Service First. Safety Always. Credit Suisse Industrials Conference Investor Presentation
Disclaimer The information ("Confidential Information") contained in this presentation is confidential and is provided by Advanced Disposal Services, Inc. (“ADS” or the "Company") confidentially to you solely for your reference and may not be retransmitted or distributed to any other persons for any purpose whatsoever. The Confidential Information is subject to change without notice, its accuracy is not guaranteed, it has not been independently verified and it may not contain all material information concerning the Company. No representations or warranties (express or implied) are made regarding, and no reliance should be placed on, the accuracy or completeness of, or any errors or omissions in, any information or opinions contained herein. None of the Company nor any of its respective directors, officers, employees, stockholders, representatives or affiliates nor any other person accepts any liability (in negligence, or otherwise) whatsoever for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith. No reliance may be placed for any purposes whatsoever on the information set forth in this presentation or on its completeness. This presentation does not constitute or form part of any offer or invitation for sale or subscription of or solicitation or invitation of any offer to buy or subscribe for any securities, nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever. Recipients of this presentation are not to construe the contents of this presentation as legal, tax or investment advice and should consult their own advisers in this regard. This presentation contains forward-looking statements within the meaning of the U.S. federal securities laws. All statements other than statements of historical facts in this presentation, including, without limitation, those regarding our business strategy, financial position, results of operations, plans, prospects and objectives of management for future operations (including development plans and objectives relating to our activities), are forward-looking statements. Many, but not all, of these statements can be found by looking for words like ‘‘expect,’’ ‘‘anticipate,’’ ‘‘goal,’’ ‘‘project,’’ ‘‘plan,’’ ‘‘believe,’’ ‘‘seek,’’ ‘‘will,’’ ‘‘may,’’ ‘‘forecast,’’ ‘‘estimate,’’ ‘‘intend,’’ ‘‘future’’ and similar words. Statements that address activities, events or developments that we intend, expect or believe may occur in the future are forward-looking statements. Forward-looking statements do not guarantee future performance and may involve risks, uncertainties and other factors which could cause our actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in those forward- looking statements. EBITDA, Adjusted EBITDA, Free Cash Flow (“FCF”) and normalized FCF are non -GAAP measures and, when analyzing our operating performance, investors should not consider these measures in isolation or as substitutes for net income, cash flows from operating activities or other statement of operations or cash flow statement data prepared in accordance with GAAP. Our calculations of EBITDA, Adjusted EBITDA, FCF and normalized FCF are not necessarily comparable to those of similarly titled measures provided by other companies. 1
Company Overview
A leading provider of solid waste collection & disposal services Overview Collection Services Transfer Stations ❖ Leading integrated provider of non-hazardous solid waste collection, transfer, recycling and disposal services ❖ Extensive network of vertically integrated and strategically located assets ❖ Focused on serving customers in secondary markets or under 73 Transfer Stations 93 Collection Operations exclusive municipal arrangements ❖ ❖ 2.8M residential customers Over 3,000 vehicle fleet ❖ ❖ Over 800 exclusive 5.1M tons of waste ❖ LTM 9/30/2018 revenue of $1.55 billion and adjusted EBITDA of municipal contracts handled annually $427 million ❖ Over 200K C&I customers 9/30/2018 Revenue Recycling Facilities Landfill Services Revenue by Source Revenue by Category (a) Landfill Gas Other Primary 4% 1% Commodity market Sales revenue Residential 1% 20% 29% Transfer / 22 Recycling Facilities 40 Landfills Landfill 18% ❖ ❖ ~520K tons of recyclables 16.5M tons disposed of Municipal anchor collected annually annually Rolloff and secondary 19% market ❖ ❖ ~160K tons of recyclables 63% internalization rate Commercial revenue processed annually 28% 80% Note: See appendix for full reconciliation of Adjusted EBITDA. (a) Primary market revenue includes revenue from the following four markets (excluding revenue from exclusive municipal contracts): Atlanta, Chicago, Detroit and Philadelphia.. 3
Key recent accomplishments Grew service revenues in 2017 by over $100 million through a Normalized free cash flow growth of combination of organic growth and 14 acquisitions 48.8% vs. FY 2016 Increased YTD 2018 cash flow from operations by 27% and normalized free cash flow by 38% vs. FY 2016 $150 12.0% $140 Enhanced customer experience by servicing 75% of customers in one of our regional customer care centers $125 10.0% Piloting next generation safety technology (million) 9.0% (margin) $100 8.0% Obtained ratings upgrades by S&P in November 2017 and by $94 Moody’s in March 2018 6.7% Reduced interest rate on Term Loan B debt by 50 bps to $75 6.0% LIBOR + 225 bps in November 2017 Transformed our Board of Directors, which is now comprised of six independent Board members and our CEO $50 4.0% LTM 12/31/2016 LTM 9/30/2018 Note: See appendix for full reconciliation of Normalized Free Cash Flow. 4
YTD 2018 performance Revenue Selected commentary ❖ Revenue growth of 3.6% driven by acquisition, volume and pricing $1,163 $1,200 $1,123 growth $1,100 (million) $1,000 Average yield of 3.2% up 180 bps versus YTD 2017. Volume $900 grew 0.8% and acquisitions net of divestitures up 2.0%. $800 Revenue offset by 2.3% related to new revenue recognition $700 YTD 9/30/2017 YTD 9/30/2018 standard that has no impact on earnings or cash flows Adjusted EBITDA and Margin ❖ Adjusted EBITDA growth of 2.9% $360 60.0% $318 $309 $320 45.0% Strong solid waste fundamentals more than offset nearly $10 $280 (margin) (million) million headwind from recycling $240 30.0% $200 27.5% 27.4% 15.0% $160 Emphasis on disciplined pricing continues $120 0.0% YTD 9/30/2017 YTD 9/30/2018 ❖ Strong normalized free cash flow Normalized Free Cash Flow and % Sales Adjusted EBITDA growth and working capital focus $120 20.0% $112 $120 16.0% (million) $90 Adjusted capital expenditures up year-to-date in part due to (margin) 12.0% timing of cell construction events $60 10.3% 8.0% $30 9.9% Focused on long-term FCF generation $0 4.0% YTD 9/30/2017 YTD 9/30/2018 5
Heightened focus on corporate governance following Highstar exit Appointment of Independent Directors ❖ A majority of the Board of Directors and all committees are now comprised of independent directors ❖ Since IPO, four independent directors have been appointed to the Board May 2, 2017 – Tanuja Dehne elected to the Board and chairs the Compensation Committee June 16, 2017 – E. Renae Conley elected to the Board and serves on the Compensation Committee and Nominating and Corporate Governance Committee October 3, 2017 – Michael J. Hoffman joined the Board and chairs the Nominating and Corporate Governance Committee and serves as a member of the Compensation Committee February 21, 2018 – Ernest J. Mrozek joined the Board and serves on the Audit Committee Sponsor Shareholding Evolution 80.0 70.7 ❖ Highstar had 2 board seats as of 7.0 December 31, 2017, but were required (% of Total Ownership) 55.6 60.0 to give up 1 seat after the March 2018 5.5 block trade since their ownership fell below 20% 40.0 32.6 0.9 63.7 ❖ 24.8 Highstar sold its remaining shares in 50.1 May 2018 and no longer has any Board 20.0 13.5 representation 31.7 24.8 13.5 0 ❖ Our Board is now comprised of six 0.0 independent Board members and our Pre-IPO Post-IPO June 2017 Post- Dec 2017 Post March 2018 Post May 2018 Post FTFO First Block Second Block Final Block CEO Highstar BTG 6
Key Investment Highlights
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