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There was a surprising uptick in sudden departures of more than a dozen executives leaving with very short notice or in some instances no notice at all. In certain instances such as BuzzFeed, which recently announced that it was shutting down its BuzzFeed news operation to refocus on HuffPost, the departure of the COO makes sense. However we also saw half a dozen CEOs depart suddenly and in the case of Waste Connections (WCN), the departure was announced a day after the CEO had already left.
Welcome to edition 38 of C-Suite Transitions, a weekly series on InsideArbitrage that tracks appointments and departures at publicly traded companies during the prior week. We highlight five appointments and departures each week by picking the largest companies from the full list of management changes.
Sudden Departures
Waste Connections (WCN)
Founded in 1997, Waste Connections (WCN) is a waste management company, that offers non-hazardous waste collection, transfer, disposal, and resource recovery services primarily through recycling and renewable fuel generation in the United States and Canada. Waste Connections also provides intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest. The company offers services to more than eight million residential, commercial, and industrial customers in 43 U.S. states and six Canadian provinces.
Ronald J. Mittelstaedt
On April 24, 2023, Waste Connections (WCN) announced that Executive Chairman Ronald J. Mittelstaedt, has been appointed President and Chief Executive Officer of the company, effective April 23, 2023. The company also announced the departure of Worthing F. Jackman from his role as President and Chief Executive Officer. Mr. Jackman’s departure qualified as termination without cause.
Mr. Mittelstaedt will remain on the Board of Directors, but no longer serve as Executive Chairman. From the company’s founding in 1997, Mr. Mittelstaedt had held the position of Chief Executive Officer through July 2019. He later transitioned to the role of Executive Chairman citing health reasons when Jackman took over as CEO. He also serves as a director of the regional airline SkyWest, Inc. (SKYW).
Mr. Mittelstaedt said, “I’m excited to return to this role to serve our 23,000 employees and focus our efforts on servant leadership, our decentralized operating structure and delivering exceptional results in all areas.“
Worthing F. Jackman
Mr. Jackman took over as CEO in 2019. He previously served as CFO since 2004 and was promoted to President in 2018. Upon his departure as CEO, Mr. Jackman resigned as a member of the company’s Board of Directors and also withdrew as a nominee for election as a director at the 2023 Annual Meeting of Shareholders.
Mr. Mittelstaedt told investors that the leadership change was “amicable” and was part of longer-term discussions regarding the company’s strategic future.
“Once again we assure you, there is nothing more to this decision than the board’s determination that a change was appropriate to ensure that we have the right leader that is the individual whose skillset and background are best aligned with the demand opportunities in the current environment,” he said. “There are no other issues or concerns, financial or otherwise, behind this announcement.”
Mr. Mittelstaedt said during the call that Jackman is unlikely to join a rival company in the near future due to a non-competition agreement.
Worthing F. Jackman served as President and Chief Executive Officer of the company, for a duration of 3 years and 9 months. The company’s performance during his tenure was 56.31%.
Acquisition Spree
Waste Connections has a track record of increasing its income and profits over time, through various acquisitions. Over the last five years, the company has spent more than $5 billion, buying more than 20 companies every year on average. The company’s American Disposal acquisition was the biggest deal made and in 2016 Waste Connections and Progressive Waste Solutions merged to form a $4.1 billion company.
Mr. Mittelstaedt emphasized that the company is in a great shape and that key strategies like acquisition plans won’t be impacted by the new leadership. Even after he stepped down from the CEO position, he was still “intimately involved with Worthing in a variety of strategic acquisitions.” In the past 25 and a half years, “we’ve done over 750 transactions, and I’ve been involved with every one,” he stated.
Waste Connections Q1 2023 Results
For the first quarter of 2023, Waste Connections reported revenue of $1.901 billion, which was up 15.4%, compared to the year-ago period. Net income was $197.8 million, compared to $180.3 million in the prior year. Adjusted EBITDA for the first quarter was $566.9 million. Net cash provided by operating activities was $442.4 million and adjusted free cash flow was $274.0 million.
Outlook 2023: WCN reiterated the FY23 financial outlook provided in February.
Dividend
Waste Connections (WCN) pays a quarterly dividend of 26 cents per share, which works out to an annual yield of 0.72% at current prices and a payout ratio of 24.80%.
Valuation
Waste Connections is up 92% in the last 5 years. The company has a market cap of $36.11 billion and an enterprise value of $43.13 billion. The company trades at an EV/EBITDA of 19.56 and has a forward P/E of 24.15.
Conclusion
I wrote the following about rollups when discussing a $100 million buyback announcement by the asset management firm Victory Capital (VCTR) last month:
Investors are skeptical of rollups where a company goes on an acquisition binge and manages to grow revenue but ends up with unmanageable amounts of debt. Valeant Pharmaceuticals (now Bausch Health) and the more recent mental health company LifeStance Health Group (LFST) come to mind when I think about rollups gone wrong.
While I was not concerned about Victory Capital’s rollup history, Waste Connections’ ballooning debt, rich valuation, string of insider sales and now the sudden departure of the CEO are significant concerns. I plan to explore the company further to see if the company could become a candidate for the short portion of the InsideArbitrage model portfolio.
Appointments
1. Harmony Biosciences Holdings (HRMY): $31.68
On April 24, 2023, Harmony Biosciences Holdings announced that Dr. Jeffrey M. Dayno, the company’s current Interim President and Chief Executive Officer and Chief Medical Officer, has been appointed as President and Chief Executive Officer of the company.
| MarketCap: $1.90B | Avg. Daily Volume (30 days): 1,525,430 | Revenue (TTM): $437.86M |
| Net Income Margin (TTM): 41.44% | ROE (TTM): 61.58% | Net Cash: $128.88M |
| P/E: 10.67 | Forward P/E: 14.75 | EV/EBIDTA (TTM): 12.33 |
| P/S (TTM): 4.30 | P/B (TTM): 4.56 | 52 Week Range: $29.81 – $62.09 |
| MarketCap: $48.04B | Avg. Daily Volume (30 days): 1,714,670 | Revenue (TTM): $37.84B |
| Net Income Margin (TTM): 6.38% | ROE (TTM): 40.94% | Net Debt: $17.2B |
| P/E: 20.53 | Forward P/E: 19.42 | EV/EBIDTA (TTM): 16.11 |
| P/S (TTM): 1.31 | P/B (TTM): 8.64 | 52 Week Range: $181.51 – $260.29 |
3. Pinterest (PINS): $26.61
On April 17, 2023, Pinterest announced that Sabrina Ellis was appointed as Chief Product Officer, effective May 15, 2023.
| MarketCap: $18.21B | Avg. Daily Volume (30 days): 8,435,426 | Revenue (TTM): $2.80B |
| Net Income Margin (TTM): -3.43% | ROE (TTM): -3.04% | Net Cash: $2.47B |
| P/E: -184.44 | Forward P/E: 40.82 | EV/EBIDTA (TTM): N/A |
| P/S (TTM): 6.70 | P/B (TTM): 5.87 | 52 Week Range: $16.14 – $29.27 |
4. Waste Connections (WCN): $140.22
On April 24, 2023, Waste Connections announced that concurrent with Mr. Jackman’s departure, Ronald J. Mittelstaedt, the company’s Executive Chairman, succeeded Mr. Jackman as the company’s President and Chief Executive Officer.
| MarketCap: $36.11B | Avg. Daily Volume (30 days): 822,949 | Revenue (TTM): $7.21B |
| Net Income Margin (TTM): 11.59% | ROE (TTM): 11.85% | Net Debt: $7.11B |
| P/E: 43.28 | Forward P/E: 24.15 | EV/EBIDTA (TTM): 19.56 |
| P/S (TTM): 5.01 | P/B (TTM): 5.07 | 52 Week Range: $112.89 – $147.64 |
5. Hope Bancorp (HOPE): $9.08
On April 17, 2023, Hope Bancorp announced the appointment of Julianna Balicka as Executive Vice President and Chief Financial Officer of the company and its wholly-owned subsidiary, Bank of Hope, effective immediately.
| MarketCap: $1.09B | Avg. Daily Volume (30 days): 1,168,300 | Revenue (TTM): $606.01M |
| Net Income Margin (TTM): 32.45% | ROE (TTM): 9.59% | Net Debt: $713.61M |
| P/E: 5.54 | Forward P/E: 5.73 | EV/EBIDTA (TTM): N/A |
| P/S (TTM): 1.76 | P/B (TTM): 0.53 | 52 Week Range: $9.05 – $15.40 |
1. Brady Corp (BRC): $49.73
On April 14, 2023, Brady Corporation announced the resignation of Aaron J. Pearce, Chief Financial Officer, and Treasurer.
| MarketCap: $2.47B | Avg. Daily Volume (30 days): 187,935 | Revenue (TTM): $1.31B |
| Net Income Margin (TTM): 12.09% | ROE (TTM): 16.40% | Net Debt: N/A |
| P/E: 15.93 | Forward P/E: N/A | EV/EBIDTA (TTM): 10.29 |
| P/S (TTM): 2.00 | P/B (TTM): 2.67 | 52 Week Range: $40.14 – $56.10 |
2. Martin Marietta Materials (MLM): $344.52
On April 21, 2023, Martin Marietta Materials announced that John P. Mohr, Senior Vice President and Chief Information Officer will be retiring from the company in the second half of 2023.
| MarketCap: $21.40B | Avg. Daily Volume (30 days): 297,198 | Revenue (TTM): $5.73B |
| Net Income Margin (TTM): 15.13% | ROE (TTM): 12.49% | Net Debt: $5.3B |
| P/E: 25.15 | Forward P/E: 23.87 | EV/EBIDTA (TTM): 16.75 |
| P/S (TTM): 3.51 | P/B (TTM): 3.00 | 52 Week Range: $283.40 – $386.03 |
3. Waste Connections (WCN): $140.22
On April 24, 2023, Waste Connections announced the departure of Worthing F. Jackman from his role as President and Chief Executive Officer of the company, effective April 23, 2023.
| MarketCap: $36.11B | Avg. Daily Volume (30 days): 822,949 | Revenue (TTM): $7.21B |
| Net Income Margin (TTM): 11.59% | ROE (TTM): 11.85% | Net Debt: $7.11B |
| P/E: 43.28 | Forward P/E: 24.15 | EV/EBIDTA (TTM): 19.56 |
| P/S (TTM): 5.01 | P/B (TTM): 5.07 | 52 Week Range: $112.89 – $147.64 |
4. Hope Bancorp (HOPE): $9.08
On April 17, 2023, Hope Bancorp announced that David P. Malone, Interim Chief Financial Officer of the company and the Bank since January 6, 2023, stepped down from these positions on April 17, 2023, and will serve as an advisor through April 30, 2023.
| MarketCap: $1.09B | Avg. Daily Volume (30 days): 1,168,300 | Revenue (TTM): $606.01M |
| Net Income Margin (TTM): 32.45% | ROE (TTM): 9.59% | Net Debt: $713.61M |
| P/E: 5.54 | Forward P/E: 5.73 | EV/EBIDTA (TTM): N/A |
| P/S (TTM): 1.76 | P/B (TTM): 0.53 | 52 Week Range: $9.05 – $15.40 |
5. PotlatchDeltic Corp (PCH): $45.24
On April 13, 2023, Jerald W. Richards, Vice President, and Chief Financial Officer of PotlatchDeltic Corporation, notified the company of his resignation, effective April 19, 2023, to pursue other career interests.
| MarketCap: $3.62B | Avg. Daily Volume (30 days): 439,706 | Revenue (TTM): $1.18B |
| Net Income Margin (TTM): 15.82% | ROE (TTM): 9.45% | Net Debt: $704.37M |
| P/E: 18.34 | Forward P/E: 41.84 | EV/EBIDTA (TTM): 12.49 |
| P/S (TTM): 2.57 | P/B (TTM): 1.66 | 52 Week Range: $37.54 – $54.77 |
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