TORONTO – Waste Connections, Inc. exceed its Q1 2020 profit outlook in spite of the pandemic.
“We couldn’t be any prouder of our company’s preparedness for and execution during this pandemic, which should leave us well-positioned when we emerge from it. An extremely strong start to the year, which had put us firmly on track to exceed our outlook, was interrupted in March by measures taken across the U.S. and Canada to limit or control the spread of COVID-19,” said Worthing Jackman, president and CEO, in a statement.
“In spite of the resulting significant slowdown in economic activity and impact to revenue, we exceeded our first quarter outlook for adjusted EBITDA and delivered adjusted free cash flow of $235.7 million, or 17.4 percent of revenue and 57.7 percent of adjusted EBITDA, while also shifting our focus to one of preparedness.”
During the first quarter of 2020 revenue was down, primarily in solid waste commercial collection and solid waste transfer and disposal resulting from a slowdown in activity associated with shelter-in-place or other closure restrictions or requirements imposed in response to the COVID-19 pandemic.
This impact occurred in March, when commercial collection activity slowed down in certain markets due to service reductions or suspensions by customers whose business activity was curtailed by such measures, with third party transfer and disposal volumes typically following similar patterns to hauling activity.
In addition, and to a lesser extent, solid waste roll-off revenue was impacted in some markets, and year-over-year revenue reductions in E&P segment resulting primarily from the drop in the value of crude oil due to increased global supplies may also be related to COVID-19.
Markets in Canada and the Northeast U.S. were hardest hit. In the aggregate, the slowdown in activity is estimated to have resulted in a decline of approximately $12 million in revenue. As a result of the expected continued slowdown in activity levels, the coompany reduced projected 2020 capital expenditures by approximately $110 million.
The second quarter will be the first full quarter to reflect the impacts from COVID-19. In April, revenue on a reported basis declined six percent year-over-year, or approximately 9.3 percent, excluding acquisitions completed since the year ago period.
Solid waste collection, transfer and disposal revenue was down 6.9 percent year-over-year on a same store basis, or down 3.2 percent excluding Canada and the Northeast U.S., which were hardest hit, and recent trends suggest that such comparisons in subsequent months should show sequential improvement.
In late April over 70 percent of locations saw mid to high single digit percentage upticks over weekly lows in solid waste landfill volumes and roll-off activity.
Additionally, about 12 percent of solid waste commercial customers and nine percent of associated revenue in competitive markets that had suspended or reduced service due to COVID-19, have since reached out for either a resumption of service or an increase in frequency. E&P waste revenue in April was $14.2 million, down 33 percent from the prior year.
“We believe the financial impact of the COVID-19 outbreak and the pace of recovery remain uncertain at this time. The severity and duration of varying impacts across markets, the shape of any economic recovery, and any additional acquisitions completed during the year will influence the extent to which our results are impacted,” Jackman said.
“However, assuming that April reflects the depths of any impact, solid waste trends have improved sequentially late in the month and into early May; a continuing economic recovery should reduce the revenue impact going forward.”