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Imperial Capital Global Opportunities Conference September 18, 2014

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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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Presentation Transcript
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
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
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
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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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