SECURE ANNOUNCES 2024 FIRST QUARTER RESULTS
-
Adjusted EBITDA1 of
$132 million ($0.47 /basic share) -
Discretionary Free Cash Flow1 of
$93 million ($0.33 /basic share) -
Strengthened our capital structure with debt repayment and refinancing. At
March 31, 2024 , the Corporation had$264 million of cash and$751 million in available borrowing capacity, subject to covenant restrictions, providing ample liquidity for shareholder returns and funding of growth initiatives -
2024 planned growth expenditures increased to approximately
$75 million (from$50 million previously announced) with customer support for infrastructure expansion projects - Intention to launch a Substantial Issuer Bid next week as part of our capital allocation strategy
"We're pleased to report a solid start to 2024, with first-quarter results meeting our expectations, allowing us to narrow our Adjusted EBITDA guidance to
"Over the last quarter, the Corporation successfully refinanced its long-term debt and continued to deliver shareholder returns through dividends and share buybacks, while maintaining significant financial flexibility. Given our positive operational results in the first quarter, the Board of Directors and management continue to believe that a significant gap exists between SECURE's current market valuation and that of peers in the waste management and energy infrastructure sector. In light of these factors, alongside ongoing initiatives, we intend to initiate a Substantial Issuer Bid next week as a key element of SECURE's capital allocation strategy."
FIRST QUARTER HIGHLIGHTS
- Closed the sale of 29 facilities to Waste Connections, Inc. (through its wholly owned subsidiary) for
$1.15 billion onFebruary 1, 2024 (the "Sale Transaction"). The 29 facilities were formerly owned byTervita Corporation and were ordered to be divested by theCompetition Tribunal . - Repaid the entire amount drawn on the
$800 million senior secured revolving credit facility, excluding letters of credit. - Redeemed the outstanding
US$153 million aggregate principal amount of 11% senior secured notes due 2025. - Closed the offering of
$300 million aggregate principal amount of 6.75% senior unsecured notes due 2029. Net proceeds from the offering, along with cash on hand, were used to redeem the outstanding$340 million aggregate principal amount of 7.25% senior unsecured notes due 2026. - Repurchased and cancelled 12,055,510 shares under the normal course issuer bid at a weighted average price per share of
$10.47 for a total of$126 million , reducing our shares outstanding by 4% in the first quarter. The Corporation repurchased an additional 2,812,700 share subsequent to quarter end. - Paid a quarterly dividend of
$0.10 per common share, which currently represents an attractive yield of 3.5% on our common shares compared to peers. - Generated revenue (excluding oil purchase and resale) of
$360 million , a decrease of 13% from the first quarter of 2023, primarily related to the impact of the Sale Transaction, and the divestiture of two non-core oilfield service business units in 2023, partially offset by higher volumes and improved margins across the Corporation's remaining infrastructure network. - Recorded net income of
$422 million or$1.50 per basic share, an increase of$367 million or$1.32 per basic share compared to the first quarter of 2023. The increase was primarily driven by the gain of$520 million recognized on the Sale Transaction, net of the current and deferred tax expenses resulting from the gain. - Achieved Adjusted EBITDA of
$132 million ($0.47 per basic share), a decrease of 13% to the first quarter of 2023 (4% on a per basic share basis) due to the same factors impacting revenue. However, the decrease in Adjusted EBITDA per basic share was partially offset by a reduction in the number of common shares outstanding resulting from ongoing share repurchases over the past year, which resulted in a decrease of 8% to the weighted average basic shares outstanding in the first quarter of 2024 from the 2023 comparative period. - Generated funds flow from operations of
$108 million ($0.38 per basic share), a decrease of 21% to the first quarter of 2023 (14% on a per basic share basis) as a result of lower operating profit resulting from the Sale Transaction. - Generated Discretionary Free Cash Flow of
$93 million ($0.33 per basic share), a decrease of 24% to the first quarter of 2023 (18% on a per basic share basis) as lower Adjusted EBITDA was partially offset by reduced spending on sustaining capital due to reduced facility count following the Sale Transaction.
The Corporation's operating and financial highlights for the three months ended
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Three months ended
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($ millions except share and per share data) |
2024 |
2023 |
% change |
Revenue (excludes oil purchase and resale) |
360 |
416 |
(13) |
Oil purchase and resale |
2,489 |
1,491 |
67 |
Total revenue |
2,849 |
1,907 |
49 |
Adjusted EBITDA (1) |
132 |
151 |
(13) |
Per share ($), basic (1) |
0.47 |
0.49 |
(4) |
Per share ($), diluted (1) |
0.46 |
0.49 |
(6) |
Net income |
422 |
55 |
667 |
Per share ($), basic |
1.50 |
0.18 |
733 |
Per share ($), diluted |
1.47 |
0.18 |
717 |
Funds flow from operations |
108 |
136 |
(21) |
Per share ($), basic and diluted (1) |
0.38 |
0.44 |
(14) |
Discretionary free cash flow (1) |
93 |
122 |
(24) |
Per share ($), basic (1) |
0.33 |
0.40 |
(18) |
Per share ($), diluted (1) |
0.32 |
0.39 |
(18) |
Capital expenditures (2) |
19 |
46 |
(59) |
Dividends declared per common share |
0.1000 |
0.1000 |
— |
Total assets |
2,645 |
2,830 |
(7) |
Long-term liabilities |
543 |
1,184 |
(54) |
Common shares - end of period |
279,071,264 |
300,818,846 |
(7) |
Weighted average common shares: |
|
|
|
Basic |
281,557,907 |
306,517,269 |
(8) |
Diluted |
286,486,941 |
310,026,987 |
(8) |
1 Non-GAAP financial measure/ratio. Refer to the "Non-GAAP and other specified financial measures" section herein. |
2 The Corporation classifies capital expenditures as either growth, acquisition or sustaining capital. Refer to "Operational Definitions" in the MD&A for further information. |
OUTLOOK
SECURE is extremely well positioned for success with a strong industry backdrop, growth opportunities, and the financial capacity to execute on our strategic initiatives and deliver enhanced shareholder returns. With the
Proceeds from the Sale Transaction, as well as continued strong free cash flow generation, provides the Corporation with significant capital allocation optionality for 2024 and beyond, facilitating our ability to execute on all SECURE's strategic priorities. With a solid foundation and clear direction, we're confident in our ability to protect the base business and seize new opportunities to create value for our shareholders. We also remain committed to enhanced shareholder returns through share repurchases and our
2024 EXPECTATIONS
- Adjusted EBITDA of
$450-$465 million , the high end of the range previously provided of$440-$465 million . Excluding Corporate costs, SECURE anticipates approximately 70% of Adjusted EBITDA will be attributable to the Waste Management reporting segment in 2024, with the remaining approximately 30% of Adjusted EBITDA generated from the Energy Infrastructure segment. - Continued robust Adjusted EBITDA margins as we focus on optimizing the business, targeting additional operating efficiencies, and continually improving operating cash flow.
- High Discretionary Free Cash Flow conversion with low sustaining capital and debt service requirements.
- Growth capital expenditures will increase by
$25 million to approximately$75 million for 2024. The increase relates to customer agreements for a produced water pipeline to a waste processing facility, as well as processing equipment for phase three at theClearwater heavy oil terminal. With a solid pipeline of organic growth opportunities, the Corporation continues to pursue growth strategies to expand its infrastructure network with new project announcements following the finalization of customer agreements. Additionally, the Corporation will consider acquisitions that meet its investment criteria and enhance its core operations in waste management and energy infrastructure. - Sustaining capital expenditures of approximately
$60 million , including landfill expansions. - Asset retirement obligation expenditures of approximately
$15 million . - Continued share repurchases, including by means of a Substantial Issuer Bid in the second quarter of 2024, based on, among other things, market conditions and the discretion of the Board of Directors.
- Annualized base dividend of
$0.40 per share, which equates to a total of approximately$110 million per year based on current issued and outstanding shares. - Allen Gransch, President, to succeed
Rene Amirault as Chief Executive Officer effectiveMay 1, 2024 . Rene will remain on the Board of Directors as Vice Chair. - Election of Allen Gransch to the Board of Directors at the Corporation's Annual General Meeting of Shareholders on
April 26, 2024 . The Board of Directors will remain at eight directors, withBrad Munro not seeking re-election. - Release of our 2023 Sustainability Report and second
Task Force on Climate-Related Financial Disclosures (TCFD) report inMay 2024 , demonstrating our ongoing commitment to transparent reporting.
"I'd like to congratulate
"As previously announced, Rene will retire as CEO on
"I'm very privileged to be taking over as CEO at this time," said
NON-GAAP AND OTHER SPECIFIED FINANCIAL MEASURES
The Corporation uses accounting principles that are generally accepted in
However, these measures should not be used as an alternative to IFRS measures because they are not standardized financial measures under IFRS and therefore might not be comparable to similar financial measures disclosed by other companies. See the "Non-GAAP and other specified financial measures" section of the Corporation's MD&A for the three months ended
Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EBITDA per share
Adjusted EBITDA is calculated as noted in the table below and reflects items that the Corporation considers appropriate to adjust given the irregular nature and relevance to comparable operations. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by revenue (excluding oil purchase and resale). Adjusted EBITDA per basic and diluted share is defined as Adjusted EBITDA divided by basic and diluted weighted average common shares. For the three months ended
The following table reconciles the Corporation's net income, being the most directly comparable financial measure disclosed in the Corporation's financial statements, to Adjusted EBITDA for the three months ended
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Three months ended
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|
2024 |
2023 |
% Change |
Net income |
422 |
55 |
667 |
Adjustments: |
|
|
|
Depreciation, depletion and amortization (1) |
45 |
54 |
(17) |
Share-based compensation (1) |
14 |
9 |
56 |
Interest, accretion and finance costs |
18 |
23 |
(22) |
Gain on asset divestitures |
(520) |
— |
100 |
Other expense (income) |
14 |
(8) |
(275) |
Unrealized loss (gain) on mark to market transactions (2) |
1 |
(3) |
(133) |
Current tax expense |
27 |
3 |
800 |
Deferred tax expense |
111 |
15 |
640 |
Transaction and related costs |
— |
3 |
(100) |
Adjusted EBITDA |
132 |
151 |
(13) |
(1) Included in cost of sales and/or G&A expenses on the Consolidated Statements of Comprehensive Income. |
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(2) Includes amounts presented in revenue on the Consolidated Statements of Comprehensive Income. Excludes mark to market transactions in connection with inventory storage positions. |
Discretionary Free Cash Flow and Discretionary Free Cash Flow per share
Discretionary Free Cash Flow is defined as funds flow from operations adjusted for sustaining capital expenditures, and lease payments. The Corporation may deduct or include additional items in its calculation of Discretionary Free Cash Flow that are unusual, non-recurring, or non-operating in nature. Discretionary Free Cash Flow per basic and diluted share is defined as Discretionary Free Cash Flow divided by basic and diluted weighted average common shares. For the three months ended
The following table reconciles the Corporation's funds flow from operations, being the most directly comparable financial measure disclosed in the Corporation's financial statements, to Discretionary Free Cash Flow.
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Three months ended
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|
2024 |
2023 |
% Change |
Funds flow from operations |
108 |
136 |
(21) |
Adjustments: |
|
|
|
Sustaining capital (1) |
(8) |
(10) |
(20) |
Lease liability principal payments and other |
(7) |
(7) |
— |
Transaction and related costs |
- |
3 |
(100) |
Discretionary free cash flow |
93 |
122 |
(24) |
(1) The Corporation classifies capital expenditures as either growth, acquisition or sustaining capital. Refer to "Operational Definitions" in the MD&A for further information. |
FINANCIAL STATEMENTS AND MD&A
The Corporation's consolidated financial statements and notes thereto and Management's Discussion and Analysis for the three months ended
FIRST QUARTER 2024 CONFERENCE CALL
SECURE will host a conference call
FORWARD-LOOKING STATEMENTS
Certain statements contained or incorporated by reference in this press release constitute "forward-looking statements and/or "forward-looking information" within the meaning of applicable securities laws (collectively referred to as "forward-looking statements"). When used in this press release, the words "achieve", "advance", "anticipate", "believe", "can be", "capacity", "commit", "continue", "could", "deliver", "drive", "enhance", "ensure", "estimate", "execute", "expect", "focus", "forecast", "forward", "future", "goal", "grow", "integrate", "intend", "may", "maintain", "objective", "ongoing", "opportunity", "outlook", "plan", "position", "potential", "prioritize", "realize", "remain", "result", "seek", "should", "strategy", "target" "will", "would" and similar expressions, as they relate to SECURE, its management are intended to identify forward-looking statements. Such statements reflect the current views of SECURE and speak only as of the date of this press release.
In particular, this press release contains or implies forward-looking statements pertaining but not limited to: SECURE's expectations and priorities for 2024 and beyond and its ability and position to achieve such priorities; lower interest expenses; debt repayment; SECURE's expectations for 2024, including growth opportunities and sustaining capital expenditures; the ability of SECURE to execute on its strategic initiatives; SECURE's capital allocation priorities and strategies, including its intention to initiate a substantial issuer bid and the timing thereof, capital structure improvements, repayment of debt, payment of dividends and the amounts thereof, growing our base infrastructure with customer-backed contracts and share repurchases; expectations regarding sustained and expanded activity levels; the ability to create value for its shareholders; construction activities on the
Forward-looking statements are based on certain assumptions that SECURE has made in respect thereof as at the date of this press release regarding, among other things: SECURE's 2024 expectations; economic and operating conditions, including commodity prices, crude oil and natural gas storage levels, interest rates, exchange rates, and inflation; ability to enter into signing agreements with customers to backstop the investments and acquisition opportunities present; continued demand for the Corporation's infrastructure services and activity linked to long-term and recurring projects; the changes in market activity and growth will be consistent with industry activity in
Forward-looking statements involve significant known and unknown risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether such results will be achieved. Readers are cautioned not to place undue reliance on these statements as a number of factors could cause actual results to differ materially from the results discussed in these forward-looking statements, including but not limited to: general global financial conditions, including general economic conditions in
The guidance in respect of the Corporation's expectations of Adjusted EBITDA and Discretionary Free Cash Flow in 2024 in this press release may be considered to be a financial outlook for the purposes of applicable Canadian securities laws. Such information is based on assumptions about future events, including economic conditions and proposed courses of action, based on management's assessment of the relevant information currently available, and which may become available in the future. These projections constitute forward-looking statements and are based on several material factors and assumptions set out above. Actual results may differ significantly from such projections. See above for a discussion of certain risks that could cause actual results to vary. The financial outlook contained in this press release has been approved by management as of the date of this press release. Readers are cautioned that any such financial outlook contained herein should not be used for purposes other than those for which it is disclosed herein. SECURE and its management believe that the financial outlook contained in this press release has been prepared based on assumptions that are reasonable in the circumstances, reflecting management's best estimates and judgments, and represents, to the best of management's knowledge and opinion, expected and targeted financial results. However, because this information is highly subjective, it should not be relied on as necessarily indicative of future results.
Although forward-looking statements contained in this press release are based upon what the Corporation believes are reasonable assumptions, the Corporation cannot assure investors that actual results will be consistent with these forward-looking statements. The forward-looking statements in this press release are made as of the date hereof and are expressly qualified by this cautionary statement. Unless otherwise required by applicable securities laws, SECURE does not intend, or assume any obligation, to update these forward-looking statements.
ABOUT SECURE
SECURE is a leading waste management and energy infrastructure business headquartered in
SECURE's shares trade under the symbol SES and are listed on the
TSX Symbol: SES
SOURCE