Waste nections(US:WCN)2022-02-17 18:56Financial 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]