Imperial Capital Global Opportunities Conference
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Imperial Capital Global Opportunities Conference September 18, 2014 PowerPoint PPT Presentation


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Imperial Capital Global Opportunities Conference September 18, 2014. SAFE HARBORS STATEMENT. WCN: INVESTMENT HIGHLIGHTS. Third largest solid waste and leading oilfield waste company in the U.S. $5 billion in assets and 7,000 employees Differentiated strategy

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Imperial Capital Global Opportunities Conference September 18, 2014

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Imperial capital global opportunities conference september 18 2014

Imperial Capital Global Opportunities Conference

September 18, 2014


Safe harbors statement

SAFE HARBORS STATEMENT


Wcn investment highlights

WCN: INVESTMENT HIGHLIGHTS

  • Third largest solid waste and leading oilfield waste company in the U.S.

    • $5 billion in assets and 7,000 employees

  • Differentiated strategy

    • Only company focused on secondary and exclusive markets

    • Expanding presence in niche segments such as E&P waste

    • Solid waste predictability + oilfield waste growth potential

  • Differentiated results

    • Sector-leading EBITDA, EBIT and free cash flow margins

    • Sector-leading conversion of EBITDA to free cash flow

  • Well positioned for additional strategic opportunities

    • Investment grade rated => tremendous access to low cost growth capital

  • Proven management team creating substantial stockholder value


Wcn financial highlights

WCN: FINANCIAL HIGHLIGHTS


Solid waste a differentiated strategy

SOLID WASTE: A DIFFERENTIATED STRATEGY


Solid waste 85 of revenue

SOLID WASTE: 85% OF REVENUE

Almost 3 million customers across 30 states


Solid waste industry tenets

SOLID WASTE INDUSTRY TENETS

  • $55 billion revenue => still consolidating

    • ~50% publicly traded companies / remainder private and municipalities

    • ~40% concentrated in two largest companies

  • Solid waste is a commodity business

    • Lowest price provider wins

    • Basic level of service expectation by customers

  • Scale matters locally

    • Market share = route density

  • Success is driven by:

    • Market selection

    • Asset and contractual positioning

    • Execution at the local level


Our differentiated strategy

OUR DIFFERENTIATED STRATEGY

  • Exclusive markets

    • Vertically integrated, or

    • Non-integrated

  • Competitive markets

    • Secondary markets with

    • High market share and

    • Vertically integrated or disposal neutral

  • What we wish to avoid:

    • Urban markets

    • #3 or worse position in a market

    • Collection-only position in a competitive market with competitor-controlled disposal


Targeting attractive markets

TARGETING ATTRACTIVE MARKETS

90% of WCN

Solid Waste

Note: Rankings reflect relative attractiveness to WCN


Strategic implications

STRATEGIC IMPLICATIONS

  • Consistent pricing

  • Lower customer churn rates

    • Comparably better core price + volume growth

  • Higher margins and free cash generation

  • Greater visibility and predictability

  • Attractive returns on invested capital

  • Our success: not dependent on behavior or execution of other national players

  • Our strategy: resilient in a weak economy; levered to improving economy


E p waste market leader in treatment disposal recovery

E&P WASTE: MARKET LEADER IN

TREATMENT, DISPOSAL & RECOVERY


E p waste 15 of revenue

E&P WASTE: 15% OF REVENUE

Strong asset positioning across diverse oil-rich basins


E p waste highlights

E&P WASTE HIGHLIGHTS

  • Market leader in higher growth oilfield waste treatment, recovery and disposal industry

    • Diversity across multiple oil-rich basins, including Permian, Bakken & Eagle Ford

    • Strong asset positions within targeted basins => almost 40 facilities

    • Pursuing permits for several greenfield development opportunities

  • Solids disposal-oriented business => strong cash flows

  • Major sector growth drivers:

    • Increased drilling in unconventional areas => higher waste intensity per well

    • Heightened customer awareness of waste stream management

    • Potential increasing environmental regulations and enforcement


1h 2014 highlights

1H 2014 HIGHLIGHTS

  • Revenue: $1.0 billion, up 7.1% YoY

    • Solid Waste Price + Volume Growth of 4.8%

      • 2.8% Price

      • 2.0% Volume => MSW landfill tons up 7%

    • E&P Revenues above expectations – up almost 23% YoY

      • Q2 revenues up almost 26% YoY and up 15% sequentially from Q1

      • All basins up year over year

  • Adjusted EBITDA: $346.6 million, or 34.4% of revenue, up 9.9% YoY

    • Up 80 bps YoY on higher E&P activity

  • Adjusted free cash flow: $208.6 million, or 20.7% of revenue, up 18.8% YoY

    • Paid down over $135 million of debt and reduced leverage to 2.75x

  • Announced acquisition of two development stage landfills in Q1’14

    • Expect both facilities to open before year-end


Q3 2014 outlook as of july 21 st

Q3 2014 OUTLOOK (as of July 21st)

  • Revenue: $530 million - $535 million, up 5% to 6% YoY

    • Solid Waste Price + Volume growth between 3.5% and 4.0%

    • E&P growth of 15%

  • Adjusted EBITDA: $186 million - $187 million, or about 35% of revenue

    • Assumes 30 bps drag from lower recycled commodity prices

  • Operating Income: 22.8% of revenue

  • Expect increased M&A activity and capital return to shareholders during 2H ‘14


Peer comparisons 2013 and 2014 e

PEER COMPARISONS – 2013 AND 2014 (e)


Financial take aways

FINANCIAL TAKE-AWAYS

  • Unique combination of industry-leading margins (EBITDA, EBIT and free cash flow) and growth from:

    • Price + increasing MSW volumes => levered to improving economy;

    • Changes to or enforcement of E&P waste regulations;

    • Potential newly permitted E&P waste facilities;

    • Potential MSW and E&P waste acquisitions; and

    • Return of capital to stockholders.

  • Strong conversion of EBITDA to free cash flow

  • Current priority for deployment of excess capital:

    • Acquisitions and construction of newly permitted E&P waste facilities;

    • Share repurchases; and

    • Debt reduction.

  • Track record for increasing quarterly cash dividends every October

    • Dividends account for less than 20% of our free cash flow

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Long term objectives

LONG-TERM OBJECTIVES

  • 8%-10% annual revenue growth balanced between organic and acquisitions

    • Maintain disciplined growth

  • Core solid waste price increase spread of 50-100bps over CPI

  • 15-30 bps EBITDA margin expansion per year, excluding acquisitions and changes in recycled commodity prices

    • Potentially greater margin expansion depending on growth in E&P waste activity

    • Slightly greater EBIT margin expansion given DD&A leverage

  • Double digit annual EPS and FCF/share growth

  • Maintain strong balance sheet as the right acquisitions are opportunistic

  • Increasing cash dividend and opportunistic share repurchases to return capital


Non gaap reconciliation schedules

NON-GAAP RECONCILIATION SCHEDULES


Imperial capital global opportunities conference september 18 2014

CORPORATE HEADQUARTERS

3 Waterway Square Place, Suite 110

The Woodlands, TX 77380

(832) 442-2200

INVESTOR RELATIONS

Worthing Jackman, EVP CFO Mary Anne Whitney, VP Finance

Phone: (832) 442-2266 Phone: (832) 442-2253

[email protected] [email protected]

http://wasteconnections.investorroom.com


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