Business Overview Waste Connections, Inc. (WCN) is the third-largest solid waste services provider in North America, offering a comprehensive suite of non-hazardous waste collection, transfer, disposal, and recycling services. With a steadfast focus on strategic acquisitions and operational excellence, Waste Connections has established itself as a industry powerhouse, boasting an extensive footprint across the United States and Canada.
Waste Connections was founded in 1997 and is headquartered in Woodbridge, Ontario, Canada. The company's operations span 46 states in the U.S. and 6 provinces in Canada, serving residential, commercial, and industrial customers through its network of collection, transfer, and disposal facilities. In addition to its core solid waste management services, Waste Connections also provides non-hazardous oil and natural gas exploration and production (E&P) waste treatment, recovery, and disposal, as well as intermodal services for cargo and solid waste container transportation in the Pacific Northwest.
From its inception, Waste Connections has followed a strategy of targeting secondary and rural markets, where it can achieve higher market share through exclusive collection services. This approach has allowed the company to avoid highly competitive urban markets and maintain strong pricing power and operational efficiencies in its core service areas. The company has also focused on owning or operating landfills in markets where it provides collection services, enabling it to internalize the waste stream and control costs.
Waste Connections has significantly expanded its footprint through strategic acquisitions of regional and local waste businesses. A major milestone in the company's growth came in 2016 with the business combination with Progressive Waste Solutions Ltd., which substantially increased its presence in Canada and solidified its position as a leading market player in several Canadian provinces and territories.
Throughout its history, Waste Connections has faced various challenges, including increased competition, regulatory changes, and fluctuations in commodity prices and recycled materials. Most recently, in 2023, the company encountered an elevated temperature landfill event at its Chiquita Canyon Landfill in California, resulting in increased costs and operational disruptions. Despite these obstacles, Waste Connections has maintained its commitment to operational efficiency, safety, and customer service, which has enabled it to deliver strong financial results and continue its growth trajectory.
The company's decentralized management structure, with regional vice presidents overseeing operations, has enabled rapid integration of acquired businesses and a nimble response to local market dynamics.
Extraordinary Growth through Acquisitions Waste Connections' growth story has been largely driven by its successful acquisition strategy. In 2024, the company completed 24 acquisitions, adding approximately $750 million in annualized revenue. This represented a new high-water mark for the company, surpassing even its previous record year of 2022, when it closed 24 acquisitions totaling $2.33 billion in annualized revenue.
The company's disciplined and relationship-driven approach to M&A has allowed it to selectively target accretive opportunities that expand its geographic footprint and service capabilities. Waste Connections' ability to quickly integrate acquired businesses and leverage synergies has been a key factor in its ability to deliver strong financial results.
Despite the record level of acquisition activity in 2024, Waste Connections' leverage ratio remained virtually unchanged at 2.67x debt-to-EBITDA, underscoring the quality of the acquired revenue streams and the company's agility in delevering. This low leverage, combined with ample liquidity of nearly $1 billion, provides Waste Connections with tremendous flexibility to continue its outsized acquisition pace while also returning capital to shareholders through dividends and share repurchases.
Impressive Financial Performance Waste Connections' financial performance in 2024 was nothing short of extraordinary. The company reported total revenues of $8.92 billion, a 11.2% year-over-year increase, driven by both organic growth and the contributions of recent acquisitions. Adjusted EBITDA reached $2.902 billion, up 15% from the prior year, with a robust margin of 32.5% - a 100-basis point improvement.
The company's pricing discipline was a key driver of its solid waste segment performance, with core price increases of 7.1% for the full year. Waste Connections was able to navigate various headwinds, including declines in recycled commodity prices, renewable energy credit (RINs) values, and foreign exchange rates, to deliver this impressive margin expansion.
Waste Connections' focus on operational efficiency and talent development was also evident in its industry-leading safety performance and record-low employee turnover rates. The company's voluntary turnover fell below 13% in 2024, down significantly from the prior year, demonstrating its ability to attract and retain top talent in a challenging labor market.
The company's strong financial performance translated to robust cash flow generation, with adjusted free cash flow of $1.218 billion in 2024, or over 50% of adjusted EBITDA. This figure excludes the impact of incremental costs associated with the closure of the Chiquita Canyon Landfill in California, as well as investments in the company's growing renewable natural gas (RNG) project pipeline.
Disciplined Capital Allocation and Shareholder Returns Waste Connections has a long history of disciplined capital allocation, prioritizing value-enhancing acquisitions while also returning capital to shareholders through dividends and share repurchases. The company's quarterly cash dividend has grown at a compound annual rate of 14% over the past 15 years, underscoring its commitment to rewarding investors.
In 2024, Waste Connections distributed $302.3 million to shareholders through cash dividends, representing an 11.7% year-over-year increase. The company also renewed its normal course issuer bid (NCIB) in 2024, authorizing the repurchase of up to 12.9 million shares, or approximately 5% of its outstanding common stock.
Looking ahead, Waste Connections' robust financial position, with a leverage ratio of 2.67x and nearly $1 billion in liquidity, provides ample flexibility to continue its accretive acquisition strategy while also potentially accelerating its return of capital to shareholders, should acquisition opportunities slow.
Sustainability and ESG Initiatives Waste Connections has made sustainability and environmental, social, and governance (ESG) initiatives a key priority. In 2020, the company adopted long-term, aspirational targets related to emissions reductions, increased resource recovery, and enhanced employee safety and engagement. To support these goals, Waste Connections has committed over $500 million in investments and projects.
One area of focus has been the expansion of the company's renewable natural gas (RNG) generation capabilities. Waste Connections currently has over a dozen RNG projects in development, which are expected to come online by 2026 and contribute approximately $200 million in incremental annual EBITDA. These investments, coupled with the company's hybrid ownership approach, help insulate Waste Connections from the volatility of RIN prices.
Additionally, Waste Connections has been at the forefront of addressing emerging environmental concerns, such as the treatment of per- and polyfluoroalkyl substances (PFAS) in landfill leachate. The company has deployed various technologies, including foam fractionation and other proprietary methods, to effectively manage PFAS contamination and ensure regulatory compliance.
Waste Connections' commitment to sustainability and ESG is reflected in its industry-leading safety performance, with a Total Recordable Incident Rate (TRIR) well below the industry average. The company has also made significant strides in improving employee engagement and reducing turnover, which are crucial to maintaining operational excellence and delivering value to its customers and shareholders.
Outlook and Conclusion Waste Connections enters 2025 with strong momentum, having delivered an "extraordinary year" in 2024 by nearly every metric. The company's guidance for the upcoming year reflects its confidence in its ability to continue executing its proven strategy, with projected revenue in the range of $9.45 billion to $9.60 billion and adjusted EBITDA margins of 33% to 33.3%.
The company's robust acquisition pipeline, disciplined capital allocation, and focus on operational excellence position Waste Connections as a premier investment opportunity in the waste management industry. With its track record of consistent growth, shareholder-friendly policies, and commitment to sustainability, Waste Connections remains well-equipped to navigate the challenges and capitalize on the opportunities that lie ahead.
Financials Waste Connections reported impressive financial results for the fiscal year 2024. Total revenues reached $8.92 billion, representing a 11.2% increase from the previous year. Adjusted EBITDA grew by 15% to $2.902 billion, with a margin of 32.5%, which was a 100-basis point improvement. The company generated adjusted free cash flow of $1.218 billion, excluding certain costs and investments.
Net income attributable to Waste Connections decreased 19% to $617.6 million in 2024, primarily due to higher impairments and other operating costs. In the fourth quarter of 2024, the company reported a net loss of $196 million, which was attributed to a $116.1 million write-down and $480.8 million in closure and post-closure liabilities related to the Chiquita Canyon Landfill closure.
For the first quarter of 2025, Waste Connections provided revenue guidance in the range of $2.2 billion to $2.225 billion, with adjusted EBITDA expected to be between $700 million and $710 million, or 31.8% to 31.9% of revenue.
Liquidity As of the end of 2024, Waste Connections maintained a strong liquidity position with nearly $1 billion available. The company's leverage ratio stood at 2.67x debt-to-EBITDA, remaining virtually unchanged despite significant acquisition activity. This robust financial position provides Waste Connections with ample flexibility to pursue further acquisitions and return capital to shareholders through dividends and share repurchases.
Specifically, as of December 31, 2024, the company had $62.4 million in cash and $778 million in remaining borrowing capacity under its $3 billion revolving credit facility. This strong liquidity position underpins Waste Connections' ability to pursue its growth strategy while maintaining financial flexibility.
Core Business Segments Waste Connections' operations consist of several key business segments:
Solid Waste Collection Services: This segment involves the collection of waste from residential, commercial, and industrial customers for transport to transfer stations, landfills, or recycling centers. Services are provided under various agreements ranging from one to five years, with some exclusive franchises extending for longer periods. Pricing is based on factors such as market conditions, collection frequency, service level, route density, waste type and volume, disposal costs, and competitive pricing.
Landfill Disposal Services: As of December 31, 2024, Waste Connections owned or operated 77 municipal solid waste (MSW) landfills, 20 E&P waste landfills and caverns, and 16 non-MSW landfills. Revenue is primarily generated through tipping fees charged to third parties based on waste volume and type.
Recycling Services: The company offers recycling services for various materials, including compost, cardboard, mixed paper, plastic containers, glass bottles, and metals. Waste Connections operates its own recycling facilities and markets collected recyclables to third parties.
Beneficial Reuse of Landfill Gas: Waste Connections develops and operates projects that convert landfill gas into a valuable source of clean energy, either for electricity generation or processing into pipeline-quality natural gas.
E&P Waste Treatment, Recovery, and Disposal Services: The company provides non-hazardous E&P waste services through a network of specialized facilities, including E&P waste landfills, MSW landfills that accept E&P waste, liquid waste injection wells, and treatment and oil recovery facilities.
Growth Strategy and Industry Trends Waste Connections' growth strategy continues to be heavily focused on acquisitions. The company had a record year of M&A activity in 2024, completing 24 acquisitions with approximately $750 million in annualized revenue. Management expects another above-average year for M&A in 2025, indicating a continuation of this successful growth strategy.
The company's ability to maintain strong financial performance while pursuing aggressive acquisition growth demonstrates the effectiveness of its integration processes and the quality of the businesses it acquires. This strategy has allowed Waste Connections to continuously expand its market presence and service offerings across North America.
Future Outlook Looking ahead to 2025, Waste Connections has provided guidance that reflects continued growth and margin expansion. The company expects:
- Revenue in the range of $9.45 billion to $9.6 billion - Adjusted EBITDA between $3.12 billion and $3.2 billion, representing a margin of 33% to 33.3% - Adjusted free cash flow between $1.3 billion and $1.35 billion, with an additional $100 million to $150 million in outlays associated with the Chiquita Canyon landfill
For solid waste operations, the company anticipates price plus volume growth in the range of 4% to 5%, excluding about 0.5 percentage points of volume impact from closing the Chiquita Canyon landfill.
These projections underscore Waste Connections' confidence in its ability to continue delivering strong financial results while navigating industry challenges and capitalizing on growth opportunities. The company's focus on operational excellence, strategic acquisitions, and sustainability initiatives positions it well for continued success in the North American waste management industry.