SECURE ANNOUNCES 2024 SECOND QUARTER RESULTS
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Adjusted EBITDA1 of
$114 million ($0.43 per basic share) and$246 million ($0.90 per basic share) for the three and six months endedJune 30, 2024 , respectively -
Full year Adjusted EBITDA guidance increased to
$470 -$490 million - Adjusted EBITDA margin 1 of 34%, maintaining consistency year over year
-
Net cash provided by operating activities of
$91 million and discretionary free cash flow1 of$53 million - 17% of shares outstanding repurchased year to date
"Strong second quarter results were driven by robust industry fundamentals, favourable weather conditions, and continued operational execution across our business units, resulting in double digit revenue growth on a same store sales basis," said
"Reflecting on our strong results in the first half of 2024, the success of our organic growth investments, and the additional Adjusted EBITDA from our metal recycling acquisition, we are pleased to raise our full year 2024 Adjusted EBITDA guidance to
SECOND QUARTER HIGHLIGHTS
- Repurchased and cancelled 37,937,838 shares, reducing our shares outstanding by 13.6% in the second quarter. The Corporation incurred a cost of
$433 million to complete the repurchases, representing a weighted average price per share of$11.41 . - Generated revenue (excluding oil purchase and resale) of
$337 million , a decrease of 5% from the second quarter of 2023, primarily due to the impact of 29 facilities divested onFebruary 1, 2024 (the "Sale Transaction"), and the divestiture of a non-core oilfield service business unit inDecember 2023 . On a same-store sales basis, revenue increased over the second quarter of 2023, driven by strong customer demand, improved weather conditions, and higher pricing. Additionally, the Corporation benefited from contributions from capital investments made in the second half of 2023 and year-to-date, including theClearwater heavy oil terminal, which began operations in Q4 2023. - Recorded net income of
$32 million or$0.12 per basic share, a decrease in net income of$2 million compared to the second quarter of 2023, while net income per share increased by$0.01 per basic share (9% increase) over the same period due to the share buybacks over the past year reducing the weighted average shares outstanding in the quarter by 11%. - Achieved Adjusted EBITDA of
$114 million ($0.43 per basic share), a decrease of 4% compared to the second quarter of 2023 (8% increase on a per share basis) as a result of the same factors described above. - Realized an Adjusted EBITDA margin of 34%, consistent with second quarter of 2023, as the impact of the Sale Transaction was offset by higher activity levels improving utilization and fixed cost absorption across the remaining infrastructure network.
- Generated funds flow from operations of
$91 million ($0.35 per basic share), an increase of 14% compared to the second quarter of 2023 (30% increase on a per share basis). This increase resulted from the timing of fixed debt payments, lower interest payments due to reduced debt, and interest income generated on cash held during the quarter, which offset the impact of lower Adjusted EBITDA and higher current taxes. - Generated discretionary free cash flow of
$53 million ($0.20 per basic share), an increase of 26% compared to the second quarter of 2023 (43% increase on a per share basis) as a result of the factors above, along with reduced spending on sustaining capital due to reduced facility count following the Sale Transaction. - Paid a quarterly dividend of
$0.10 per common share, which currently represents a yield of 3.4% on our common shares. - Extended the maturity of our
$800 million senior secured revolving credit facility untilMay 31, 2027 , strengthening our capital structure, and ensuring financial stability and operational flexibility. As atJune 30, 2024 , the Corporation had drawn$121 million , excluding letters of credit.
The Corporation's operating and financial highlights for the three and six months ended
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Three months ended
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Six months ended
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($ millions except share and per share data) |
2024 |
2023 |
% change |
2024 |
2023 |
% change |
Revenue (excludes oil purchase and resale) |
337 |
353 |
(5) |
697 |
769 |
(9) |
Oil purchase and resale |
2,215 |
1,429 |
55 |
4,704 |
2,920 |
61 |
Total revenue |
2,552 |
1,782 |
43 |
5,401 |
3,689 |
46 |
Adjusted EBITDA (1) |
114 |
119 |
(4) |
246 |
270 |
(9) |
Per share ($), basic (1) |
0.43 |
0.40 |
8 |
0.90 |
0.90 |
— |
Per share ($), diluted (1) |
0.43 |
0.40 |
8 |
0.89 |
0.89 |
— |
Net income |
32 |
34 |
(6) |
454 |
89 |
410 |
Per share ($), basic |
0.12 |
0.11 |
9 |
1.67 |
0.30 |
457 |
Per share ($), diluted |
0.12 |
0.11 |
9 |
1.64 |
0.29 |
466 |
Funds flow from operations |
91 |
80 |
14 |
199 |
216 |
(8) |
Per share ($), basic |
0.35 |
0.27 |
30 |
0.73 |
0.72 |
1 |
Per share ($), diluted |
0.34 |
0.27 |
26 |
0.72 |
0.71 |
1 |
Discretionary free cash flow (1) |
53 |
42 |
26 |
146 |
163 |
(10) |
Per share ($), basic (1) |
0.20 |
0.14 |
43 |
0.54 |
0.54 |
— |
Per share ($), diluted (1) |
0.20 |
0.14 |
43 |
0.53 |
0.54 |
(2) |
Capital expenditures (2) |
43 |
68 |
(37) |
62 |
114 |
(46) |
Dividends declared per common share |
0.10 |
0.10 |
— |
0.20 |
0.20 |
— |
Total assets |
2,312 |
2,796 |
(17) |
2,312 |
2,796 |
(17) |
Long-term liabilities |
658 |
1,179 |
(44) |
658 |
1,179 |
(44) |
Common shares - end of period |
241,167,308 |
293,629,841 |
(18) |
241,167,308 |
293,629,841 |
(18) |
Weighted average common shares: |
|
|
|
|
|
|
Basic |
262,468,788 |
296,343,936 |
(11) |
272,013,348 |
301,402,499 |
(10) |
Diluted |
265,906,070 |
298,407,348 |
(11) |
276,196,506 |
304,185,069 |
(9) |
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 well positioned for success with a constructive industry backdrop, growth opportunities, and the financial capacity to execute on our strategic initiatives and deliver enhanced shareholder returns. Sustained and expanded industry activity levels in the coming years are expected to drive higher volumes and overall demand for SECURE's infrastructure as new infrastructure developments in western
With our waste processing facilities currently operating at approximately 60 percent utilization, we have ample capacity to accommodate growing customer needs for processing, disposal, recycling, recovery, and terminalling, all with minimal incremental fixed costs or additional capital investment. With the completion of the Trans Mountain Expansion Pipeline in May, and commissioning of LNG Canada's export terminal expected by early 2025, increased capacity for our customers to gain stronger pricing with access to global markets is expected to result in sustained and growing activity levels in the years to come. Furthermore, the industrial sector is expected to remain stable, characterized by sustained volumes, continued demand for our infrastructure services and activity linked to long-term and recurring projects.
The accretive multiple achieved from the mandated facilities divestiture to Waste Connections in the first quarter highlights the underlying value of SECURE's business. The Board of Directors and management believe a substantive disparity remains between SECURE's share price and its fundamental value, which supported the share buybacks executed in the second quarter. In the coming months, the Board of Directors and management will continue to evaluate our capital allocation priorities. We intend to remain active under our Normal Course Issuer Bid ("NCIB") and may repurchase up to the remaining 6.3 million shares before the NCIB renewal on
Low leverage following the receipt of proceeds from the Sale Transaction, as well as continued strong free cash flow generation, provides the Corporation with significant capacity to execute on SECURE's strategic priorities. With a solid foundation and clear direction, we're confident in our ability to protect the base business, continue to advance our strategy as a leader in waste management and energy infrastructure and seize new opportunities to create value for our shareholders.
2024 EXPECTATIONS
- The previous guidance to our 2024 Adjusted EBITDA ranged from
$450 million to$465 million . Given the strong first half results and the tuck in metal acquisition, the Corporation has increased our full year Adjusted EBITDA guidance to$470 -$490 million . Excluding Corporate costs, SECURE anticipates approximately 70% of Adjusted EBITDA will be attributable to the Waste Management 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 of
$75 million for 2024, consistent with previous guidance, related primarily to expansions at theClearwater heavy oil terminal, and pipeline tie-ins to existing waste processing facilities. 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 further 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 through the NCIB 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$96 million per year based on current issued and outstanding shares.
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 and six 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 and six 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 and six months ended
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Three months ended
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Six months ended
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2024 |
2023 |
% Change |
2024 |
2023 |
% Change |
Net income |
32 |
34 |
(6) |
454 |
89 |
410 |
Adjustments: |
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Depreciation, depletion and amortization (1) |
41 |
47 |
(13) |
86 |
101 |
(15) |
Share-based compensation |
6 |
5 |
20 |
20 |
14 |
43 |
Interest, accretion and finance costs |
13 |
24 |
(46) |
31 |
47 |
(34) |
Gain on asset divestitures |
— |
— |
— |
(520) |
— |
100 |
Other expense (income) |
1 |
(8) |
(113) |
15 |
(16) |
(194) |
Unrealized loss on mark to market transactions (2) |
8 |
3 |
167 |
9 |
— |
100 |
Current tax expense |
15 |
1 |
1,400 |
42 |
4 |
950 |
Deferred tax expense (recovery) |
(4) |
9 |
(144) |
107 |
24 |
346 |
Transaction and related costs |
2 |
4 |
(50) |
2 |
7 |
(71) |
Adjusted EBITDA |
114 |
119 |
(4) |
246 |
270 |
(9) |
(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. |
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 and six 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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Six months ended
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2024 |
2023 |
% Change |
2024 |
2023 |
% Change |
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Funds flow from operations |
91 |
80 |
14 |
199 |
216 |
(8) |
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Adjustments: |
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Sustaining capital (1) |
(32) |
(37) |
(14) |
(40) |
(47) |
(15) |
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Lease liability principal payments and other |
(8) |
(5) |
60 |
(15) |
(13) |
15 |
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Transaction and related costs |
2 |
4 |
(50) |
2 |
7 |
(71) |
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Discretionary free cash flow |
53 |
42 |
26 |
146 |
163 |
(10) |
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(1) The Corporation classifies capital expenditures as either growth, acquisition or sustaining capital. Refer to "Operational Definitions" in the MD&A for further information. |
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FINANCIAL STATEMENTS AND MD&A
The Corporation's consolidated financial statements and notes thereto and Management's Discussion and Analysis for the three and six months ended
SECOND 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 and capitalize on its strategic initiatives and divestitures; SECURE's capital allocation priorities and strategies; 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, and deliver returns to, our shareholders; the performance and benefits of SECURE's metal recycling business; 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