Q4 was $495 million, about $9 million above outlook, with a margin of 30.5% of revenue, up 20 basis points year-over-year [26] - Adjusted free cash flow increased 20% year-over-year to $1.01 billion, reflecting a conversion rate of 52.6% of adjusted EBITDA [28] Business Line Data and Key Metrics Changes - Solid waste pricing growth was approximately 5.7% in Q4, with commercial collection revenue up 13% and roll-off revenue up 11% [21][23] - E&P waste revenue was about $34 million, up $9 million year-over-year, indicating a recovery from mid-2020 lows [24] - Revenues from recovered commodities increased by about 90% year-over-year, driven by higher RIN prices and strong fiber values [25] Market Data and Key Metrics Changes - Solid waste volumes increased by 1.2%, with positive trends across all U.S. regions, particularly in the Central and Western regions [22] - The company expects solid waste organic growth of 6.5% to 7% in 2022, supplemented by $350 million from completed acquisitions [30] Company Strategy and Development Direction - The company plans to maintain its focus on solid waste opportunities, with a capital deployment strategy that prioritizes acquisitions and resource recovery projects [45][47] - Investments in sustainability include $100 million for new landfill gas and resource recovery facilities, with a total CapEx of $850 million expected in 2022 [15][31] - The company aims for revenue growth to reach $10 billion and more in the future, emphasizing a culture of accountability and commitment [39][47] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving double-digit percentage growth in revenue, adjusted EBITDA, and adjusted free cash flow in 2022, despite inflationary pressures [4][11] - The company is well-positioned from a working capital standpoint, providing a strong cushion for future growth [28] - Management acknowledged the challenges posed by labor constraints and inflation but remains optimistic about the operational outlook [101] Other Important Information - The company completed over 30 acquisitions in 2021, contributing approximately $400 million in annualized revenue [18] - The effective tax rate for 2022 is expected to be around 22%, with cash taxes projected at 50% to 60% of book [31] Q&A Session Summary Question: Capital deployment priorities and risks of strategic drift - Management emphasized maintaining focus on solid waste opportunities and an all-of-the-above approach to capital deployment, with no intention of drifting away from core markets [45][47] Question: Future acquisition strategy and return of capital - Management indicated that as the company grows, the focus will shift towards organic growth and share repurchases to maintain double-digit free cash flow per share growth [49] Question: Operating leverage and cost inflation assumptions - Management explained that to achieve 20 basis points of leverage, a 6.5% price increase is necessary to offset inflationary pressures [54][56] Question: E&P waste revenue outlook - Management acknowledged the potential for increased E&P waste activity but noted that labor constraints could limit immediate growth [101] Question: Safety performance amidst labor challenges - Management highlighted a behavioral-based approach to safety, which has led to improved safety metrics despite challenges from acquisitions [90][91] Question: Recycling opportunities and acquisitions - Management confirmed that recent investments in recycling facilities aim to reduce reliance on third-party processing and optimize operations [86][87]

Part I [Business](index=3&type=section&id=Item%201.%20Business) Waste Connections is North America's third-largest solid waste services company, providing comprehensive waste management services and pursuing growth through strategic acquisitions - Waste Connections is the **third largest solid waste services company** in North America, operating in **43 U.S. states** and **six Canadian provinces**, also providing non-hazardous exploration and production (E&P) waste services[9](index=9&type=chunk) - The company's operating strategy targets secondary and rural markets for **high market share**, controlling waste streams via **exclusive contracts**, optimizing asset positioning, and providing vertically integrated services[11](index=11&type=chunk)[12](index=12&type=chunk)[13](index=13&type=chunk)[14](index=14&type=chunk)[15](index=15&type=chunk) - Growth is achieved through **exclusive arrangements**, internal expansion via **market penetration and pricing**, and strategic acquisitions[22](index=22&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) Acquisition Activity (2019-2021) | Year | Number of Acquisitions | Net Fair Value of Consideration | | :--- | :--- | :--- | | 2021 | 30 | $1.069 billion | | 2020 | 21 | $481.6 million | | 2019 | 21 | $837.7 million | [Human Capital](index=7&type=section&id=HUMAN%20CAPITAL) The company employed **19,998 people** as of December 31, 2021, prioritizing safety, employee development, and diversity, with significant COVID-19 support Workforce Demographics (as of Dec 31, 2021) | Metric | Value | | :--- | :--- | | Total Active Employees | 19,998 | | U.S. Employees | 17,146 | | Canada Employees | 2,852 | | Commercial Truck Drivers | 10,322 | | Mechanics | 1,663 | | Employees under Collective Bargaining | ~15% | | Ethnic Minorities | 38.6% | | Women | 16.4% | | Armed Services Veterans | 8% | - Over **$40 million** in incremental costs were incurred for employee support since the COVID-19 pandemic onset through 2021, including supplemental pay, expanded benefits, and minimum wage increases[36](index=36&type=chunk)[37](index=37&type=chunk) - The 'Drive to ZERO' safety program achieved **zero or reduced incident frequency** in over **56% of operating locations** in 2021, supported by a **$10 million** fleet-wide technology upgrade with Machine Vision and AI[38](index=38&type=chunk)[41](index=41&type=chunk)[43](index=43&type=chunk) [Waste Services](index=15&type=section&id=WASTE%20SERVICES) The company provides diverse waste services, including collection and recycling, operating **97 landfills** with an average remaining life of **29 years**, and developing landfill gas-to-energy projects Landfill Portfolio (as of Dec 31, 2021) | Landfill Type | Owned/Operated Count | | :--- | :--- | | Municipal Solid Waste (MSW) | 71 | | E&P Waste Only | 12 | | Non-MSW (Construction & Demolition, etc.) | 14 | | **Total** | **97** | - The average remaining life for owned and operated landfills is estimated to be **29 years** based on permitted capacity, and **33 years** when including probable expansion capacity[66](index=66&type=chunk)[67](index=67&type=chunk) Landfill Airspace Changes (in thousands of tons) | | 2021 | 2020 | | :--- | :--- | :--- | | **Balance, beginning of year** | **1,541,645** | **1,439,177** | | Acquired landfills | 41,374 | 16,200 | | Airspace consumed | (46,632) | (44,346) | | **Balance, end of year** | **1,687,476** | **1,541,645** | - The company has gas recovery systems at **53 of its landfills** to collect methane for beneficial reuse, such as generating electricity or producing pipeline-quality natural gas[74](index=74&type=chunk) [Regulation](index=23&type=section&id=REGULATION) The company's operations are subject to extensive environmental, health, and safety regulations in the U.S. and Canada, including those for landfills, emissions, and emerging contaminants like PFAS - Operations are subject to extensive regulations in the U.S. and Canada, administered by agencies like the EPA and Environment and Climate Change Canada, governing permits, discharges, waste handling, and worker safety[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk) - Key U.S. regulations include RCRA Subtitle D for non-hazardous landfills, CERCLA (Superfund) for cleanup liability, the Clean Water Act for wastewater/stormwater discharge, and the Clean Air Act for air emissions from landfills[89](index=89&type=chunk)[92](index=92&type=chunk)[101](index=101&type=chunk)[108](index=108&type=chunk) - The company is monitoring potential heightened regulation of emerging contaminants like PFAS, which could increase financial obligations for post-closure maintenance, leachate treatment, and remediation[138](index=138&type=chunk)[139](index=139&type=chunk)[145](index=145&type=chunk) - Climate change regulations, such as Canada's Greenhouse Gas Pollution Pricing Act (GGPPA) and EPA rules on GHG emissions, affect both the company's operations and its E&P customers, potentially increasing costs[129](index=129&type=chunk)[265](index=265&type=chunk) [Risk Factors](index=61&type=section&id=Item%201A.%20Risk%20Factors) The company faces numerous risks including intense competition, contract loss, permitting difficulties, economic sensitivity, operational hazards, and extensive environmental and regulatory compliance burdens - The company faces high competition from large national companies, regional players, and public sector operators, which could affect its ability to win or retain contracts and maintain pricing[193](index=193&type=chunk)[194](index=194&type=chunk) - Financial performance is vulnerable to economic slowdowns, which can decrease waste volumes, increase pricing pressure, and reduce demand for recycled commodities and E&P waste services[245](index=245&type=chunk)[246](index=246&type=chunk) - Extensive and evolving environmental, health, and safety laws, including potential regulations on GHG emissions and emerging contaminants like PFAS, may restrict operations and increase compliance costs[262](index=262&type=chunk)[264](index=264&type=chunk)[267](index=267&type=chunk) - The business is subject to operational risks such as truck accidents and equipment failures, and financial risks including impairment of goodwill, increases in insurance costs, and volatility in recycled commodity and renewable fuel prices[213](index=213&type=chunk)[215](index=215&type=chunk)[220](index=220&type=chunk)[224](index=224&type=chunk)[238](index=238&type=chunk) [Properties](index=88&type=section&id=Item%202.%20Properties) As of December 31, 2021, Waste Connections owned or operated a vast network of **334 collection operations**, **195 transfer stations**, **97 landfills**, and **71 recycling operations** across 43 U.S. states and six Canadian provinces Key Properties Owned or Operated (as of Dec 31, 2021) | Facility Type | Count | | :--- | :--- | | Solid Waste Collection Operations | 334 (owned) | | Transfer Stations | 195 (142 owned, 53 operated) | | MSW Landfills | 71 (61 owned, 10 operated) | | E&P Waste Landfills | 12 (owned) | | Non-MSW Landfills | 14 (owned) | | Recycling Operations | 71 (owned) | | E&P Liquid Waste Injection Wells | 23 (owned) | Part II [Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities](index=89&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Shareholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Waste Connections' common shares are listed on the NYSE and TSX, maintaining a regular quarterly cash dividend and an active share repurchase program, demonstrating strong shareholder returns - The company's common shares are listed on the NYSE and TSX under the symbol 'WCN'[283](index=283&type=chunk) - A regular quarterly cash dividend of **$0.23 per common share** was approved in February 2022, with a long-term objective of increasing the dividend amount over time[284](index=284&type=chunk) - The company has a Normal Course Issuer Bid (NCIB) to repurchase up to **13,025,895 common shares** between August 2021 and August 2022, with **3.0 million shares** repurchased for **$339.0 million** as of December 31, 2021[285](index=285&type=chunk) Share Repurchases (Q4 2021) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Oct 2021 | — | $ - | | Nov 2021 | — | $ - | | Dec 2021 | 257,832 | $129.36 | Five-Year Cumulative Total Shareholder Return (Indexed) | Company / Index | Dec 2016 | Dec 2021 | | :--- | :--- | :--- | | **Waste Connections, Inc.** | **$100** | **$270.11** | | S&P 500 Index | $100 | $233.41 | | S&P/TSX 60 Index | $100 | $177.53 | | Dow Jones U.S. Waste & Disposal Services Index | $100 | $235.89 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=93&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2021, Waste Connections' revenue grew **13.0%** to **$6.151 billion**, with net income increasing to **$618.0 million**, driven by acquisitions and price increases, reflecting strong financial performance and liquidity Key Financial Performance (2021 vs. 2020, in millions) | Metric | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $6,151.4 | $5,446.0 | +13.0% | | Net Income | $618.0 | $204.7 | +202.0% | | Adjusted EBITDA | $1,919.0 | $1,662.0 | +15.5% | | Adjusted Free Cash Flow | $1,010.0 | $841.9 | +19.9% | - Solid waste internal growth was **8.4%** in 2021, comprised of **5.0% pricing growth**, **1.6% volume growth**, and a **1.8%** increase from higher recycled commodity values[309](index=309&type=chunk) - The company's Leverage Ratio (Total Debt to EBITDA) decreased from **2.68x** at year-end 2020 to **2.50x** at year-end 2021[315](index=315&type=chunk) - In 2021, the company returned **$559.2 million** to shareholders, consisting of **$220.2 million** in cash dividends and **$339.0 million** in share repurchases[314](index=314&type=chunk) [Results of Operations](index=109&type=section&id=Results%20of%20Operations) For 2021, revenues increased **13.0%** to **$6.151 billion**, primarily from acquisitions and price increases, leading to a significant rise in operating income to **$1.040 billion**, largely due to lower impairment charges compared to 2020 Consolidated Statement of Net Income Summary (in thousands) | Item | 2021 | 2020 | | :--- | :--- | :--- | | **Revenues** | **$6,151,361** | **$5,445,990** | | Cost of operations | $3,654,074 | $3,276,808 | | SG&A | $612,337 | $537,632 | | Impairments and other operating items | $32,316 | $466,718 | | **Operating income** | **$1,039,625** | **$412,428** | | Loss on early extinguishment of debt | $(115,288) | $— | | **Net income attributable to Waste Connections** | **$618,047** | **$204,677** | - The **$705.4 million** revenue increase in 2021 was driven by acquisitions (net **$215.4 million**), price increases (**$257.2 million**), solid waste volume increases (**$85.0 million**), higher recycled commodity sales (**$92.7 million**), and favorable currency exchange rates (**$48.1 million**), partially offset by a decrease in E&P waste revenue (**$18.9 million**)[351](index=351&type=chunk)[353](index=353&type=chunk)[354](index=354&type=chunk)[355](index=355&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk) - Operating income increased by **$627.2 million**, largely due to the absence of the significant **$417.4 million** E&P impairment charge recorded in 2020, along with strong revenue growth in 2021[377](index=377&type=chunk)[378](index=378&type=chunk) [Segment Reporting](index=119&type=section&id=Segment%20Reporting) All five geographic segments reported revenue growth in 2021, with Canada showing the strongest EBITDA margin improvement to **39.7%**, while Central's margin declined due to lower-margin acquisitions Segment Revenue and EBITDA (2021, in millions) | Segment | Revenue | EBITDA | EBITDA Margin | | :--- | :--- | :--- | :--- | | Eastern | $1,521.3 | $404.5 | 26.6% | | Southern | $1,446.7 | $395.0 | 27.3% | | Western | $1,280.2 | $405.8 | 31.7% | | Central | $1,046.4 | $359.4 | 34.3% | | Canada | $856.7 | $339.9 | 39.7% | - The Canada segment's EBITDA margin increased by **370 basis points** to **39.7%** in 2021, benefiting from price-led revenue growth and higher prices for renewable energy credits[410](index=410&type=chunk) - The Central segment's EBITDA margin declined by **130 basis points** to **34.3%**, primarily due to the integration of acquisitions with lower EBITDA margins than the segment average[406](index=406&type=chunk) [Liquidity and Capital Resources](index=124&type=section&id=Liquidity%20and%20Capital%20Resources) Net cash from operating activities increased **20.6%** to **$1.698 billion** in 2021, with significant cash used for acquisitions and capital expenditures, ending the year with **$933.8 million** in credit facility capacity Cash Flow Summary (in millions) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,698.2 | $1,408.5 | | Net cash used in investing activities | $(1,693.5) | $(1,046.0) | | Net cash used in financing activities | $(499.5) | $(78.2) | - Capital expenditures for property and equipment increased **24.7%** to **$744.3 million** in 2021, with a forecast of approximately **$850 million** for 2022[313](index=313&type=chunk)[425](index=425&type=chunk) Contractual Obligations (as of Dec 31, 2021, in thousands) | Obligation | Total | Less Than 1 Year | 1 to 3 Years | 3 to 5 Years | Over 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Long-term debt | $5,101,971 | $6,020 | $12,329 | $1,466,634 | $3,616,988 | | Cash interest payments | $1,935,714 | $143,758 | $300,524 | $270,904 | $1,220,528 | | Final capping, closure and post-closure | $1,505,730 | $17,934 | $40,283 | $9,237 | $1,438,276 | [Quantitative and Qualitative Disclosures About Market Risk](index=140&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from interest rates, commodity prices (fuel and recyclables), and foreign currency exchange rates, with specific sensitivities quantified for each risk factor - A **one percentage point increase** in interest rates on the **$603.9 million** of unhedged variable-rate debt as of December 31, 2021, would decrease annual pre-tax income by approximately **$6.0 million**[462](index=462&type=chunk)[464](index=464&type=chunk) - For the **45.0 million gallons** of unhedged fuel expected to be purchased in 2022, a **$0.10 per gallon** price increase would decrease pre-tax income by approximately **$4.5 million**[466](index=466&type=chunk) - A **10% decrease** in average recycled commodity prices would have reduced 2021 revenues by **$19.6 million**[467](index=467&type=chunk) - A **$0.01 change** in the Canadian dollar to U.S. dollar exchange rate would impact annual revenue by approximately **$11.0 million** and EBITDA by approximately **$4.5 million**[468](index=468&type=chunk) [Financial Statements and Supplementary Data](index=143&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2021, 2020, and 2019, along with detailed notes and an unqualified audit opinion from Grant Thornton LLP Consolidated Balance Sheet Summary (in thousands) | | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $1,032,777 | $1,408,272 | | Goodwill | $6,187,643 | $5,726,650 | | **Total Assets** | **$14,699,924** | **$13,992,364** | | Total Current Liabilities | $1,232,746 | $1,028,654 | | Long-term Debt & Notes Payable | $5,040,500 | $4,708,678 | | **Total Liabilities** | **$7,706,379** | **$7,128,926** | | **Total Equity** | **$6,993,545** | **$6,863,438** | Consolidated Statement of Net Income Summary (in thousands) | | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | **Revenues** | **$6,151,361** | **$5,445,990** | **$5,388,679** | | Operating Income | $1,039,625 | $412,428 | $837,778 | | **Net Income Attributable to Waste Connections** | **$618,047** | **$204,677** | **$566,841** | | **Diluted EPS** | **$2.36** | **$0.78** | **$2.14** | [Controls and Procedures](index=241&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2021, with an unqualified opinion from the independent auditor - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[741](index=741&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2021, based on the COSO framework[743](index=743&type=chunk) - There were no changes in internal control over financial reporting during the fourth quarter of 2021 that materially affected, or are reasonably likely to materially affect, internal controls[745](index=745&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=242&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance, including the Code of Conduct and Ethics, is incorporated by reference from the 2022 Proxy Statement - The information required by this item is incorporated by reference from the company's definitive Proxy Statement for the 2022 Annual Meeting of Shareholders[747](index=747&type=chunk) [Executive Compensation](index=242&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation details are incorporated by reference from the company's definitive 2022 Proxy Statement - The information required by this item is incorporated by reference from the company's definitive Proxy Statement for the 2022 Annual Meeting of Shareholders[750](index=750&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters](index=242&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters) Security ownership and related shareholder matters are incorporated by reference from the company's definitive 2022 Proxy Statement - The information required by this item is incorporated by reference from the company's definitive Proxy Statement for the 2022 Annual Meeting of Shareholders[751](index=751&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=242&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the company's definitive 2022 Proxy Statement - The information required by this item is incorporated by reference from the company's definitive Proxy Statement for the 2022 Annual Meeting of Shareholders[752](index=752&type=chunk) [Principal Accounting Fees and Services](index=243&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Principal accounting fees and services information is incorporated by reference from the company's definitive 2022 Proxy Statement - The information required by this item is incorporated by reference from the company's definitive Proxy Statement for the 2022 Annual Meeting of Shareholders[753](index=753&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=243&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section provides an index to the consolidated financial statements and lists all exhibits filed as part of the Annual Report on Form 10-K, including governance documents, debt agreements, and certifications - This section contains the index to the Consolidated Financial Statements and Financial Statement Schedule II – Valuation and Qualifying Accounts[754](index=754&type=chunk) - A comprehensive list of exhibits is provided, including governance documents, debt agreements, incentive plans, and required certifications by the CEO and CFO[755](index=755&type=chunk)[756](index=756&type=chunk)[758](index=758&type=chunk)

Company Overview - Waste Connections is the third largest solid waste company in North America[4] - The company estimates 2021 revenue of approximately $6.11 billion[8] - The company estimates 2021 adjusted EBITDA of approximately $1.91 billion[8] - The company estimates 2021 adjusted free cash flow of approximately $1.025 billion[8] Financial Performance and Outlook - Nine months YTD 2021 revenue was $4.527 billion, an increase of $479 million or 11.8% year-over-year[30] - Nine months YTD 2021 adjusted EBITDA was $1.424 billion, an increase of $188 million or 15.2% year-over-year, with margins of 31.4%, up 90bps year-over-year[30] - The company anticipates full year 2021 revenue of $6.110 billion, up $664 million year-over-year or 12%[32] - The company anticipates full year 2021 adjusted EBITDA of approximately $1.910 billion, up $248 million year-over-year or 15%[32] - The company anticipates full year 2021 adjusted free cash flow of approximately $1.025 billion[32] Shareholder Returns - The company has a differentiated 10-Year Total Shareholder Return (TSR) of approximately 543%[16] - The company has demonstrated 17 consecutive years of positive TSR[4, 16]

PART I – FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Waste Connections, Inc. for the quarterly period ended September 30, 2021, including the Balance Sheets, Statements of Net Income, Comprehensive Income, Equity, and Cash Flows, along with detailed Notes to the financial statements [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows total assets increased to **$14.27 billion** as of September 30, 2021, from **$13.99 billion** at December 31, 2020, primarily driven by growth in Goodwill and Property and equipment, while Cash and equivalents decreased, and total liabilities rose to **$7.39 billion** from **$7.13 billion**, mainly due to an increase in long-term debt Condensed Consolidated Balance Sheet Highlights (in thousands of U.S. dollars) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Total Current Assets** | $1,160,288 | $1,408,272 | | Cash and equivalents | $339,479 | $617,294 | | **Total Assets** | **$14,274,832** | **$13,992,364** | | **Total Current Liabilities** | $1,145,298 | $1,028,654 | | Long-term portion of debt and notes payable | $4,869,213 | $4,708,678 | | **Total Liabilities** | **$7,391,676** | **$7,128,926** | | **Total Equity** | **$6,883,156** | **$6,863,438** | [Condensed Consolidated Statements of Net Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Net%20Income) For the three months ended September 30, 2021, revenues increased to **$1.60 billion** from **$1.39 billion** year-over-year, but net income decreased to **$114.4 million** from **$158.0 million**, primarily due to a **$115.3 million** loss on early extinguishment of debt, while for the nine-month period, revenues grew to **$4.53 billion** from **$4.05 billion**, and net income significantly increased to **$451.7 million** from **$74.0 million** in the prior year, which was impacted by a large impairment charge Statement of Net Income Summary (in thousands of U.S. dollars, except per share data) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $1,597,168 | $1,389,552 | $4,527,042 | $4,047,739 | | **Operating Income** | $285,144 | $230,679 | $790,304 | $215,284 | | Loss on early extinguishment of debt | ($115,288) | — | ($115,288) | — | | **Net Income Attributable to Waste Connections** | **$114,381** | **$158,049** | **$451,736** | **$74,012** | | **Diluted EPS** | **$0.44** | **$0.60** | **$1.72** | **$0.28** | [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2021, net cash from operating activities increased to **$1.27 billion** from **$1.19 billion** in the prior year, net cash used in investing activities rose to **$1.03 billion**, driven by higher payments for acquisitions, and net cash used in financing activities was **$491.6 million**, a significant increase from **$4.1 million** in 2020, mainly due to debt repayments, share repurchases, and premiums paid on early debt extinguishment Cash Flow Summary (Nine Months Ended Sep 30, in thousands of U.S. dollars) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | **$1,269,961** | **$1,185,573** | | Net cash used in investing activities | ($1,034,840) | ($650,066) | | Net cash used in financing activities | ($491,581) | ($4,093) | | **Net (decrease) increase in cash** | **($256,017)** | **$532,394** | [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the accounting policies and financial data presented in the statements, covering impairments related to E&P operations, revenue recognition by service line, acquisition activities, details on long-term debt including new note offerings and credit agreement amendments, segment performance, derivative instruments, and legal contingencies - In 2020, the company recorded a significant impairment charge of **$417.4 million** on property and equipment related to four E&P landfills, triggered by a decline in oil prices, the COVID-19 pandemic, and reduced demand for E&P waste services[37](index=37&type=chunk)[38](index=38&type=chunk)[200](index=200&type=chunk) - During the first nine months of 2021, the company acquired **14** non-hazardous solid waste businesses for a total consideration of **$591.8 million**, including **$561.3 million** in cash, which resulted in the recognition of **$280.9 million** in goodwill[55](index=55&type=chunk)[60](index=60&type=chunk) - In September 2021, the company issued **$1.5 billion** in new Senior Notes due 2032 and 2052, with proceeds along with borrowings from the credit facility used to repay **$1.5 billion** of existing Private Notes, resulting in a **$115.3 million** loss on early extinguishment of debt[78](index=78&type=chunk)[81](index=81&type=chunk)[214](index=214&type=chunk) - The company is involved in significant legal proceedings, including being named a potentially responsible party (PRP) for the Lower Duwamish Waterway Superfund Site and litigation with Los Angeles County over the Chiquita Canyon Landfill expansion permit conditions[129](index=129&type=chunk)[136](index=136&type=chunk)[138](index=138&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=59&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and results of operations, highlighting a **14.9%** revenue increase in Q3 2021 to **$1.6 billion**, driven by acquisitions, price increases, and volume recovery from COVID-19 impacts, covering detailed operational performance, segment results, liquidity, capital resources, and non-GAAP financial measures, with key events including significant acquisition activity, a major debt refinancing, and continued impacts from the COVID-19 pandemic on volumes and costs [Results of Operations](index=65&type=section&id=Results%20of%20Operations) For Q3 2021, revenues grew **14.9%** to **$1.60 billion**, driven by acquisitions (**$54.1 million**), price increases (**$67.7 million**), and solid waste volume growth (**$28.9 million**), operating income rose **23.6%** to **$285.1 million**, and net income fell to **$114.4 million** from **$158.0 million** YoY due to a **$115.3 million** loss on debt extinguishment, while for the nine-month period, revenues increased **11.8%** to **$4.53 billion**, and operating income surged to **$790.3 million** from **$215.3 million**, as the prior year included a **$417.4 million** E&P impairment charge Results of Operations Summary (Q3 2021 vs Q3 2020, in thousands) | Item | Q3 2021 | % of Revenue | Q3 2020 | % of Revenue | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | **$1,597,168** | **100.0%** | **$1,389,552** | **100.0%** | | Cost of operations | $946,098 | 59.2% | $828,822 | 59.6% | | SG&A | $155,520 | 9.8% | $136,003 | 9.8% | | **Operating income** | **$285,144** | **17.8%** | **$230,679** | **16.6%** | | Loss on early extinguishment of debt | ($115,288) | (7.2%) | — | 0.0% | | **Net income attributable to WCN** | **$114,381** | **7.2%** | **$158,049** | **11.4%** | - Q3 2021 revenue growth of **$207.6 million** was primarily driven by acquisitions (**$54.1 million**), core price increases and surcharges (**$67.7 million**), solid waste volume increases (**$28.9 million**), higher recyclable commodity sales (**$28.3 million**), and increased E&P revenue (**$11.3 million**)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk) - Cost of Operations as a percentage of revenue decreased to **59.2%** in Q3 2021 from **59.6%** in Q3 2020, mainly due to a reduction in supplemental bonuses for frontline workers related to COVID-19 and lower recycling processing costs, which offset higher fuel and 401(k) matching expenses[178](index=178&type=chunk)[180](index=180&type=chunk) - The effective tax rate for the nine months ended Sep 30, 2021 was **19.1%**, compared to **24.4%** for the same period in 2020, with the 2020 rate higher due to a **$27.4 million** expense from new tax regulations and a **$4.1 million** expense related to the E&P asset impairment[215](index=215&type=chunk)[217](index=217&type=chunk) [Segment Results](index=80&type=section&id=Segment%20Results) All five geographic segments reported revenue and EBITDA growth in Q3 2021, with the Eastern segment's revenue growing **15.1%** to **$396.2 million**, the Southern segment's revenue increasing **12.2%** to **$371.0 million**, the Western segment seeing **10.2%** revenue growth, the Central segment's revenue jumping **19.7%**, and the Canada segment's revenue rising **21.3%** Segment Revenue (Q3 2021 vs Q3 2020, in thousands) | Segment | Q3 2021 Revenue | Q3 2020 Revenue | % Change | | :--- | :--- | :--- | :--- | | Eastern | $396,229 | $344,353 | 15.1% | | Southern | $370,958 | $330,575 | 12.2% | | Western | $332,020 | $301,221 | 10.2% | | Central | $273,682 | $228,566 | 19.7% | | Canada | $224,279 | $184,837 | 21.3% | Segment EBITDA (Q3 2021 vs Q3 2020, in thousands) | Segment | Q3 2021 EBITDA | Q3 2020 EBITDA | % Change | | :--- | :--- | :--- | :--- | | Western | $108,280 | $101,071 | 7.1% | | Eastern | $106,908 | $90,991 | 17.5% | | Southern | $99,612 | $81,394 | 22.4% | | Central | $95,026 | $82,887 | 14.6% | | Canada | $92,275 | $72,516 | 27.2% | [Liquidity and Capital Resources](index=95&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity with **$1.27 billion** in cash from operations for the first nine months of 2021, though working capital surplus decreased to **$15.0 million** from **$379.6 million** at year-end 2020, mainly due to cash used for acquisitions and debt management, with key activities including paying **$561.3 million** for acquisitions, **$479.5 million** in capital expenditures, and **$305.6 million** in share repurchases, and the company refinanced **$1.5 billion** of debt by issuing new senior notes, leading to adjusted free cash flow for the nine-month period increasing to **$825.8 million** from **$778.4 million** YoY - Net cash from operations increased by **$84.4 million** YoY to **$1.27 billion** for the nine months ended Sep 30, 2021, primarily due to higher earnings[259](index=259&type=chunk)[260](index=260&type=chunk) - Cash used in investing activities increased significantly to **$1.035 billion** from **$650.1 million** YoY, driven by a **$387.5 million** increase in cash paid for acquisitions[264](index=264&type=chunk)[265](index=265&type=chunk) - Financing activities used **$491.6 million** in cash, a sharp increase from **$4.1 million** used in the prior year, driven by a **$110.6 million** premium paid on early debt extinguishment and a **$200.0 million** increase in share repurchases[266](index=266&type=chunk)[270](index=270&type=chunk) - The company repurchased **2.75 million** common shares for **$305.6 million** in the first nine months of 2021 and increased its quarterly dividend by **12.2%** to **$0.23** per share in October 2021[125](index=125&type=chunk)[145](index=145&type=chunk) Adjusted Free Cash Flow (in thousands) | | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,269,961 | $1,185,573 | | Less: Capital expenditures | ($479,480) | ($420,694) | | Adjustments | $25,847 | $2,941 | | **Adjusted free cash flow** | **$825,838** | **$778,391** | [Quantitative and Qualitative Disclosures About Market Risk](index=110&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from interest rates, commodity prices (diesel fuel and recyclables), and foreign currency exchange rates, with **$434.9 million** of its debt at floating rates as of September 30, 2021, where a **1%** rate increase would decrease annual pre-tax income by **$4.3 million**, and a **10%** decrease in average recycled commodity prices would have impacted nine-month revenues by **$12.6 million**, while a **$0.01** change in the CAD/USD exchange rate would impact annual revenue by approximately **$10.6 million** - A **one percentage point** increase in interest rates on the **$434.9 million** of unhedged variable-rate debt would decrease annual pre-tax income by approximately **$4.3 million**[306](index=306&type=chunk)[307](index=307&type=chunk) - A **$0.10 per gallon** increase in fuel price for the remainder of 2021 would decrease pre-tax income by approximately **$1.0 million** based on an expected **10.2 million gallons** purchased at market prices[309](index=309&type=chunk) - A **10%** decrease in average recycled commodity prices would have reduced revenues by **$12.6 million** for the nine months ended September 30, 2021[310](index=310&type=chunk) - The company uses interest rate swaps to effectively fix the rate on a notional amount of its variable rate debt, with **six agreements** outstanding as of September 30, 2021[303](index=303&type=chunk) [Controls and Procedures](index=113&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of September 30, 2021, concluding that these controls are **effective** at a reasonable assurance level, ensuring that required information is recorded, processed, and reported in a timely manner, with no material changes to the company's internal control over financial reporting during the third quarter of 2021 - The President and CEO, along with the Executive VP and CFO, concluded that as of September 30, 2021, the company's disclosure controls and procedures were **effective** at the reasonable assurance level[313](index=313&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, internal controls[314](index=314&type=chunk) PART II – OTHER INFORMATION [Legal Proceedings](index=114&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference the information regarding the company's legal proceedings as detailed in Note 18 of the Condensed Consolidated Financial Statements, with key proceedings mentioned in Note 18 including the Lower Duwamish Waterway Superfund site allocation process and litigation concerning the Chiquita Canyon Landfill expansion in Los Angeles County - Information regarding legal proceedings is incorporated by reference from Note 18 to the Condensed Consolidated Financial Statements[316](index=316&type=chunk) [Exhibits](index=114&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Second Amended and Restated Credit Agreement, the Fifth Supplemental Indenture for the new senior notes, and certifications by the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act - Key exhibits filed include the Second Amended and Restated Revolving Credit and Term Loan Agreement dated July 30, 2021, and the Fifth Supplemental Indenture for senior notes dated September 20, 2021[317](index=317&type=chunk) - Certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a) and 18 U.S.C. §1350 are included as exhibits[317](index=317&type=chunk)

[PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Financial statements for Q2 2021 show a significant turnaround with revenues up 17.5% to $1.53 billion and net income of $177.1 million, contrasting with a prior-year net loss [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a slight increase in total assets to $14.11 billion and a 17.8% rise in cash and equivalents as of June 30, 2021 Balance Sheet Highlights (in thousands of U.S. dollars) | Account | June 30, 2021 | December 31, 2020 | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **$14,106,207** | **$13,992,364** | **+0.8%** | | Cash and equivalents | $727,395 | $617,294 | +17.8% | | Goodwill | $5,818,749 | $5,726,650 | +1.6% | | **Total Liabilities** | **$7,237,607** | **$7,128,926** | **+1.5%** | | Long-term debt and notes payable | $4,762,857 | $4,708,678 | +1.1% | | **Total Equity** | **$6,868,600** | **$6,863,438** | **+0.1%** | [Condensed Consolidated Statements of Net Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Net%20Income%20%28Loss%29) The income statement reflects a 17.5% Q2 2021 revenue increase to $1.53 billion and a swing to $177.0 million net income, largely due to the absence of a prior-year impairment charge Income Statement Summary (in thousands of U.S. dollars, except per share data) | Metric | Q2 2021 | Q2 2020 | YoY Change | Six Months 2021 | Six Months 2020 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenues** | **$1,533,931** | **$1,305,782** | **+17.5%** | **$2,929,874** | **$2,658,187** | **+10.2%** | | Operating Income (Loss) | $266,788 | $(232,357) | N/A | $505,160 | $(15,394) | N/A | | **Net Income (Loss) attributable to Waste Connections** | **$177,047** | **$(227,072)** | **N/A** | **$337,356** | **$(84,037)** | **N/A** | | Diluted EPS | $0.68 | $(0.86) | N/A | $1.29 | $(0.32) | N/A | | Cash Dividends per Share | $0.205 | $0.185 | +10.8% | $0.410 | $0.370 | +10.8% | - The significant swing from a net loss in 2020 to net income in 2021 was primarily due to a **$437.3 million impairment charge** taken in Q2 2020 that did not recur in 2021[11](index=11&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased by 12.7% to $848.5 million for the six months ended June 30, 2021, with significant share repurchases and dividend payments Cash Flow Summary for Six Months Ended June 30 (in thousands of U.S. dollars) | Cash Flow Category | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | **Net cash provided by operating activities** | **$848,478** | **$753,185** | **+12.7%** | | Net cash used in investing activities | $(332,794) | $(359,956) | -7.5% | | Net cash provided by (used in) financing activities | $(393,184) | $67,515 | N/A | | Net increase in cash | $123,373 | $460,203 | -73.2% | | Cash at end of period | $837,762 | $883,424 | -5.2% | - Key financing activities in the first six months of 2021 included **$305.6 million for share repurchases** and **$107.3 million for dividend payments**[20](index=20&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail a significant Q2 2020 impairment charge, segment realignment, and revenue breakdown by service line, including strong recycling growth and share repurchases - In Q2 2020, the company recorded a significant **impairment charge of $417.4 million** related to property and equipment at four Exploration & Production (E&P) landfills, triggered by a decline in oil prices and E&P activity, exacerbated by the COVID-19 pandemic[41](index=41&type=chunk)[42](index=42&type=chunk) Revenue by Service Line - Q2 2021 vs Q2 2020 (in thousands of U.S. dollars) | Service Line | Q2 2021 | Q2 2020 | YoY Change | | :--- | :--- | :--- | :--- | | Total collection | $1,098,319 | $948,072 | +15.9% | | Landfill | $327,124 | $280,619 | +16.6% | | Transfer | $217,133 | $189,085 | +14.8% | | Recycling | $41,539 | $20,217 | +105.5% | | E&P | $34,607 | $40,152 | -13.8% | - As of July 2020, the company realigned its segments, combining the former E&P segment into the Southern segment, with prior period segment results reclassified to conform to this new structure[75](index=75&type=chunk) - The company repurchased **2,745,990 common shares** for **$305.6 million** in the first six months of 2021 under its Normal Course Issuer Bid (NCIB)[115](index=115&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=53&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes strong Q2 2021 performance to broad recovery, driving 17.5% revenue growth, improved operating margins, and a strong liquidity position with a $414.2 million working capital surplus [Results of Operations](index=58&type=section&id=Results%20of%20Operations) Q2 2021 revenue growth was primarily driven by solid waste volume increases and core price adjustments, leading to improved operating margins and a significant swing to operating income Q2 2021 Revenue Growth Drivers (in millions of U.S. dollars) | Driver | Impact on Revenue | | :--- | :--- | | Acquisitions | +$47.6 | | Core Price Increases | +$58.3 | | Surcharges | +$2.6 | | Solid Waste Volume Increases | +$80.2 | | E&P Revenue Decrease | -$4.4 | | Recyclable Commodities Increase | +$18.0 | | Foreign Exchange Impact | +$20.5 | | Divestitures | -$3.5 | | **Total Increase** | **~$228.1** | - Cost of Operations as a percentage of revenue decreased to **58.8%** in Q2 2021 from **60.2%** in Q2 2020, primarily due to leveraging revenue growth and a decrease in supplemental bonuses for front-line employees related to COVID-19 that were paid in the prior year[173](index=173&type=chunk) - Operating income swung to **$266.8 million** in Q2 2021 from an **operating loss of $232.4 million** in Q2 2020, with this **$499.2 million increase** primarily driven by the non-recurrence of a **$417.4 million impairment charge** at E&P operations in the prior-year period[198](index=198&type=chunk)[201](index=201&type=chunk) [Segment Results](index=73&type=section&id=Segment%20Results) All geographic segments demonstrated strong Q2 2021 revenue growth, with Canada leading at 36.6%, though the Southern segment's growth was tempered by E&P declines Segment Revenue & EBITDA - Q2 2021 (in thousands of U.S. dollars) | Segment | Revenue | Revenue % of Total | Segment EBITDA | EBITDA Margin | | :--- | :--- | :--- | :--- | :--- | | Eastern | $369,617 | 24.1% | $99,382 | 26.9% | | Southern | $363,336 | 23.7% | $98,928 | 27.2% | | Western | $313,789 | 20.4% | $99,402 | 31.7% | | Central | $266,845 | 17.4% | $94,886 | 35.6% | | Canada | $220,344 | 14.4% | $88,641 | 40.2% | - All geographic segments showed strong YoY revenue growth in Q2 2021, with the Canada segment leading at **36.6% growth**, significantly aided by favorable foreign currency exchange rates and higher renewable energy credit prices[236](index=236&type=chunk) - The Southern segment's **9.0% revenue growth** was tempered by a **$5.2 million decline** in E&P operations revenue, highlighting the continued weakness in that sub-sector compared to the broader solid waste business recovery[229](index=229&type=chunk) [Liquidity and Capital Resources](index=89&type=section&id=Liquidity%20and%20Capital%20Resources) Net cash from operating activities increased by $95.3 million to $848.5 million, supporting planned $675 million capital expenditures and a strong $414.2 million working capital surplus - Net cash from operating activities increased by **$95.3 million** to **$848.5 million** for the first six months of 2021 compared to the same period in 2020, driven by higher earnings and favorable changes in deferred income taxes[260](index=260&type=chunk)[261](index=261&type=chunk) - The company plans for total capital expenditures of approximately **$675 million** in 2021, to be funded by cash on hand, internally generated funds, and borrowings[274](index=274&type=chunk) - As of June 30, 2021, the company had a **working capital surplus of $414.2 million**, including **$727.4 million in cash and equivalents**[264](index=264&type=chunk) [Non-GAAP Financial Measures](index=100&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) This section provides reconciliations for non-GAAP financial measures, including Adjusted EBITDA and Adjusted Free Cash Flow, demonstrating operational performance and liquidity Adjusted EBITDA Reconciliation (in thousands of U.S. dollars) | Metric | Q2 2021 | Q2 2020 | Six Months 2021 | Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) attributable to Waste Connections | $177,047 | $(227,072) | $337,356 | $(84,037) | | Adjustments (Taxes, Interest, D&A, Impairments, etc.) | $307,858 | $621,394 | $580,723 | $886,882 | | **Adjusted EBITDA** | **$484,905** | **$394,322** | **$918,079** | **$802,845** | Adjusted Free Cash Flow (in thousands of U.S. dollars) | Period | Six Months 2021 | Six Months 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $848,478 | $753,185 | | Less: Capital expenditures | $(271,392) | $(268,711) | | Other Adjustments | $8,749 | $9,661 | | **Adjusted free cash flow** | **$585,835** | **$494,569** | [Quantitative and Qualitative Disclosures About Market Risk](index=104&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rates, commodity prices, and foreign exchange, with specific sensitivities outlined for unhedged debt, fuel costs, and recycled commodity prices - A one percentage point increase in interest rates on the company's unhedged variable-rate debt of **$305.0 million** would decrease annual pre-tax income by approximately **$3.0 million**[305](index=305&type=chunk) - A **$0.10 per gallon increase** in the price of fuel for the remaining six months of 2021 would decrease pre-tax income by approximately **$2.0 million**[307](index=307&type=chunk) - A **10% decrease** in average recycled commodity prices would have reduced revenues by **$7.2 million** for the six months ended June 30, 2021[308](index=308&type=chunk) [Controls and Procedures](index=107&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting during the quarter - The President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer concluded that as of June 30, 2021, the company's disclosure controls and procedures were effective at the reasonable assurance level[311](index=311&type=chunk) [PART II – OTHER INFORMATION](index=108&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Legal Proceedings](index=108&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, including environmental matters and litigation related to landfill permits, as detailed in Note 18 of the financial statements - Information regarding the company's legal proceedings is incorporated by reference from Note 18 to the Condensed Consolidated Financial Statements[314](index=314&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=108&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2021, the company repurchased 2,079,806 shares for approximately $239.7 million under its NCIB, with 10,398,783 shares remaining available for repurchase Share Repurchases for Q2 2021 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2021 | 1,879,806 | $114.86 | | May 2021 | 200,000 | $118.62 | | June 2021 | 0 | N/A | | **Total Q2** | **2,079,806** | **$115.22** | - The Board of Directors approved the annual renewal of the NCIB on July 27, 2021, expected to be effective from August 10, 2021, to August 9, 2022[315](index=315&type=chunk) [Exhibits](index=109&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate governance documents, credit agreements, and required CEO and CFO certifications