Waste Connections, Inc. (WCN) Q1 2019 Earnings Summary

Executive Summary

Strong start to 2019: revenue of $1.245B and adjusted EBITDA of $385.7M (31.0% margin) both exceeded company outlook, driven by >5% solid waste price growth that offset weather and recycling headwinds .
GAAP diluted EPS was $0.48; adjusted EPS was $0.62, up 10.7% YoY per share; adjusted free cash flow was $246.3M (19.8% of revenue), supporting continued capital returns and M&A .
Q2 2019 outlook guides to ~~$1.36B revenue, 31.9% adjusted EBITDA margin (~~$434M), and solid waste price growth of 4.5%–5.0% with flat to +0.5% volume; tax rate ~22% with potential to 26.5% if IRS regs finalize (≈$0.03 EPS impact) .
Catalysts: sustained price discipline, sequential volume improvement, and elevated M&A pipeline (~$100M annualized YTD closed/signed) underpin margin trajectory and FCF; recycling weakness and weather are manageable headwinds per management commentary .

What Went Well and What Went Wrong

What Went Well
- Price-led outperformance: “Continuing strength in solid waste price growth once again drove underlying margin expansion and better than expected financial results,” enabling beats on revenue and adjusted EBITDA vs outlook .
- Free cash flow strength: Adjusted FCF was $246.3M (~19.8% of revenue), tracking toward the $950M full-year target and supporting elevated M&A and shareholder returns .
- M&A execution: Signed/closed ~$100M annualized revenue YTD, with new market entries and tuck-ins, positioning for another “outsized year of acquisition activity” per President Worthing Jackman .
What Went Wrong
- Recycling pressure: Further declines in recycled commodity values weighed on the quarter (price still offset); solid waste recycling revenue fell YoY to $19.3M from $22.5M .
- Weather impacts: Management cited “weather-related impacts across multiple markets,” though price strength offset margin drag .
- Slight YoY EBITDA margin mix: Adjusted EBITDA margin ticked down 30 bps YoY (31.0% vs 31.3%) due to mix factors including recycled commodities; still ahead of outlook .

Financial Results

Overall financials vs prior periods and estimates

Metric	Q3 2018	Q4 2018	Q1 2019
Revenue ($USD Billions)	$1.281	$1.262	$1.245
GAAP Diluted EPS ($)	$0.57	$0.50	$0.48
Adjusted EPS ($)	$0.69	$0.63	$0.62
Adjusted EBITDA ($USD Millions)	$416.8	$397.2	$385.7
Adjusted EBITDA Margin (%)	32.5%	31.5%	31.0%
Vs S&P Global Consensus	N/A (not provided)	N/A (not provided)	Estimates unavailable via S&P Global at this time (see Estimates Context)

Segment/revenue mix

Revenue Breakdown ($USD Millions, Reported)	Q1 2018	Q1 2019
Solid Waste Collection	$807.247 (70.8%)	$889.177 (71.4%)
Solid Waste Disposal & Transfer	$221.361 (19.4%)	$240.745 (19.3%)
Solid Waste Recycling	$22.513 (2.0%)	$19.300 (1.6%)
E&P Waste Treatment, Recovery & Disposal	$55.610 (4.9%)	$63.137 (5.1%)
Intermodal & Other	$33.400 (2.9%)	$32.278 (2.6%)
Total Reported Revenue	$1,140.131 (100.0%)	$1,244.637 (100.0%)

Key KPIs and Cash Flow

KPI / Cash Flow	Q1 2018	Q1 2019
Solid Waste Internal Growth – Core Price	4.5% (FY18 ref)	5.0% total; U.S. 4.8%, Canada 6.4%
Solid Waste Internal Growth – Volume		(1.2%) total; U.S. (1.0%), Canada (2.2%)
Recycling Impact (YoY)		(0.5%) to internal growth
FX Impact (YoY)		(0.7%) total; Canada (5.1%)
Net Cash from Operating Activities ($M)	$307.247	$363.772
Capital Expenditures ($M)	$91.216	$114.238
Adjusted Free Cash Flow ($M)	$220.153	$246.335
Adjusted FCF as % of Revenue	19.3%	19.8%
Days Sales Outstanding		43 (30 net of deferred revenue)
Debt to Book Capitalization		39%
Diluted Shares (mm)	264.589	264.337

Notes on non-GAAP: Adjusted EBITDA excludes amortization, impairments/other operating items, transaction-related costs, certain equity award fair value changes, and other specified items; Adjusted EPS excludes similar items and amortization of intangibles; reconciliations provided in the release .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	Q2 2019	—	≈$1.360B	New
Adjusted EBITDA Margin	Q2 2019	—	≈31.9% (~$434M)	New
Solid Waste Price Growth	Q2 2019	—	4.5%–5.0%	New
Solid Waste Volume	Q2 2019	—	Flat to +0.5%	New
Effective Tax Rate	Q2 2019	—	~22%; if IRS regs enacted: ~~26.5% (~~$0.03 EPS impact)	New
Revenue	FY 2019	≈$5.310B (2/13/19)	No update provided in Q1 materials	No update
Adjusted EBITDA	FY 2019	≈$1.705B (32.1%) (2/13/19)	No update provided in Q1 materials	No update
Adjusted Free Cash Flow	FY 2019	≈$950M (2/13/19)	No update provided in Q1 materials	No update
Net Cash from Ops	FY 2019	≈$1.525B (2/13/19)	No update provided in Q1 materials	No update
Net Income (GAAP)	FY 2019	≈$636M (2/13/19)	No update provided in Q1 materials	No update

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3’18, Q4’18)	Current Period (Q1’19)	Trend
Solid waste pricing	Q3: price up 120 bps YoY; price-led growth . Q4: pricing growth up 130 bps YoY to 4.5% .	>5% price growth, above high end of outlook; margin expansion .	Improving/stable strength
Recycling commodity headwinds	Q3: “toughest quarterly comparison” for recycled commodity values . Q4: “precipitous decline” in recycled commodities offset by price/E&P .	Further declines continued, but price offset impact .	Persistent headwind, managed
E&P (oilfield) waste activity	Q3: continued strength in E&P . Q4: E&P activity supported outperformance .	E&P revenue mix up YoY ($63.1M vs $55.6M) .	Improving
M&A cadence	Q3: signed ~$175M annualized; total ~$360M in 2018 . Q4: rollover ~$200M in 2019; more than $360M 2018 acquired .	~$100M annualized YTD; potential for another outsized year .	Elevated
Weather/macro	Q3: cost pressures noted . Q4: macro commentary, cost pressures .	Weather-related impacts across multiple markets, offset by price .	Transitory headwind

Management Commentary

“We are extremely pleased with the strong start to the year… Continuing strength in solid waste price growth once again drove underlying margin expansion and better than expected financial results… enabling us to overcome weather-related impacts across multiple markets and further declines in recycled commodity values.” — Worthing F. Jackman, President .
“Year-to-date, we’ve signed or closed acquisitions with total annualized revenue of approximately $100 million… Our strong financial profile and free cash flow generation provide us the flexibility to fund continuing outsized acquisition activity while increasing the return of capital to shareholders.” — Worthing F. Jackman .
Prior context: “2018 finished on a high note… adjusted EBITDA… expanded 30 basis points… Increases in both solid waste pricing growth… and E&P waste activity enabled us to overcome the precipitous decline in recycled commodity values…” — Ronald J. Mittelstaedt, CEO (Feb 13, 2019) .

Q&A Highlights

Q2 cadence and tax sensitivity: On the call, management outlined Q2 revenue (~~$1.36B), 31.9% adjusted EBITDA margin (~~$434M), price growth (4.5%–5.0%), volume (flat to +0.5%), and tax rate (~22% with potential to 26.5% if IRS regs enacted; ≈$0.03 EPS impact) .
Pricing vs recycling dynamic: Management emphasized price discipline and underlying margin expansion despite recycling commodity weakness (consistent with press release comments) .
Acquisition pipeline: Reiterated ~$100M annualized YTD signed/closed and capacity for “outsized” activity, supported by strong FCF .

Estimates Context

Wall Street consensus (S&P Global) for Q1 2019 EPS, revenue, and EBITDA was unavailable via our data connection at this time; as a result, we cannot present a definitive “vs consensus” comparison for the quarter. We note that management stated revenue and adjusted EBITDA exceeded their outlook .
If you’d like, we can refresh S&P Global estimates and provide a beat/miss table once access resumes.

Key Takeaways for Investors

Price leadership is the key driver: >5% solid waste price growth powered a revenue and adjusted EBITDA beat vs outlook and underpinned margin resilience despite recycling and weather headwinds .
Margin trajectory constructive: Q1 margin dip vs Q4 reflects mix/seasonality and recycling; Q2 guide implies ~90 bps sequential margin expansion to 31.9% on stable price and modest volume .
FCF supports optionality: Adjusted FCF at ~20% of revenue and CFO of $364M in Q1 provide ample capacity for M&A and increased capital returns without compromising balance sheet (Debt/Book Cap 39%) .
M&A remains a growth pillar: ~~$100M annualized revenue YTD signed/closed with potential for an “outsized” year; historical rollovers (~~$200M in 2019 from 2018 deals) suggest sustained top-line support .
Watch recycling and FX: Recycling commodity prices and Canadian FX trimmed growth; price discipline and E&P exposure helped offset—continued monitoring warranted .
Near-term setup: Q2 guide provides visibility to sequential improvement; tax-rate sensitivity from potential IRS regulations could affect EPS by ~$0.03 in Q2 if enacted .
Leadership continuity: Temporary CEO leave in February transferred principal executive duties to President Worthing Jackman; business execution remains solid through transition .

Sources: Q1 2019 8‑K and press release, financial tables, and Reg FD guidance; prior Q4’18 and Q3’18 8‑Ks for trend analysis. Specific citations embedded above.