Waste Connections, Inc. (WCN) Q3 2018 Earnings Summary

Executive Summary

Revenue of $1.281B, adjusted EPS $0.69 and adjusted EBITDA $416.8M (32.5% margin); results exceeded outlook on solid waste price growth and stronger E&P activity, despite recycling headwinds .
Management highlighted sequential volume improvement and robust price-led growth; announced a 14.3% increase in the quarterly dividend and signed its largest YTD acquisition (~$175M annualized revenue), positioning 2019 for 8–10% revenue growth and margin expansion .
Q4 2018 outlook: revenue ~$1.225B, adjusted EBITDA ~$386M (~31.5%), solid waste price growth ~4.5% and volume ~-1%; operating income ~~17.2% (~~$211M) and net income ~$139.4M .
Full-year 2018 guidance (raised in July): revenue ~$4.880B (from ~$4.825B), adjusted EBITDA ~$1.555B (~31.9%), adjusted FCF ~$860M; Q3 performance kept the company “on track to meet or exceed” this outlook .

What Went Well and What Went Wrong

What Went Well

Price-led solid waste growth with 4.5% pricing (solid waste price growth up 120bps YoY) and sequential volume improvement (+140bps) produced better-than-expected results, supporting margin expansion and strong YTD free cash flow generation ($675.7M, 18.5% of revenue) .
E&P waste activity accelerated, contributing to YoY operating income growth; management expects rollover contribution plus organic growth to drive 8–10% revenue growth in 2019 and further margin expansion .
Strategic M&A momentum: signed a multi-market collection acquisition (~$175M annualized revenue), bringing 2018 acquired annualized revenue to ~$360M and expanding into two new markets .

What Went Wrong

Recycling commodity price declines reduced revenue (recycling internal growth -1.8% total in Q3; recyclable commodity sales down $19.5M YoY in Q3) .
Volume headwinds from purposeful shedding of lower-quality revenue and permit limitations (e.g., lower special waste volumes at Chiquita Canyon) pressured solid waste volumes (Q3 total volume -0.1%) .
Cost inflation: higher taxes on revenues, labor, diesel, trucking, leachate disposal increased operating expenses; cost of operations still improved modestly as % of revenue due to internalization and abating hurricane-related costs .

Financial Results

Metric	Q1 2018	Q2 2018	Q3 2018
Revenue ($USD Billions)	$1.140	$1.240	$1.281
Net Income ($USD Millions)	$124.9	$138.7	$150.8
Diluted EPS (GAAP)	$0.47	$0.52	$0.57
Adjusted EPS (Non-GAAP)	$0.56	$0.65	$0.69
Operating Income ($USD Millions)	$188.7	$210.7	$232.9
Adjusted EBITDA ($USD Millions)	$356.9	$395.5	$416.8
Adjusted EBITDA Margin (%)	31.3%	31.9%	32.5%

Segment revenue mix

Segment	Q3 2017 ($USD Millions, %)	Q3 2018 ($USD Millions, %)
Solid Waste Collection	$812.9 (67.4%)	$869.3 (67.9%)
Solid Waste Disposal & Transfer	$259.5 (21.5%)	$291.3 (22.7%)
Solid Waste Recycling	$22.4 (1.7%)	$22.4 (1.7%)
E&P Waste Treatment, Recovery & Disposal	$54.7 (4.5%)	$64.8 (5.1%)
Intermodal & Other	$33.4 (3.1%)	$33.4 (2.6%)
Total Reported Revenue	$1,206.5 (100%)	$1,281.1 (100%)

KPIs – Solid Waste Internal Growth components (Total)

Component	Q1 2018	Q2 2018	Q3 2018
Core Price	4.1%	3.9%	4.0%
Surcharges	0.2%	0.3%	0.5%
Volume	-1.1%	-1.5%	-0.1%
Recycling	-1.9%	-1.8%	-1.8%
FX Impact	0.7%	0.7%	-0.7%
Total	2.0%	1.6%	1.9%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2018	~$4.825B (original)	~$4.880B (updated Jul 24)	Raised
Adjusted EBITDA	FY 2018	~$1.550B (original)	~$1.555B (~31.9% of revenue)	Raised
Net Cash from Ops	FY 2018	N/A	~$1.379B	New (provided)
Adjusted Free Cash Flow	FY 2018	~$850M (original)	~$860M (~17.6% of revenue)	Raised
Capex	FY 2018	~$500M (original)	~$530M	Raised
Revenue	Q4 2018	N/A	~$1.225B	New
Adjusted EBITDA	Q4 2018	N/A	~$386M (~31.5%)	New
Operating Income	Q4 2018	N/A	~~17.2% (~~$211M)	New
Net Income	Q4 2018	N/A	~$139.4M	New
Solid Waste Price Growth	Q4 2018	N/A	~4.5%	New
Solid Waste Volume	Q4 2018	N/A	~-1%	New
Dividend	Ongoing	Quarterly dividend increased by 14.3%	Implemented	Raised

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 2018)	Previous Mentions (Q2 2018)	Current Period (Q3 2018)	Trend
Solid waste pricing and volume	Better than expected pricing; weather impacted volumes	Continued strength; volume negative due to shedding lower quality revenue	Price-led growth; sequential volume improvement (+140bps)	Improving pricing; volume stabilizing
Recycling commodity headwinds	Steep decline in fiber values	Headwinds increased; outlook still exceeded	Toughest quarterly comparison for recycled commodities, persisted	Persistent headwind
E&P waste activity	Strong E&P activity supported results	Continued strength in E&P	Strength in Permian and multiple basins lifted revenue and margins	Strengthening
Cost inflation (diesel, labor, trucking)	Noted weather-related impacts	Weather-delayed ramp; cost pressures implied	Higher taxes on revenue, labor, diesel, trucking, leachate costs	Cost pressure elevated
M&A pipeline and market entries	Multiple acquisitions; share repurchases	Acquisitions completed; ~$175M acquired YTD	Largest YTD deal signed (~$175M annualized revenue); ~$360M acquired YTD	Accelerating M&A
Regulatory/permit impacts	N/A	N/A	Chiquita Canyon permit limitations reduced special waste volumes	Localized constraint

Management Commentary

“Solid waste pricing up 120 basis points year over year plus 140 basis points sequential volume improvement drove better than expected results... enabled us to overcome the toughest quarterly comparison for recycled commodity values... adjusted free cash flow remains strong...” — Ronald J. Mittelstaedt, Chairman & CEO .
“The pace of acquisition activity remains elevated... signed our largest deal year to date... approximately $175 million... expected to bring total acquired annualized revenues to approximately $360 million in 2018... position us for between 8% and 10% revenue growth and continued margin expansion in 2019.” — Ronald J. Mittelstaedt .
“Our third quarter performance puts us firmly on track to meet or exceed the increased expectations for the full year we communicated in July.” — Ronald J. Mittelstaedt .

Q&A Highlights

Full Q3 2018 earnings call transcript was not available in our document corpus despite targeted searches; however, management furnished Q4 2018 outlook via a Regulation FD 8‑K: revenue ~$1.225B, adjusted EBITDA ~$386M (~31.5%), operating income ~~17.2% (~~$211M), net income ~$139.4M; solid waste price growth ~4.5% and volume ~-1% .
Clarifications implied by the outlook: margin cadence remains strong into Q4 despite expected negative volume; depreciation/depletion (~11.8% of revenue) and amortization (~2.2% of revenue) components provided, with amortization ~about $0.07 per diluted share net of taxes .
Management tone across materials: confident in price-led growth, E&P strength, M&A pipeline, and return of capital through dividend increase .

Note: We attempted to locate and read the full Q3 2018 earnings call transcript using document search and listing tools, but no transcript was found for WCN in the specified date range [SearchDocuments, ListDocuments].

Estimates Context

Wall Street consensus estimates (S&P Global/Capital IQ) for Q3 2018 EPS and revenue were not retrievable due to SPGI request limits at the time of query; therefore, we cannot present beat/miss versus consensus for this quarter (values unavailable). Values retrieved from S&P Global*.

Key Takeaways for Investors

Price-led growth supported margin expansion: adjusted EBITDA margin improved to 32.5% in Q3 and is guided at ~31.5% for Q4; operating discipline offset recycling headwinds .
E&P exposure is a tailwind: activity in Permian and other basins continues to drive incremental revenue/margins; watch commodity-linked sensitivity into 2019 .
Active M&A strategy is accretive: the signed ~$175M annualized revenue deal and ~$360M acquired YTD broaden footprint and support 8–10% revenue growth in 2019 with margin expansion .
Cost inflation and localized regulatory limitations (e.g., Chiquita Canyon) are headwinds; internalization and operational improvements helped keep cost of operations flat-to-down as a % of revenue .
Capital returns increasing: dividend raised by 14.3%; strong adjusted FCF (YTD $675.7M, 18.5% of revenue) creates flexibility for both M&A and return of capital .
Near-term trading setup: Q4 guide implies continued margin resilience despite negative volume; catalysts include closing the signed acquisition, integration updates, and potential estimate revisions once consensus is available .
Medium-term thesis: price leadership in exclusive/secondary markets, improving E&P cycle, consolidation benefits, and disciplined returns should sustain above-average growth and margin trajectory into 2019 .