Waste nections(US:WCN)2023-02-16 20:59Financial Data and Key Metrics Changes - In Q4 2022, revenue reached $1.869 billion, exceeding expectations by $24 million and reflecting a year-over-year increase of 15.1% [22] - Adjusted EBITDA for Q4 was $564 million, up 13.8% year-over-year, resulting in an adjusted EBITDA margin of 30.2%, which was a 20 basis point beat to the outlook [28][29] - For the full year 2022, adjusted free cash flow was $1.165 billion, representing a 15% increase year-over-year, with capital expenditures (CapEx) of $913 million, up 23% year-over-year [14][30] Business Line Data and Key Metrics Changes - Solid waste pricing in Q4 increased by 10.6%, with core pricing contributing 9% and showing a sequential increase of 70 basis points from Q3 [23] - Commercial collection revenue rose by 14% year-over-year, primarily driven by pricing, while landfill rates per ton increased by about 7.5% [26] - Recycled commodity revenues were down approximately 70% year-over-year due to a significant decline in values since July [27] Market Data and Key Metrics Changes - The company experienced a 1.7% decline in solid waste volumes in Q4, attributed to the non-renewal of two municipal contracts [25] - The pricing acceleration in competitive regions during 2022 positioned the company for an estimated 9.5% total price increase in 2023, primarily from core pricing [24] Company Strategy and Development Direction - The company plans to continue its focus on sustainability and operational execution, with a significant increase in CapEx for sustainability-related projects expected in 2023 [15][17] - Acquisition activity in 2022 totaled approximately $640 million in annualized revenue, with a disciplined approach to market selection and risk profiles [18][19] - The company aims for double-digit revenue growth and adjusted EBITDA margin expansion in 2023, with potential upside from improved commodity values and additional acquisitions [7][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in overcoming inflationary pressures and commodity-related headwinds, with expectations for continued pricing momentum in 2023 [5][12] - The company anticipates a challenging operating environment but remains optimistic about the potential for margin expansion and revenue growth [41][42] - Management noted that improvements in recycled commodity prices have been observed in February, although these have not been factored into the current outlook [36] Other Important Information - The company returned $668 million to shareholders through dividends and share repurchases in 2022, marking a nearly 20% increase from the previous year [20] - The 2023 outlook includes an estimated revenue of $8.05 billion and adjusted EBITDA of approximately $2.5 billion, reflecting a 30 basis point increase in margin year-over-year [33][34] Q&A Session Summary Question: Can you expand on the margin cadence implied by guidance? - Management indicated that the first quarter is expected to have the toughest comparisons, with margin improvements anticipated in subsequent quarters [44][46] Question: What is the outlook for R&D and monetizing gas at facilities? - Management stated that there are currently 17 sites with electric generation facilities, but further details on monetization will depend on regulatory developments [51][53] Question: How is volume expected to trend in 2023? - Management expects volume growth to remain flat to down 1%, with potential episodic increases from new contracts [55][57] Question: What is the M&A pipeline looking like? - The company noted that while there have been larger transactions, the average size of targeted acquisitions remains consistent, focusing on companies with $20 million to $40 million in revenue [66][70] Question: What is the sustainability CapEx budget for 2023? - The sustainability CapEx budget for 2023 is expected to be between $75 million and $85 million, reflecting some shifts from previous expectations [85]