Service First. Safety Always. Gabelli & Company Waste Symposium March 2018
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 exclusive municipal arrangements LTM 12/31/2017 revenue of $1.5 billion and adjusted EBITDA of $418 million 93 Collection Operations 2.8M residential customers Over 800 exclusive municipal contracts Over 200K C&I customers 73 Transfer Stations Over 3,000 vehicle fleet 5.5M tons of waste handled annually YE 12/31/2017 Revenue Recycling Facilities Landfill Services Revenue by Source Revenue by Category (a) Landfill Gas Commodity 1% Sales 2% Other 4% Residential 28% Primary market revenue 20% Transfer / Landfill 19% Rolloff 19% Commercial 27% Exclusive municipal and secondary market revenue 80% 22 Recycling Facilities ~520K tons of recyclables collected annually ~160K tons of recyclables processed annually 40 Landfills 16.8M tons disposed of annually 63% internalization rate 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
(million) Key 2017 accomplishments Grew the business by over $100 million through a combination of organic growth and 14 acquisitions Normalized free cash flow growth of 40.2% in 2018 Increased cash flow from operations by 30% to $308.8 million $150 12.0% Increased normalized free cash flow by 40% to $131.8 million $132 Improved customer experience by servicing 75% of customers in one of our regional customer care centers $125 10.0% Obtained a ratings updgrade by S&P and reduced our interest rated on our Term Loan B debt by 50 bps to LIBOR + 225 bps $100 $94 8.7% 8.0% (margin) Continued improvements in key safety metrics $75 6.7% 6.0% Transformed our Board of directors, which is now comprised of a majority of independent Board members $50 LTM 12/31/2016 LTM 12/31/2017 4.0% Note: See appendix for full reconciliation of Normalized Free Cash Flow 4
(% of Total Ownership) Focus on corporate governance and sponsor shareholder ownership continues to decline 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 60.0 70.7 7.0 55.6 5.5 Highstar has the right to nominate a number of designees to the Board equal to the percentage of common stock owned 40.0 20.0 0.0 32.6 63.7 0.9 50.1 31.7 Pre-IPO Post-IPO June 2017 Post- FTFO Highstar BTG 24.8 24.8 Dec 2017 Post First Block 13.5 13.5 March 2018 Post Second Block Highstar had 2 board seats as of December 31, 2017, but they are required to give up 1 seat after the March 2018 block trade since their ownership fell below 20% BTG s Board designee left the Board on 10/31/17 and BTG has no further board representation 5
Key Investment Highlights
Disposal Market 1 Market selection creating competitive and differentiated business model driving growth Competitive Market Focus on vertical integration in exclusive and secondary markets (a) Exclusive Secondary Primary Primary market revenue 20% Strong competitive position ADS Owned Landfills Exclusive municipal and secondary market revenue 80% Enhanced customer retention Disciplined price environment ADS owned landfill first priority Disposal Neutral Enables vertical integration in any market Pursue opportunities in primary markets where we own a landfill Atlanta, Chicago, Philadelphia, Detroit Competitor Owned Disposal neutral second priority Opportunity for highly profitable operations Efficient collection operations Limited capital requirement Opportunities for price initiatives High Priority Not a Priority ADS Core Focus Ability to maintain high quality, strategically located infrastructure (a) Primary market revenue includes revenue from the following four markets (excluding revenue from exclusive municipal contracts): Atlanta, Chicago, Detroit and Philadelphia 7
2 Strategic network of vertically integrated disposal assets providing scale, scope and diversity Complementary network of landfills & transfer stations (a) Balanced geographic revenue base (c) ME MN WI IA MO AR LA IL MS MI IN KY TN AL OH WV GA SC FL VA NC NY PA NJ MD DE VT NH MA CT RI Corporate Headquarters Regional Headquarters Hauling/Collection Landfills Recycling Transfer Stations not listed Midwest 37% South 38% East 25% Revenue diversification by source (d) Landfills 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 Landfill Gas Commodity 1% Sales 2% Other 4% Residential 28% Transfer stations Extend reach of landfill service area Highly complementary to landfills, enhancing competitive advantage Transfer / Landfill 19% 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 Rolloff 19% Commercial 27% (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 12/31/2017 revenue (d) Based on LTM 12/31/2017 revenue 8
Average growth (% of collection routes) (% of routes automated) 3 Operating efficiency gains, acquisitions and pricing driving margin and free cash flow enhancement CNG conversion Fleet automation (residential) 25% 60% 57% 20% 15% 10% 5% 5% 18% 50% 40% 30% 20% 10% 43% 0% 12/31/2013 12/31/2017 0% 12/31/2013 12/31/2017 Growth from acquisitions Safety initiatives Other initiatives Number of acquisitions: 8 12 8 14 5.0% 4.0% 3.0% 2.0% 1.0% 1.3% 1.2% 1.8% 3.9% Workforce training Risk management and auditing Drive cam Snapshots Sales productivity and pricing effectiveness Driver productivity and route optimization Maintenance efficiency Effective purchasing Acquisition spend: 0.0% 2014 2015 2016 2017 $10 $50 $5 $112 9
4 Strong core revenue growth and increasing profitability allow for free cash flow expansion and continuous de-leveraging Revenue Growth Adjusted EBITDA $1,508 $418 $1,319 $361 YE 12/31/2013 YE 12/31/2017 YE 12/31/2013 YE 12/31/2017 Normalized FCF growth Leverage (a) $63 million $132 6.3 1.7x $69 4.7 % FCF margin YE 12/31/2013 YE 12/31/2017 5.2% % of sales 8.7% +350 bps YE 12/31/2013 YE 12/31/2017 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 10
Financial Update and Highlights
(million) (million) (million) 2017 performance Revenue Selected commentary $1,600 $1,450 $1,300 $1,405 $1,508 Revenue growth of 7.3% driven by acquisition, volume and pricing growth $1,150 Average yield of 1.2% moderated by tough prior year comps but $1,000 YE 12/31/2016 YE 12/31/2017 Adjusted EBITDA and Margin offset by volume growth turning positive impacted by strong disposal volume and positive commercial and roll off activity $425 $411 $418 50.0% Adjusted EBITDA growth of 1.7% during 2017 $400 $375 $350 $325 29.3% 27.7% YE 12/31/2016 YE 12/31/2017 Normalized Free Cash Flow and % Sales 40.0% 30.0% 20.0% 10.0% (margin) Gains from organic and acquisition growth moderated by nearterm headwinds from fuel, healthcare, public company costs, leachate and sulfate treatment costs and start-up costs Strong normalized FCF growth year-to-date $150 $125 $132 16.0% 12.0% Adjusted EBITDA growth coupled with interest savings driving improvements $100 $75 $94 6.7% 8.7% 8.0% 4.0% (margin) Completed another repricing of the Term Loan B in Q4 2017 that reduced interest costs by 50 basis points $50 YE 12/31/2016 YE 12/31/2017 0.0% Focused on long-term FCF generation Note: See appendix for full reconciliation of Adjusted EBITDA and Normalized Free Cash Flow 12
(million) (million) (million) 2018 guidance (as outlined on February 22, 2018) Revenue (a) Selected commentary $1,700 $1,600 $1,500 $1,508 $1,555 Revenue growth of 3.1% is somewhat moderated due to a 140 basis points headwind from recycling and new revenue standard $1,400 $1,300 Average yield guide of 2.1% to 2.8%, and acquisition rollover of $1,200 YE 12/31/2017 YE 12/31/2018 1.3% are key drivers to the revenue growth $450 $425 Adjusted EBITDA and Margin (a) $431 $418 36.0% 32.0% Adjusted EBITDA also expected to grow 3.1% Core business operations remain strong $400 $375 27.7% 27.7% 28.0% 24.0% (margin) Margins are expected to be flat largely due to headwinds from recycling and fuel offset by core margin gains and new revenue $350 YE 12/31/2017 YE 12/31/2018 20.0% standard Normalized Free Cash Flow and % Sales (a) Normalized free cash flow growth continues $150 $125 $100 $75 $50 $132 $139 8.7% 8.9% YE 12/31/2017 YE 12/31/2018 12.0% 10.0% 8.0% 6.0% 4.0% (margin) Adjusted EBITDA growth coupled with debt repricing driving improvements Higher capital spending led largely by timing of landfill cell development projects somewhat moderates growth but free cash flow percentage growth still outpacing revenue and adjusted EBITDA Note: See appendix for full reconciliation of Adjusted EBITDA and Normalized Free Cash Flow (a) All guidance numbers shown at midpoint of the range 13
Appendix I: Supplemental Materials
Adjusted EBITDA reconciliation Adjustments to EBITDA ($ in millions) 2013 2014 2015 2016 2017 Net Income (loss) ($117.8) ($17.1) ($33.6) ($30.4) 38.3 Loss (income) from discontinued operations, net (22.5) (0.3) - - - Income tax benefit (45.4) (80.6) (19.4) (25.7) (41.2) 28.8% 29.4% Interest expense 163.1 141.5 138.0 130.2 93.0 D&A 278.9 271.4 259.1 246.9 269.8 Loss on debt extinguishment and modifications - - - 64.7 3.7 Accretion on landfill retirement obligations 13.7 13.5 13.1 13.0 15.4 Accretion on loss contracts and other long-term liabilities 0.4 0.9 0.8 0.4 0.4 EBITDA from Continuing Operations $315.4 $329.3 $358.0 $399.1 $379.4 Acquisition and development costs 1.2 0.1 1.4 0.7 1.3 Stock based compensation 4.6 2.1 3.1 5.5 9.7 Loss on sale of assets and asset impairments 5.5 6.5 21.6 1.8 11.4 Restructuring charges 10.0 4.6-0.8 3.4 Unrealized loss (gain) on derivative instruments - 27.3 (11.1) (18.5) (1.5) Realized loss (gain) on fuel derivative instruments (1.1) 1.9 26.4 14.9 2.0 Gain on redemption of security - - (2.5) - - Rebranding and integration costs 25.8 7.1 - - - (Earnings) losses in equity investee, net (0.3) (0.1) 0.3 (0.3) 0.3 Write-off of share issuance & other capital market costs and other - - 2.8 7.1 1.0 Greentree expense, net of estimated insurance recoveries - - - - 11.1 Adjusted EBITDA $361.1 $378.8 $400.0 $411.1 $418.1 15
Normalized free cash flow reconciliation 2013 2014 2015 2016 2017 Net Cash Provided by Operating Activities $180.3 $243.2 $244.5 $237.0 $308.8 Purchases of Property and Equipment (a) (158.1) (166.0) (177.3) (171.0) (174.8) Proceeds from the Sale of Property and Equipment 3.4 3.0 2.6 3.3 2.2 Free Cash Flow $25.6 $80.2 $69.8 $69.3 $136.2 Net Assumption of Long-term Care and Closure - - - - (20.0) Restructuring Payments 44.4 9.9 3.2 2.1 0.8 Payments to Retired Executives - - - - 6.2 Greentree Costs - - - - 5.7 Capital Market Costs - - 2.7 7.7 0.9 Realized Loss on Derivatives (1.1) 1.9 26.4 14.9 2.0 Normalized Free Cash $68.9 $92.0 $102.1 $94.0 $131.8 Normalized Free Cash % margin 5.2% 6.6% 7.3% 6.7% 8.7% (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 2015: Excludes the impact of land purchased for future landfill airspace of $2.4M 16