Service First. Safety Always. Credit Suisse Industrials Conference - - PowerPoint PPT Presentation

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Service First. Safety Always. Credit Suisse Industrials Conference - - PowerPoint PPT Presentation

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


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Service First. Safety Always.

Credit Suisse Industrials Conference Investor Presentation

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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

  • f 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

  • ther 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.

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Company Overview

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Residential 29% Commercial 28% Rolloff 19% Transfer / Landfill 18% Commodity Sales 1% Landfill Gas 1% Other 4%

A leading provider of solid waste collection & disposal services

Overview

❖ 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 exclusive municipal arrangements ❖ LTM 9/30/2018 revenue of $1.55 billion and adjusted EBITDA of $427 million

Collection Services 93 Collection Operations ❖ 2.8M residential customers ❖ Over 800 exclusive municipal contracts ❖ Over 200K C&I customers 73 Transfer Stations Transfer Stations 40 Landfills Landfill Services 22 Recycling Facilities Recycling Facilities ❖ Over 3,000 vehicle fleet ❖ 5.1M tons of waste handled annually ❖ ~520K tons of recyclables collected annually ❖ ~160K tons of recyclables processed annually ❖ 16.5M tons disposed of annually ❖ 63% internalization rate

9/30/2018 Revenue

Revenue by Source

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..

Revenue by Category(a)

Primary market revenue 20% Municipal anchor and secondary market revenue 80%

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$94 $140 6.7% 9.0%

4.0% 6.0% 8.0% 10.0% 12.0% $50 $75 $100 $125 $150

LTM 12/31/2016 LTM 9/30/2018

(margin) (million)

Key recent accomplishments

Normalized free cash flow growth of 48.8% vs. FY 2016 Grew service revenues in 2017 by over $100 million through a combination of organic growth and 14 acquisitions Increased YTD 2018 cash flow from operations by 27% and normalized free cash flow by 38% vs. FY 2016 Piloting next generation safety technology Reduced interest rate on Term Loan B debt by 50 bps to LIBOR + 225 bps in November 2017 Enhanced customer experience by servicing 75% of customers in one of our regional customer care centers Transformed our Board of Directors, which is now comprised

  • f six independent Board members and our CEO

Obtained ratings upgrades by S&P in November 2017 and by Moody’s in March 2018

Note: See appendix for full reconciliation of Normalized Free Cash Flow.

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YTD 2018 performance

Revenue Selected commentary Adjusted EBITDA and Margin Normalized Free Cash Flow and % Sales ❖ Revenue growth of 3.6% driven by acquisition, volume and pricing growth  Average yield of 3.2% up 180 bps versus YTD 2017. Volume grew 0.8% and acquisitions net of divestitures up 2.0%. Revenue offset by 2.3% related to new revenue recognition standard that has no impact on earnings or cash flows ❖ Adjusted EBITDA growth of 2.9%  Strong solid waste fundamentals more than offset nearly $10 million headwind from recycling  Emphasis on disciplined pricing continues ❖ Strong normalized free cash flow  Adjusted EBITDA growth and working capital focus  Adjusted capital expenditures up year-to-date in part due to timing of cell construction events  Focused on long-term FCF generation

$1,123 $1,163 $700 $800 $900 $1,000 $1,100 $1,200 YTD 9/30/2017 YTD 9/30/2018 (million) $309 $318 27.5% 27.4% 0.0% 15.0% 30.0% 45.0% 60.0% $120 $160 $200 $240 $280 $320 $360 YTD 9/30/2017 YTD 9/30/2018 (margin) (million) $112 $120 9.9% 10.3% 4.0% 8.0% 12.0% 16.0% 20.0% $0 $30 $60 $90 $120 YTD 9/30/2017 YTD 9/30/2018 (margin) (million)

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63.7 50.1 31.7 24.8 13.5 7.0 5.5 0.9 70.7 55.6 32.6 24.8 13.5 0.0 20.0 40.0 60.0 80.0 Pre-IPO Post-IPO June 2017 Post- FTFO Dec 2017 Post First Block March 2018 Post Second Block May 2018 Post Final Block (% of Total Ownership) Highstar BTG

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

❖ Highstar had 2 board seats as of December 31, 2017, but were required to give up 1 seat after the March 2018 block trade since their ownership fell below 20% ❖ Highstar sold its remaining shares in May 2018 and no longer has any Board representation ❖ Our Board is now comprised of six independent Board members and our CEO

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Key Investment Highlights

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8 ADS owned landfill – first priority

❖ Enables vertical integration in any market ❖ Pursue opportunities in primary markets where we own a landfill  Atlanta, Chicago, Philadelphia, Detroit

Disposal neutral – second priority

❖ Opportunity for highly profitable operations  Efficient collection operations  Limited capital requirement  Opportunities for price initiatives  Ability to maintain high quality, strategically located infrastructure

Competitive Market Municipal Anchor Secondary Primary Disposal Market ADS Owned Landfills Disposal Neutral Competitor Owned Landfills

Market selection creating competitive and differentiated business model driving growth

Not a Priority High Priority ADS Core Focus

 Strong competitive position  Enhanced customer retention  Disciplined price environment

Focus on vertical integration in exclusive and secondary markets(a)

Primary market revenue 20% Municipal Anchor and secondary market revenue 80%

(a) Primary market revenue includes revenue from the following four markets (excluding revenue from exclusive municipal contracts): Atlanta, Chicago, Detroit and Philadelphia

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Residential 29% Commercial 28% Rolloff 19% Transfer / Landfill 18% Commodity Sales 1% Landfill Gas 1% Other 4% East 25% South 39% Midwest 36%

Strategic network of vertically integrated disposal assets providing scale, scope and diversity

(a) As of December 31, 2017. (b) Average of 37 years of aggregate remaining permitable and deemed permitable life among active landfills. (c) Shaded states reflect continuing operations only. Percentages by region represent % of LTM 9/30/2018 revenue. (d) Based on LTM 9/30/2018 revenue.

Landfills Transfer stations

Complementary network of landfills & transfer stations(a)

❖ Extend reach of landfill service area ❖ Highly complementary to landfills, enhancing competitive advantage ❖ Foundation of vertically integrated operations ❖ Most profitable component of the waste services value chain ❖ Establish a highly defensible market position ❖ Average landfill expected life of 37 years(b) with 35% capacity utilization

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ME

Corporate Headquarters Regional Headquarters Hauling/Collection Landfills Recycling Transfer Stations not listed

MN IA MO AR LA MS AL TN IL WI MI IN KY SC NC VA WV OH PA NJ MD DE NY VT MA CT RI GA NH FL

Balanced geographic revenue base(c) Revenue diversification by source(d)

Collection

❖ Large diverse customer base with largest customer represents less than 2% of revenue(d) ❖ Over 800 municipal contracts representing approximately 2.8 million residential customers  Terms of 3-10 years or longer with Renewal rate of approximately 80% ❖ Over 200,000 commercial & industrial contracts  Rolling contracts that are typically 5 years in duration  Strong relationship with C&I customers

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10 Fleet automation (residential)

Operating efficiency gains, acquisitions and pricing driving margin and free cash flow enhancement

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Other initiatives Safety initiatives ❖ Workforce training ❖ Risk management and auditing ❖ Drive cam ❖ Snapshots ❖ Sales productivity and pricing effectiveness ❖ Driver productivity and route optimization ❖ Maintenance efficiency ❖ Effective purchasing Growth from acquisitions

Number of acquisitions:

8 12 8 14 $10 $50 $5 $112

Acquisition spend:

CNG conversion

5% 18% 0% 5% 10% 15% 20% 25% 12/31/2013 9/30/2018 (% of collection routes) 43% 57% 0% 10% 20% 30% 40% 50% 60% 12/31/2013 9/30/2018 (% of routes automated) 1.3% 1.2% 1.8% 3.9% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 2014 2015 2016 2017 Average growth

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6.3 4.4 YE 12/31/2013 YE 9/30/2018 $69 $140 YE 12/31/2013 YE 9/30/2018

$71 million

Strong core revenue growth and increasing profitability allow for free cash flow expansion and continuous de-leveraging

Revenue Growth

+380 bps % of sales 5.2% 9.0%

Normalized FCF growth Adjusted EBITDA

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Leverage(a)

Note: See appendix for full reconciliation of Adjusted EBITDA and Normalized Free Cash Flow. (a) Leverage consistent with debt covenant compliance calculations and gives affect to pro-forma adjustments.

1.9x

% FCF margin $361 $427 YE 12/31/2013 YE 9/30/2018 $1,319 $1,548 YE 12/31/2013 YE 9/30/2018

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Appendix I: Supplemental Materials

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Adjustments to EBITDA

Adjusted EBITDA reconciliation

28.8% 29.4%

($ in millions) 2013 2016 2017 TTM Sept 2018 YTD Sept 2018 Net (loss) income ($117.8) ($30.4) 38.3 48.9 6.9 Income from discontinued operations, net (22.5)

  • Income tax (benefit) expense

(45.4) (25.7) (41.2) (36.5) 3.3 Interest expense 163.1 130.2 93.0 94.3 71.0 D&A 278.9 246.9 269.8 274.7 202.8 Loss on debt extinguishment and modifications

  • 64.7

3.7 3.7

  • Accretion on landfill retirement obligations

13.7 13.0 15.4 15.7 11.4 Accretion on loss contracts and other long-term liabilities 0.4 0.4 0.4 0.4 0.3 EBITDA from Continuing Operations $315.4 $399.1 $379.4 $401.2 $295.7 Acquisition and development costs 1.2 0.7 1.3 0.5 0.4 Stock based compensation 4.6 5.5 9.7 10.3 8.5 Loss on sale of assets and asset impairments 5.5 1.8 11.4 (2.5) (2.8) Restructuring charges 10.0 0.8 3.4 0.1 0.1 Unrealized (gain) loss on derivative instruments

  • (18.5)

(1.5) (8.0) (4.8) Realized (gain) loss on fuel derivative instruments (1.1) 14.9 2.0 (1.7) (2.2) Rebranding and integration costs 25.8

  • (Earnings) losses in equity investee, net

(0.3) (0.3) 0.3

  • (0.3)

Write-off of share issuance, capital market costs, and other

  • 7.1

1.0 1.9 1.7 Greentree expense, net of estimated insurance recoveries

  • 11.1

3.4 0.1 Landfill remediation expenses and related impacts

  • 22.0

22.0 Adjusted EBITDA $361.1 $411.1 $418.1 $427.2 $318.4

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Normalized free cash flow reconciliation

2013 2016 2017 TTM Sept 2018 YTD Sept 2018 Net Cash Provided by Operating Activities $180.3 $237.0 $308.8 $295.8 $234.4 Purchases of Property and Equipment(a) (158.1) (171.0) (174.8) (179.4) (133.3) Proceeds from the Sale of Property and Equipment 3.4 3.3 2.2 7.7 7.3 Free Cash Flow $25.6 $69.3 $136.2 $124.1 $108.4 Net Assumption of Long-term Care and Closure

  • (20.0)

5.0

3 Restructuring Payments 44.4 2.1 0.8 0.9 0.5 Payments to Retired Executives

  • 6.2
  • Greentree Costs, Net of Insurance Recoveries
  • 5.7

4.4

3.4 Landfill Remediation Costs

  • 6.2

6.2 Capital Market Costs

  • 7.7

0.9 1.0 0.4 Realized Loss on Derivatives (1.1) 14.9 2.0 (1.7) (2.2) Normalized Free Cash $68.9 $94.0 $131.8 $139.9 $119.7

(a) 2017: Excludes the impact of land purchased for future airspace of $3.1M and the purchase of a facility related to a municipal contract of $8.7M.