Q4 2024 Earnings Summary
- Waste Connections expects significant growth in renewable natural gas (RNG) projects, with $200 million in incremental EBITDA anticipated by 2026-2027, leading to substantial free cash flow growth.
- Strong pricing strategy with anticipated 6% price increases in 2025, supported by strong pricing retention and improved employee retention, is expected to drive revenue growth and margin expansion. ,
- Continued growth in the E&P segment, with revenue run rate approaching $150 million per quarter, driven by recent acquisitions and strong underlying business performance.
- Declining volumes are expected for the fourth consecutive year in 2025. Even after excluding the impact of the Chiquita Canyon landfill closure, the company anticipates reported volumes to decrease by 1.5% to 2.5% in 2025. This trend reflects ongoing challenges in driving organic volume growth.
- Commodity-driven revenues and Renewable Identification Numbers (RINs) are expected to be headwinds in 2025, potentially impacting margins. The company has guided that recycling and RINs, which were beneficial in 2024, will flip to a negative impact of down 20 to 50 basis points on margins in 2025. This shift could pressure profitability.
- Significant capital expenditures on renewable natural gas (RNG) projects are expected to strain free cash flow in the near term. The company plans to spend approximately $100 million to $150 million on RNG projects in 2025, a substantial increase from prior years. These projects will not contribute meaningfully to EBITDA until 2026 or later, potentially pressuring free cash flow before then.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenues | Increased from $2,035,609K in Q4 2023 to $2,260,283K in Q4 2024 (≈11% increase) | Total revenues rose by ≈11% driven by stronger operational performance and growth initiatives, including acquisitions and pricing benefits that built on prior period momentum, pushing revenues from $2.035B to $2.260B in Q4 2024. |
Operating Income | Swung from a positive $224,518K in Q4 2023 to a loss of ($199,190)K in Q4 2024 | A dramatic turnaround occurred in operating income, likely due to rising operating costs, impairments, or one-off expenses that outweighed the revenue gains, reversing the positive performance seen previously. |
Net Income | Declined from $126,629K in Q4 2023 to a loss of ($196,004)K in Q4 2024 | Net income suffered as the negative operating performance, spiking costs, or other non-operating expenses outweighed the revenue growth realized, marking a significant shift compared to the modest profit in the prior period. |
Earnings per Share (EPS) | Dropped from $0.49 in Q4 2023 to ($0.76) in Q4 2024 | EPS declined sharply due to the adverse net income result in Q4 2024, reflecting the broader deterioration in profitability compared to the positive EPS in the previous year. |
Eastern Region Revenue | Increased from $192.3M in Q4 2023 to $485.54M in Q4 2024 (≈+152% increase) | A massive increase in the Eastern region revenue, up 152%, is attributable to aggressive acquisitions, strong pricing, and volume improvements that built upon a relatively lower base in Q4 2023. |
Canada’s Revenue | Declined from $256.83M in Q4 2023 to $167.54M in Q4 2024 (≈35% drop) | Canada’s revenue dropped by roughly 35%, likely due to lower collection volumes, unfavorable pricing dynamics, and possibly currency or market challenges that contrasted with previous performance. |
Operating Cash Flow | Improved modestly from $555,941K in Q4 2023 to $568,929K in Q4 2024 | Operating cash flow saw a modest increase, reflecting slightly improved collection efficiencies and operational adjustments despite the overall deteriorated net income, continuing the positive trend from the previous period. |
Total Assets | Grew from $17,731,240K in Q4 2023 to $19,817,809K in Q4 2024 (≈11.7% increase) | Total assets increased by 11.7% due to continued capital investments, acquisitions, and organic growth strategies that built on the prior period successes, reflecting a strategic expansion in the asset base. |
Total Liabilities | Rose from $10,218,095K in Q4 2023 to $11,833,909K in Q4 2024 (≈17.9% increase) | Total liabilities increased by about 17.9%, indicating higher leverage, likely tied to debt used to finance acquisitions and capital investments that further expanded operations compared to the previous period. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue (Quarterly) | Q1 2025 | no prior guidance | $2.2 billion to $2.225 billion | no prior guidance |
Adjusted EBITDA (Quarterly) | Q1 2025 | no prior guidance | $700 million to $710 million or 31.8% to 31.9% of revenue | no prior guidance |
Depreciation and Amortization | Q1 2025 | no prior guidance | About 13.4% of revenue, including $48 million in amortization of intangibles | no prior guidance |
Interest Expense Net of Interest Income | Q1 2025 | no prior guidance | Approximately $80 million | no prior guidance |
Tax Rate (Quarterly) | Q1 2025 | no prior guidance | Estimated at 23% | no prior guidance |
Revenue (Annual) | FY 2025 | no prior guidance | $9.45 billion to $9.6 billion | no prior guidance |
Solid Waste Price plus Volume Growth | FY 2025 | no prior guidance | Expected in the range of 4% to 5% | no prior guidance |
Pricing | FY 2025 | no prior guidance | Up about 6% | no prior guidance |
Acquisition Revenue Contribution | FY 2025 | no prior guidance | About 3.5% | no prior guidance |
Adjusted EBITDA (Annual) | FY 2025 | no prior guidance | $3.12 billion to $3.2 billion | no prior guidance |
Adjusted EBITDA Margin | FY 2025 | no prior guidance | Expected in the range of 33% to 33.3% | no prior guidance |
Adjusted Free Cash Flow | FY 2025 | no prior guidance | $1.3 billion to $1.35 billion | no prior guidance |
Capital Expenditures | FY 2025 | no prior guidance | $1.2 billion to $1.225 billion, including $100 million to $150 million for RNG projects | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Renewable Natural Gas | In Q1–Q3 calls, RNG investments were frequently discussed with planned CapEx (e.g. $150 million in Q1 and significant spending in Q2), revised EBITDA guidance (incremental $200 million by 2026) and noted delays and “last mile” issues | Q4 provided more granular details: about a dozen RNG facilities, $60 million spent in 2024, projected spending of $100–150 million in 2025, with most work finishing by 2025 and a strong EBITDA ramp expected in 2026/2027 | Greater clarity and positive forward-looking guidance as the company refines its RNG rollout and underscores its sustainability initiatives. |
Pricing Strategy and Pricing Power | Q1–Q3 emphasized robust core pricing increases (e.g. 7.8% in Q1, 6.8%–7.5% in Q3), high retention levels, and regional variations, with strategic comments on balancing price–volume trade-offs | In Q4, management detailed pricing performance with a 6.7% core pricing in solid waste, clear visibility on early price increases for 2025 and a focus on maintaining a 150 bp spread over inflations | Consistent positive sentiment; the messaging reinforces strong pricing power while outlining a disciplined approach to sustaining margins. |
Acquisitions and M&A Growth Opportunities | Throughout Q1–Q3, the company highlighted record acquisition activity, a robust pipeline with acquisitions adding significant annualized revenue and disciplined integration methods | Q4 reported closure of 24 acquisitions in 2024 with $750 million of annualized revenue, a strong pipeline already signaled for early 2025 and a continued focus on integration and low leverage | Steady and robust M&A momentum, with an even more impressive close to the year that underscores disciplined growth and integration capabilities. |
Commodity Price Volatility and RIN Margin Headwinds | Q1–Q3 discussed initial commodity tailwinds and significant margin benefits from RINs (e.g. 100 bp in Q1), but also noted expected step‐downs later in the year as conditions normalized | In Q4, management explicitly stated that benefits from RINs have flipped into a headwind of 20–50 bps in 2025 and emphasized that commodity price volatility remains a key challenge | Increased concern over fading commodity benefits; earlier tailwinds are now viewed as risks to future margins. |
Declining Waste Volumes and Organic Growth Challenges | Q1–Q3 consistently mentioned volume declines due to purposeful shedding, weather impacts, and nonrenewals—with trade‐offs made for higher pricing | Q4 echoed continued volume declines (e.g. 2.7% decline in solid waste, with further headwinds due to Chiquita landfill closure) while emphasizing a higher pricing strategy to offset volume losses | Persistent challenges with reported volumes, managed by an intentional price–volume trade‐off strategy. |
Capital Expenditure Pressures Affecting Free Cash Flow | Q1–Q3 discussed CapEx related to RNG projects and acquisitions, with management noting ongoing pressures but maintaining free cash flow guidance (e.g. Q1: $150 million RNG CapEx; Q2: unchanged $1.2 billion FCF) | Q4 detailed a total 2024 CapEx of $1.056 billion, including significant outlays for the Chiquita Canyon closure, yet free cash flow achieved $1.218 billion, reflecting adjusted benefits and a forecast for reduced pressures post-2025 | Continued CapEx pressures remain a theme, yet improved free cash flow performance signals stabilization and benefits from scheduled downgrades in spending. |
Operational Efficiency Improvements via Advanced Technologies | In Q1 and Q2, management introduced initiatives employing AI and robotics in MRFs (e.g. new Illinois plant with automation, early AI deployments for routing) with modest detail in Q1 | Q4 amplified these technology efforts by detailing robotics enhancements in recycling facilities and AI use for safety and revenue augmentation, showcasing concrete applications across operations | An emerging and increasingly prominent focus on advanced tech, signaling accelerated investment in operational efficiencies. |
Employee Retention and Workforce Operational Improvements | Q1–Q3 consistently noted improving retention with declining voluntary turnover (down 30% in Q1; 35% improvement in Q2; multiyear 40% reduction in Q3), reduced open positions and enhanced safety metrics | Q4 reported record improvements with voluntary turnover below 13%, open positions down 60%, and better integrated safety and training programs, emphasizing strong workforce stability | Consistently positive trend with continued improvements driving operational efficiencies and cost savings. |
Operational and Supply Chain Risks (Rail issues and severe weather disruptions) | In Q1–Q3, the topic featured prominently: Q1 noted severe weather disruptions and shutdowns; Q2 discussed rail issues with Norfolk Southern and wildfire proximity impacts; Q3 again detailed severe weather and rail cost challenges | Q4 did not mention these risks, suggesting either improved external conditions or a reduced emphasis in the latest discussion. | No current mention indicates either a temporary resolution or lower perceived impact in Q4, marking a shift in sentiment compared to earlier periods. |
Margin Expansion Strategies and Risks from Fading Commodity Benefits | Q1–Q3 discussions underscored margin expansion through price–cost spreads, operational efficiencies, employee initiatives, and accretive acquisitions, while cautioning that commodity benefits (e.g. from recycled materials and RINs) would fade over the year | Q4 provided a detailed outlook: strong pricing and operational improvements are expected to drive margin gains (50–80 bps expansion) but acknowledged that fading commodity benefits and FX risks remain significant concerns | A consistent strategic focus on margin expansion, though with growing caution about external risks (fading commodity tailwinds) that may dampen future gains. |
Regional Market Performance Improvements (Notably in the Northeast) | Q1 mentioned opportunities across regions including the Northeast; Q2 detailed ramp-up at Arrowhead (volumes growing from 2,700 to 6,000+ tons) and investments in rail; Q3 highlighted strategic acquisitions in New York and improved regional integration | In Q4, management highlighted substantial improvements in Northeast operations: leveraging landfill closures, ramp-up of Arrowhead volumes (targeting up to 10,000 tons per day) and benefits from storm cleanup and internalized volumes | A clear consolidation of improvements in the Northeast, with expanded rail capacity and operational integration setting the stage for future growth. |
Special Waste Segment Dynamics | Q1 noted special waste and C&D volumes down roughly 15%, Q2 reported a 13% decline (and a 20% drop from 2022 levels), while Q3 discussed sequential improvements and variability due to event‐driven projects | Q4 observed a modest 2% year-over-year increase in special waste volumes, partly due to timing adjustments and storm cleanup activities, indicating a recovery from prior declines | A turnaround from previous declines, with recovery in the segment as timing adjustments and external events contribute to improved year-over-year dynamics. |
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Margin Outlook
Q: What's driving the 2025 margin expansion?
A: The company expects 50 to 80 basis points of margin expansion in 2025, primarily driven by the strength of the underlying business, including price-led organic growth and cost efficiencies. Despite headwinds from commodities, RINs, and foreign exchange—potentially reducing margins by 20 to 50 basis points—the solid waste business is projected to improve margins by up to 100 basis points. Acquisitions like Secure contribute minimally, as most benefits were realized in 2024. -
Free Cash Flow and CapEx Timing
Q: How will green CapEx and Chiquita spending affect free cash flow?
A: Green capital expenditures are expected to be around $125 million in 2025, up from $60 million in 2024 and $40 million in 2023, with spending largely concluding by 2026. Chiquita's capital spending peaked at $224 million in 2024 and is projected to decrease to about $125 million in 2025, tapering off by 2027. As these projects wind down, free cash flow conversion is anticipated to materially improve, potentially reaching $48 to $50 million on a normalized basis in 2026, excluding benefits from high flow-through RNG. -
Volume Trends
Q: Can volumes return to positive growth in 2026?
A: The company anticipates a volume decline of 1.5% to 2.5% in 2025, partly due to intentional shedding of unprofitable contracts acquired through M&A and a strategic trade-off between price and volume. Positive volume growth may require improved economic activity or a slowdown in M&A, but there's optimism for potential growth in 2026 if economic conditions improve. -
M&A Pipeline and Outlook
Q: What's the outlook for M&A activity in 2025?
A: Following a record $750 million in M&A spending in 2024, the company expects an above-average year in 2025. The M&A pipeline is very robust, featuring stand-alone franchises, competitive markets, and E&P tuck-ins. Potential deals may approach the size of the previous Secure acquisition, and no significant headwinds are anticipated. -
Pricing Strategy
Q: Where might core pricing bottom out, and what's the trajectory into 2025?
A: The company projects price increases of about 6% in 2025. Pricing is expected to start higher and moderate over the year, following typical patterns. Early indications show strong pricing retention, supported by a focus on maintaining a 150 to 200 basis point spread over internal cost inflation, which is projected to be around 4.5%. -
Employee Retention and Turnover
Q: How is employee retention in acquired businesses?
A: The company achieved under 10% voluntary turnover in 2024, despite higher rates in newly acquired companies due to stringent safety standards. Turnover in acquisitions can reach 30% to 35% in the first year, but safety incidents are often reduced by 3x within 12 months. -
Rail Shipments and Logistics
Q: How are rail shipments expected to ramp up in 2025?
A: Volumes at the Arrowhead landfill have increased from 2,500–2,700 tons per day to 7,000 tons per day since acquisition. The company expects to reach 8,000 to 9,000 tons per day by the end of 2025 and potentially 10,000 tons per day over several years. Shipping costs remain stable due to a long-term contract with Norfolk Southern. -
PFAS Treatment Solutions
Q: What's the latest on PFAS treatment solutions?
A: The company is implementing foam fractionation processes to treat PFAS in landfill leachate, with successful results in Minnesota, Pennsylvania, and New York. These treatments are effective and economically feasible, helping meet requirements from wastewater treatment plants. -
Renewable Natural Gas (RNG) Contribution
Q: How does RNG contribute to EBITDA, and will you lock in RIN prices?
A: RNG contributed around $100 to $110 million in revenue in 2024, with nominal incremental contributions expected in 2025. The company plans to opportunistically lock in RIN prices when favorable, as it did in 2024 at around $3 per RIN. -
Investment Tax Credits (ITC)
Q: Are you expecting to qualify for ITC benefits?
A: The company believes it qualifies for ITC benefits and benefited from a $10 million tax credit in 2024. While it's premature to estimate exact amounts for future facilities, the company aims to maximize these benefits as facilities come online.
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