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W ASTE C ONNECTIONS I NC. Connect with the Future Credit Suisse Industrial & Environmental Services Conference May 14, 2013
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SAFE HARBORS STATEMENT
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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
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WCN: FINANCIAL HIGHLIGHTS *A Non-GAAP measure; see appendix for reconciliation schedules.
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SOLID WASTE: A DIFFERENTIATED STRATEGY
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SOLID WASTE: 87% OF REVENUE Over 2 million customers across 30 states
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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
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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
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TARGETING ATTRACTIVE MARKETS Integrated OperationsNon-Integrated Operations Exclusive Markets: - #1 EBITDA margin - #1 EBIT margin - #1 FCF margin - #1 ROA -#3 EBITDA margin -#2(tie) EBIT margin -#2 FCF margin -#2 ROA Competitive Markets: - #2 EBITDA margin - #2(tie) EBIT margin - #3 FCF margin - #3 ROA -#4 EBITDA margin -#4 EBIT margin -#4 FCF margin -#4 ROA 90% of WCN Solid Waste Note: Rankings reflect relative attractiveness to WCN
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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
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E&P WASTE: MARKET LEADER IN TREATMENT, DISPOSAL & RECOVERY
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R360 / E&P WASTE: 13% OF REVENUE Strong asset positioning across diverse oil-rich basins
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R360 / E&P WASTE HIGHLIGHTS WCN => entered E&P waste business in 2010; expanded presence across a dozen of our landfills, and then again thru the R360 acquisition in October 2012 R360 => 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 => 26 facilities Pursuing permits for several greenfield development opportunities High margin 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
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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; Debt reduction; and Share repurchases. Track record for increasing quarterly cash dividends every October Dividends account for less than 20% of our free cash flow 15
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Q1 2013 HIGHLIGHTS Revenue: $449.9 million, up 19.5% YoY 87% MSW / 13% E&P Solid waste organic growth exceeded expectations: 3.2% price -1.9% volume -0.4% recycling and other Adjusted EBITDA: $146.1 million, or 32.5% of revenue, up 25.6% YoY Higher margin acquisitions drove a 160bps YoY margin increase => 50bps above expectations Adjusted free cash flow: $100.2 million, or 22.3% of revenue, up 28.9% YoY Paid down over $100 million of debt during the quarter Observation: improving landfill volumes and ramping E&P activity provide a solid entry point into Q2
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Q2 2013 OUTLOOK (as of April 25 th ) Revenue: $480 - $482 million, up 17% YoY Slight increase in E&P as % of total vs. Q1, given the potential seasonal ramp in activity Solid waste organic growth assumptions: Pricing growth of almost 3% Volume growth between -1% and -1.5% Recycling and other at about -1.0% Adjusted EBITDA: $164 - $165 million, or 34.2% of revenue up about 220bps YoY Completed refinancing of existing revolver and term loan to reduce borrowing costs; current costs @ 3.2x leverage ratio: Revolver: Libor + 150 bps Term Loan: Libor + 187.5 bps
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2013 OUTLOOK (as of February 20 th ) Revenue: $1.925 billion - $1.95 billion, up 16.5% Pricing growth of about 3% Volume growth between -0.5% and -1.0% Recycling and other slightly negative $250 million - $275 million from E&P waste EBITDA margin: about 34.5%, up 270 bps Double digit EPS growth, in spite of 100 bps increase in non-cash D&A % resulting from acquisition-related accounting for the R360 transaction Free cash flow: at least $300 million => $2.50 per diluted share Additional acquisitions, newly permitted E&P waste facilities, increased recycled commodity prices or improving economy would provide further upside
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LONG-TERM OBJECTIVES 8%-12% annual revenue growth balanced between organic and acquisitions Maintain disciplined growth Core solid waste price increase spread of 50-100bps over CPI 15-30bps per year EBITDA margin expansion, excluding acquisition impact and changes in recycling commodity prices 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 Above average EPS accretion from acquisitions currently given low cost of incremental debt Increasing cash dividend and opportunistic share repurchases to return capital
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NON-GAAP RECONCILIATION SCHEDULES
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_________________________________________________________________________________________________________________ *Adjusted EBITDA, a non-GAAP financial measure, is provided supplementally because it is widely used by investors as a performance and valuation measure in the solid waste industry. Other companies may calculate differently.
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W ASTE C ONNECTIONS I NC. Connect with the Future
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