PR Newswire | Oct 27, 2021 04:06PM EDT

Outlook

10/27 15:05 CDT

Waste Connections Reports Third Quarter 2021 Results And Raises Full Year Outlook TORONTO, Oct. 27, 2021

* Strong execution, accelerating solid waste pricing growth and continued strength in both resource recovery values and acquisition activity again drive outsized results and increased full year outlook * Revenue of $1.597 billion, up 14.9% year over year, exceeding outlook * Reports organic growth of 11.3%, including 7.3% solid waste price + volume growth, exceeding outlook * Net income(a) of $114.4 million, and adjusted EBITDA(b) of $505.6 million, or 31.7% of revenue, up sequentially from Q2 and up 60 basis points year over year * Net income and adjusted net income(b) of $0.44 and $0.89 per share, respectively * Year to date net cash provided by operating activities of $1.270 billion and adjusted free cash flow(b) of $825.8 million, or 18.2% of revenue * Year to date closed acquisitions of approximately $240 million in annualized revenues * Increases regularly quarterly dividend by 12.2% * Provides full year 2021 revenue outlook of approximately $6.110 billion, net income of approximately $633 million, adjusted EBITDA(b) of approximately $1.910 billion, net cash from operating activities of approximately $1.689 billion and adjusted free cash flow of approximately $1.025 billion

TORONTO, Oct. 27, 2021 /PRNewswire/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the third quarter of 2021.

"We delivered another top to bottom beat in the period on continued strength in solid waste pricing, higher recycled commodity values, and improving E&P waste activity, along with acquisitions closed during the period. More importantly, quality of revenue drove 60 basis points year-over-year adjusted EBITDA(b) margin expansion in the quarter, overcoming an estimated 40 basis points impact from margin dilutive acquisitions and hurricanes, putting us firmly on track to exceed the updated full year 2021 outlook we provided in August," said Worthing F. Jackman, President and Chief Executive Officer.

"Strong execution, proactive acceleration of solid waste pricing to address inflationary pressures, and outsized contribution from acquisitions completed in 2021, already position us for double-digit growth, underlying solid waste margin expansion and strong free cash flow conversion in 2022. Additional acquisitions expected to be completed later this year, and any continuation of trends in E&P waste activity or commodity-driven revenues, would provide incremental benefit."

Mr. Jackman continued, "As anticipated, the strength of our operating performance, free cash flow generation and balance sheet positioned us for another double-digit increase in our quarterly cash dividend, our eleventh straight year, demonstrating once again our ability to fund our differentiated growth strategy and outsized acquisition activity, along with an increasing return of capital to shareholders."

Q3 2021 Results

Revenue in the third quarter totaled $1.597 billion, up from $1.390 billion in the year ago period. Operating income was $285.1 million, which included $5.6 million in acquisition-related costs, $3.1 million of impairments and other operating items, and $0.9 million in fair value accounting changes to equity awards. This compares to operating income of $230.7 million in the third quarter of 2020, which included $7.9 million of costs primarily resulting from impairments and other operating items and acquisition-related costs. Net income in the third quarter was $114.4 million, or $0.44 per share on a diluted basis of 261.1 million shares, including a net of tax loss on debt extinguishment associated with the prepayment of senior notes of $84.2 million or $0.32 per share. In the year ago period, the Company reported net income of $158.0 million, or $0.60 per share on a diluted basis of 263.5 million shares.

Adjusted net income(b) in the third quarter was $233.1 million, or $0.89 per diluted share, versus $188.6 million, or $0.72 per diluted share, in the prior year period. Adjusted EBITDA(b) in the third quarter was $505.6 million and 31.7% of revenue, as compared to $432.6 million and 31.1% of revenue in the prior year period. Adjusted net income, adjusted net income per diluted share and adjusted EBITDA, all non-GAAP measures, primarily exclude impairments and acquisition-related items, as reflected in the detailed reconciliations in the attached tables.

Nine Months Year to Date Results

For the nine months ended September 30, 2021, revenue was $4.527 billion, up from $4.048 billion in the year ago period. Operating income, which included $9.8 million in impairments and other operating items, $7.6 million in fair value accounting changes to equity awards and $6.2 million in acquisition-related costs, was $790.3 million, as compared to operating income of $215.3 million for the same period in 2020, which included $453.1 million primarily related to impairments and other operating items.

Net income for the nine months ended September 30, 2021 was $451.7 million, or $1.72 per share on a diluted basis of 261.9 million shares. In the year ago period, the Company reported net income of $74.0 million, or $0.28 per share on a diluted basis of 263.7 million shares.

Adjusted net income(b) for the nine months ended September 30, 2021 was $629.5 million, or $2.39 per diluted share, compared to $517.2 million, or $1.96 per diluted share, in the year ago period. Adjusted EBITDA(b) for the nine months ended September 30, 2021 was $1.424 billion and 31.4% of revenue, up from $1.235 billion and 30.5% of revenue in the prior year period.

Updated 2021 Outlook

Waste Connections also updated its outlook for 2021, which assumes no change in the current economic environment or underlying economic trends, including as a result of or related to impacts from the COVID-19 pandemic. The Company's outlook excludes any impact from additional acquisitions that may close during the year, and expensing of transaction-related items. The outlook provided below is forward looking, and actual results may differ materially depending on risks and uncertainties detailed at the end of this release and in our periodic filings with the U.S. Securities and Exchange Commission and the securities commissions or similar regulatory authorities in Canada. Certain components of the outlook for 2021 are subject to quarterly fluctuations. See reconciliations in the attached tables.

* Revenue is estimated at approximately $6.110 billion, as compared to our revised revenue outlook of $5.975 billion provided in August. * Net income is estimated at approximately $633 million, and adjusted EBITDA(b) is estimated at approximately $1.910 billion, or about 31.3% of revenue, as compared to our revised adjusted EBITDA(b) outlook of $1.875 billion provided in August. * Capital expenditures are estimated at approximately $700 million, as compared to our revised capital expenditures outlook of approximately $675 million provided in August. * Net cash provided by operating activities is estimated at $1.689 billion, as compared to our revised outlook of $1.666 billion provided in August; adjusted free cash flow(b) is estimated at approximately $1.025 billion, or about 16.8% of revenue, as compared to our adjusted free cash flow outlook of $1.0 billion provided in August.

Q3 2021 Earnings Conference Call

Waste Connections will be hosting a conference call related to third quarter earnings on October 28th at 8:30 A.M. Eastern Time. A live audio webcast of the conference call can be accessed by visiting investors.wasteconnections.com and selecting "News & Events" from the website menu. Alternatively, listeners may access the call by dialing 800-915-4731 (within North America) or 212-231-2911 (international) approximately 10 minutes prior to the scheduled start time; a passcode is not required. A replay of the conference call will be available until November 4, 2021, by calling 800-633-8284 (within North America) or 402-977-9140 (international) and entering Passcode #21998075.

Waste Connections will be filing a Form 8-K on EDGAR and on SEDAR (as an "Other" document) prior to markets opening on October 28th, providing the Company's fourth quarter 2021 outlook for revenue, price plus volume growth for solid waste, and adjusted EBITDA(b).

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^ (a) All references to "Net income" refer to the financial statement line item"Net income attributable to Waste Connections".

^ (b) A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule.

About Waste Connections

Waste Connections is an integrated solid waste services company that provides non-hazardous waste collection, transfer and disposal services, along with resource recovery primarily through recycling and renewable fuels generation. The Company serves more than eight million residential, commercial and industrial customers in mostly exclusive and secondary markets across 44 states in the U.S. and six provinces in Canada. Waste Connections also provides non-hazardous oilfield waste treatment, recovery and disposal services in several basins across the U.S., as well as intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest. For more information, visit Waste Connections at wasteconnections.com.

Environmental, Social and Governance

Waste Connections views its Environmental, Social and Governance ("ESG") efforts as integral to its business, with initiatives consistent with its objective of long-term value creation. In 2020, the Company introduced long-term, aspirational ESG targets and committed over $500 million for investments to meet or exceed such sustainability targets. These investments primarily focus on reducing emissions, increasing resource recovery of both recyclable commodities and clean energy fuels, reducing reliance on off-site disposal for landfill leachate, further improving safety through reduced incidents and enhancing employee engagement through improved voluntary turnover and Servant Leadership scores. The Company's updated 2021 Sustainability Report provides progress updates on its targets and investments towards their achievement. For more information, visit the Waste Connections website at wasteconnections.com/sustainability.

Safe Harbor and Forward-Looking Information

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 ("PSLRA"), including "forward-looking information" within the meaning of applicable Canadian securities laws. These forward-looking statements are neither historical facts nor assurances of future performance and reflect Waste Connections' current beliefs and expectations regarding future events and operating performance. These forward-looking statements are often identified by the words "may," "might," "believes," "thinks," "expects," "estimate," "continue," "intends" or other words of similar meaning. All of the forward-looking statements included in this press release are made pursuant to the safe harbor provisions of the PSLRA and applicable securities laws in Canada. Forward-looking statements involve risks and uncertainties. Forward-looking statements in this press release include, but are not limited to, statements about expected 2021 and 2022 financial results, outlook and related assumptions, potential acquisition activity and return of capital to shareholders. Important factors that could cause actual results to differ, possibly materially, from those indicated by the forward-looking statements include, but are not limited to, risk factors detailed from time to time in the Company's filings with the SEC and the securities commissions or similar regulatory authorities in Canada. You should not place undue reliance on forward-looking statements, which speak only as of the date of this press release. Waste Connections undertakes no obligation to update the forward-looking statements set forth in this press release, whether as a result of new information, future events, or otherwise, unless required by applicable securities laws.

- financial tables attached -

CONTACT:

Mary Anne Whitney / (832) 442-2253 Joe Box / (832) 442-2153

maryannew@wasteconnections.com joe.box@wasteconnections.com

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2021

(Unaudited)

(in thousands of U.S. dollars, except share and per share amounts)

Three months ended Nine months ended

September 30, September 30,

2020 2021 2020 2021

Revenues $ 1,389,552 $ 1,597,168 $ 4,047,739 $ 4,527,042

Operatingexpenses:

Cost of operations 828,822 946,098 2,429,957 2,673,209

Selling, general 136,003 155,520 404,213 454,885and administrative

Depreciation 157,590 171,965 459,641 498,588

Amortization of 32,653 35,337 96,062 100,237intangibles

Impairments andother operating 3,805 3,104 442,582 9,819items

Operating income 230,679 285,144 215,284 790,304

Interest expense (40,636) (40,418) (119,562) (124,171)

Interest income 903 495 4,396 2,342

Other income 702 3,140 (3,046) 5,452(expense), net

Loss on earlyextinguishment of - (115,288) - (115,288)debt

Income beforeincome tax 191,648 133,073 97,072 558,639provision

Income tax (33,657) (18,419) (23,654) (106,578)provision

Net income 157,991 114,654 73,418 452,061

Plus (less): Netloss (income)attributable to 58 (273) 594 (325)noncontrollinginterests

Net incomeattributable to $ 158,049 $ 114,381 $ 74,012 $ 451,736Waste Connections

Earnings percommon shareattributable toWaste Connections'commonshareholders:

Basic $ 0.60 $ 0.44 $ 0.28 $ 1.73

Diluted $ 0.60 $ 0.44 $ 0.28 $ 1.72

Shares used in theper sharecalculations:

Basic 262,998,317 260,550,774 263,253,087 261,372,827

Diluted 263,507,486 261,145,220 263,718,001 261,879,754

Cash dividends per $ 0.185 $ 0.205 $ 0.555 $ 0.615common share

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands of U.S. dollars, except share and per share amounts)

December 31, September 30,

2020 2021

ASSETS

Current assets:

Cash and equivalents $ 617,294 $ 339,479

Accounts receivable, net of allowance for creditlosses of $19,380 and $20,306 at December 31, 630,264 692,0512020 and September 30, 2021, respectively

Prepaid expenses and other current assets 160,714 128,758

Total current assets 1,408,272 1,160,288

Restricted cash 97,095 118,893

Restricted investments 57,516 58,430

Property and equipment, net 5,284,506 5,414,789

Operating lease right-of-use assets 170,923 162,640

Goodwill 5,726,650 6,006,533

Intangible assets, net 1,155,079 1,264,728

Other assets, net 92,323 88,531

Total assets $ 13,992,364 $ 14,274,832

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable $ 290,820 $ 341,211

Book overdraft 17,079 16,527

Deferred revenue 233,596 254,135

Accrued liabilities 404,923 448,541

Current portion of operating lease liabilities 30,671 37,236

Current portion of contingent consideration 43,297 42,359

Current portion of long-term debt and notes 8,268 5,289payable

Total current liabilities 1,028,654 1,145,298

Long-term portion of debt and notes payable 4,708,678 4,869,213

Long-term portion of operating lease liabilities 147,223 132,589

Long-term portion of contingent consideration 28,439 24,592

Deferred income taxes 760,044 777,968

Other long-term liabilities 455,888 442,016

Total liabilities 7,128,926 7,391,676

Commitments and contingencies

Equity:

Common shares: 262,899,174 shares issued and262,824,990 shares outstanding at December 31, 4,030,368 3,726,1342020; 260,526,784 shares issued and 260,453,918shares outstanding at September 30, 2021

Additional paid-in capital 170,555 184,995

Accumulated other comprehensive income (loss) (651) 17,553

Treasury shares: 74,184 and 72,866 shares atDecember 31, 2020 and September 30, 2021, - -respectively

Retained earnings 2,659,001 2,949,984

Total Waste Connections' equity 6,859,273 6,878,666

Noncontrolling interest in subsidiaries 4,165 4,490

Total equity 6,863,438 6,883,156

$ 13,992,364 $ 14,274,832

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2021

(Unaudited)

(in thousands of U.S. dollars)

Nine months ended September 30,

2020 2021

Cash flows from operating activities:

Net income $ 73,418 $ 452,061

Adjustments to reconcile net income to net cash provided by operatingactivities:

Loss on disposal of assets and impairments 423,832 9,302

Depreciation 459,641 498,588

Amortization of intangibles 96,062 100,237

Loss on early extinguishment of debt - 115,288

Deferred income taxes, net of acquisitions (77,613) (24,282)

Amortization of debt issuance costs 6,146 3,887

Share-based compensation 38,316 42,694

Interest accretion 12,843 12,068

Payment of contingent consideration recorded in earnings - (520)

Adjustments to contingent consideration 16,852 89

Other 936 (1,286)

Net change in operating assets and liabilities, net of acquisitions 135,140 61,835

Net cash provided by operating activities 1,185,573 1,269,961

Cash flows from investing activities:

Payments for acquisitions, net of cash acquired (173,810) (561,276)

Capital expenditures for property and equipment (420,694) (479,480)

Capital expenditures for undeveloped landfill property (66,809) -

Proceeds from disposal of assets 11,564 10,109

Other (317) (4,193)

Net cash used in investing activities (650,066) (1,034,840)

Cash flows from financing activities:

Proceeds from long-term debt 1,790,625 1,943,192

Principal payments on notes payable and long-term debt (1,505,641) (1,814,034)

Premiums paid on early extinguishment of debt - (110,617)

Payment of contingent consideration recorded at acquisition date (2,812) (7,998)

Change in book overdraft (862) (563)

Payments for repurchase of common shares (105,654) (305,640)

Payments for cash dividends (145,921) (160,754)

Tax withholdings related to net share settlements of equity-based compensation (23,390) (18,576)

Debt issuance costs (11,117) (17,997)

Proceeds from issuance of shares under employee share purchase plan - 1,275

Proceeds from sale of common shares held in trust 679 131

Net cash used in financing activities (4,093) (491,581)

Effect of exchange rate changes on cash, cash equivalents and restricted cash 980 443

Net increase (decrease) in cash, cash equivalents and restricted cash 532,394 (256,017)

Cash, cash equivalents and restricted cash at beginning of period 423,221 714,389

Cash, cash equivalents and restricted cash at end of period $ 955,615 $ 458,372

ADDITIONAL STATISTICS

(in thousands of U.S. dollars, except where noted)

Solid Waste Internal Growth: The following table reflects a breakdown of thecomponents of our solid waste internal growth for the three andnine month periods ended September 30, 2021:

Three months ended Nine months ended September 30, 2021 September 30, 2021

Core Price 4.7 % 4.6 %

Surcharges 0.4 % 0.1 %

Volume 2.2 % 1.8 %

Recycling 2.1 % 1.5 %

Foreign Exchange Impact 0.7 % 1.0 %

Total 10.1 % 9.0 %

Revenue Breakdown: The following table reflects a breakdown of our revenue forthe three month periods ended September 30, 2020 and 2021:

Three months ended September 30, 2020

Inter-company Reported Revenue % Elimination Revenue

Solid Waste Collection $ 1,010,497 $ (3,940) $ 1,006,557 72.4 %

Solid Waste Disposal and Transfer 514,705 (203,136) 311,569 22.4 %

Solid Waste Recycling 21,377 (656) 20,721 1.5 %

E&P Waste Treatment, Recovery and Disposal 26,218 (2,575) 23,643 1.7 %

Intermodal and Other 27,141 (79) 27,062 2.0 %

Total $ 1,599,938 $ (210,386) $ 1,389,552 100.0 %

Three months ended September 30, 2021

Inter-company Reported Revenue % Elimination Revenue

Solid Waste Collection $ 1,137,206 $ (3,091) $ 1,134,115 71.0 %

Solid Waste Disposal and Transfer 553,974 (217,899) 336,075 21.0 %

Solid Waste Recycling 55,772 (1,354) 54,418 3.4 %

E&P Waste Treatment, Recovery and Disposal 38,519 (3,560) 34,959 2.2 %

Intermodal and Other 38,377 (776) 37,601 2.4 %

Total $ 1,823,848 $ (226,680) $ 1,597,168 100.0 %

Contribution from Acquisitions: The following table reflects revenues fromacquisitions, net of divestitures, for the three and nine month periodsended September 30, 2020 and 2021:

Three months ended Nine months ended September 30, September 30,

2020 2021 2020 2021

Acquisitions, net $ 44,214 $ 51,368 $ 144,509 $ 136,035

ADDITIONAL STATISTICS (continued)

(in thousands of U.S. dollars, except where noted)

Other Cash Flow Items: The following table reflects cash interest and cashtaxes for the three and nine month periods ended September 30, 2020 and 2021:

Three months ended Nine months ended

September 30, September 30,

2020 2021 2020 2021

Cash Interest Paid $ 23,572 $ 38,685 $ 86,400 $ 120,647

Cash Taxes Paid 47,965 29,411 61,015 90,104

Debt to Book Capitalization as of September 30, 2021: 41%

Internalization for the three months ended September 30, 2021: 56%

Days Sales Outstanding for the three months ended September 30, 2021: 40 (25net of deferred revenue)

Share Information for the three months ended September 30, 2021:

Basic shares outstanding 260,550,774

Dilutive effect of equity-based awards 594,446

Diluted shares outstanding 261,145,220

NON-GAAP RECONCILIATION SCHEDULE

(in thousands of U.S. dollars, except where noted)

Reconciliation of Adjusted EBITDA:

Adjusted EBITDA, a non-GAAP financial measure, is provided supplementallybecause it is widely used by investors as a performance and valuation measurein the solid waste industry. Management uses adjusted EBITDA as one of theprincipal measures to evaluate and monitor the ongoing financial performance ofWaste Connections' operations. Waste Connections defines adjusted EBITDA asnet income attributable to Waste Connections, plus or minus net income (loss)attributable to noncontrolling interests, plus income tax provision, plusinterest expense, less interest income, plus depreciation and amortizationexpense, plus closure and post-closure accretion expense, plus or minus anyloss or gain on impairments and other operating items, plus other expense, lessother income. Waste Connections further adjusts this calculation to excludethe effects of other items management believes impact the ability to assess theoperating performance of its business. This measure is not a substitute for,and should be used in conjunction with, GAAP financial measures. Othercompanies may calculate adjusted EBITDA differently.

Three months ended Nine months ended

September 30, September 30,

2020 2021 2020 2021

Net income attributable to Waste Connections $ 158,049 $ 114,381 $ 74,012 $ 451,736

Plus/(less): Net income (loss) attributable to noncontrolling interests (58) 273 (594) 325

Plus: Income tax provision 33,657 18,419 23,654 106,578

Plus: Interest expense 40,636 40,418 119,562 124,171

Less: Interest income (903) (495) (4,396) (2,342)

Plus: Depreciation and amortization 190,243 207,302 555,703 598,825

Plus: Closure and post-closure accretion 3,723 3,544 11,340 10,919

Plus: Impairments and other operating items 3,805 3,104 442,582 9,819

Plus/(Less): Other expense (income), net (702) (3,140) 3,046 (5,452)

Plus: Loss on early extinguishment of debt - 115,288 - 115,288

Adjustments:

Plus: Transaction-related expenses^(a) 2,335 5,637 4,497 6,220

Plus: Fair value changes to equity awards^(b) 1,798 914 6,021 7,638

Adjusted EBITDA $ 432,583 $ 505,645 $ 1,235,427 $ 1,423,725

As % of revenues 31.1% 31.7% 30.5% 31.4%

____________________________

(a) Reflects the addback of acquisition-related transaction costs.

(b) Reflects fair value accounting changes associated with certain equity awards.

NON-GAAP RECONCILIATION SCHEDULE (continued)

(in thousands of U.S. dollars, except where noted)

Reconciliation of Adjusted Free Cash Flow:

Adjusted free cash flow, a non-GAAP financial measure, is providedsupplementally because it is widely used by investors as a valuation andliquidity measure in the solid waste industry. Management uses adjusted freecash flow as one of the principal measures to evaluate and monitor the ongoingfinancial performance of Waste Connections' operations. Waste Connectionsdefines adjusted free cash flow as net cash provided by operating activities,plus or minus change in book overdraft, plus proceeds from disposal of assets,less capital expenditures for property and equipment and distributions tononcontrolling interests. Waste Connections further adjusts this calculationto exclude the effects of items management believes impact the ability toassess the operating performance of its business. This measure is not asubstitute for, and should be used in conjunction with, GAAP liquidity orfinancial measures. Other companies may calculate adjusted free cash flowdifferently.

Three months ended Nine months ended

September 30, September 30,

2020 2021 2020 2021

Net cash provided by operating activities $ 432,388 $ 421,482 $ 1,185,573 $ 1,269,961

Less: Change in book overdraft (256) (373) (862) (563)

Plus: Proceeds from disposal of assets 922 2,204 11,564 10,109

Less: Capital expenditures for property and equipment (151,983) (208,089) (420,694) (479,480)

Adjustments:

Payment of contingent consideration recorded in earnings^(a) - - - 520

Cash received for divestitures^(b) - - (4,974) -

Transaction-related expenses^(c) 2,335 25,090 4,497 25,673

Pre-existing Progressive Waste share-based grants^(d) 1,015 173 7,455 317

Tax effect^(e) (599) (485) (4,168) (699)

Adjusted free cash flow $ 283,822 $ 240,002 $ 778,391 $ 825,838

As % of revenues 20.4% 15.0% 19.2% 18.2%

___________________________

Reflects the addback of acquisition-related payments for contingent consideration that were recorded as expenses in earnings and as a component(a) of cash flows from operating activities as the amounts paid exceeded the fair value of the contingent consideration recorded at the acquisition date.

(b) Reflects the elimination of cash received in conjunction with the divestiture of certain operations.

(c) Reflects the addback of acquisition-related transaction costs and settlement of an acquired compensation liability.

(d) Reflects the cash settlement of pre-existing Progressive Waste share-based awards during the period.

(e) The aggregate tax effect of footnotes (a) through (d) is calculated based on the applied tax rates for the respective periods.

NON-GAAP RECONCILIATION SCHEDULE (continued)

(in thousands of U.S. dollars, except per share amounts)

Reconciliation of Adjusted Net Income attributable to Waste Connections andAdjusted Net Income per Diluted Share attributable to Waste Connections:

Adjusted net income attributable to Waste Connections and adjusted net incomeper diluted share attributable to Waste Connections, both non-GAAP financialmeasures, are provided supplementally because they are widely used by investorsas a valuation measure in the solid waste industry. Management uses adjustednet income attributable to Waste Connections and adjusted net income perdiluted share attributable to Waste Connections as one of the principalmeasures to evaluate and monitor the ongoing financial performance of WasteConnections' operations. Waste Connections provides adjusted net incomeattributable to Waste Connections to exclude the effects of items managementbelieves impact the comparability of operating results between periods. Adjusted net income attributable to Waste Connections has limitations due tothe fact that it excludes items that have an impact on the Company's financialcondition and results of operations. Adjusted net income attributable to WasteConnections and adjusted net income per diluted share attributable to WasteConnections are not a substitute for, and should be used in conjunction with,GAAP financial measures. Other companies may calculate these non-GAAPfinancial measures differently.

Three months ended Nine months ended

September 30, September 30,

2020 2021 2020 2021

Reported net income attributable to Waste Connections $ 158,049 $ 114,381 $ 74,012 $ 451,736

Adjustments:

Amortization of intangibles^(a) 32,653 35,337 96,062 100,237

Impairments and other operating items^(b) 3,805 3,104 442,582 9,819

Transaction-related expenses^(c) 2,335 5,637 4,497 6,220

Fair value changes to equity awards^(d) 1,798 914 6,021 7,638

Loss on early extinguishment of debt^(e) - 115,288 - 115,288

Tax effect^(f) (10,000) (41,531) (137,523) (61,466)

Tax items^(g) - - 31,508 -

Adjusted net income attributable to Waste Connections $ 188,640 $ 233,130 $ 517,159 $ 629,472

Diluted earnings per common share attributable to WasteConnections' common shareholders:

Reported net income $ 0.60 $ 0.44 $ 0.28 $ 1.72

Adjusted net income $ 0.72 $ 0.89 $ 1.96 $ 2.39

____________________________

(a) Reflects the elimination of the non-cash amortization of acquisition-related intangible assets.

(b) Reflects the addback of impairments and other operating items.

(c) Reflects the addback of acquisition-related transaction costs.

(d) Reflects fair value accounting changes associated with certain equity awards.

(e) Reflects the make-whole premium and related fees associated with the early termination of $1.5 billion in senior notes.

(f) The aggregate tax effect of the adjustments in footnotes (a) through (e) is calculated based on the applied tax rates for the respective periods.

Reflects the impact of a portion of the Company's 2019 inter-entity payments no longer being deductible for tax purposes due to the(g) finalization of tax regulations on April 7, 2020 under Internal Revenue Code section 267A and an increase in deferred tax liabilities resulting from the E&P impairment.

UPDATED 2021 OUTLOOK

NON-GAAP RECONCILIATION SCHEDULE

(in thousands of U.S. dollars, except where noted)

Reconciliation of Adjusted EBITDA:

2021 Outlook

August Current Observation Estimates Estimates

Net income attributable to Waste Connections $ 690,000 $ 633,000

Plus: Income tax provision (a) 184,294 156,487 Approximate 20.5% effective rate

Plus: Interest expense, net 162,000 162,000

Plus: Depreciation and Depletion 680,000 671,000 Approximately 11.0% of revenue

Plus: Amortization 132,000 139,000

Plus: Closure and post-closure accretion 15,000 15,000

Plus: Loss on early extinguishment of debt (b) - 115,288

Plus: Impairments and other operating items (b) 6,712 9,819

Plus: Other income, net (b) (2,312) (5,452)

Adjustments: (b)

Plus: Transaction-related expenses 583 6,220

Plus: Fair value changes to equity awards 6,723 7,638

Adjusted EBITDA $ 1,875,000 $ 1,910,000 Approximately 31.3% of revenue

____________________________

Approximately 20.5% full year effective tax rate, including amounts(a) reported for the nine month period ended September 30, 2021; figure excludes tax impact from early debt extinguishment costs.

(b) Reflects amounts reported for the nine month period ended September 30, 2021, as shown on page 9.

Reconciliation of Adjusted Free Cash Flow:

2021 Outlook

August Current Estimates Estimates

Net cash provided by operating activities $ 1,666,061 $ 1,689,080

Plus: Proceeds from disposal of assets (a) 7,906 10,109

Less: Capital expenditures for property and equipment (675,000) (700,000)

Adjustments: (a)

Payment of contingent consideration recorded in earnings 520 520

Transaction-related expenses 583 25,673

Pre-existing Progressive Waste share-based grants 144 317

Tax effect (214) (699)

Adjusted free cash flow $ 1,000,000 $ 1,025,000

As % of revenues 16.7% 16.8%

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(a) Reflects amounts reported for the nine month period ended September 30, 2021, as shown on page 10.

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SOURCE Waste Connections, Inc.