Strong
Operational Performance Drives Double-Digit Growth in Revenue,
Operating EBITDA and Net Cash Provided by Operating
Activities
WM (NYSE: WM) today announced financial results for the quarter
ended March 31, 2022.
Three Months Ended
Three Months Ended
March 31,
2022 (in millions, except per share amounts)
March 31,
2021 (in millions, except per share amounts)
As Reported
As Adjusted(a)
As Reported
As Adjusted(a)
Revenue
$4,661
$4,661
$4,112
$4,112
Income from Operations
$768
$803
$650
$689
Operating EBITDA(b)
$1,250
$1,285
$1,122
$1,161
Operating EBITDA Margin
26.8%
27.6%
27.3%
28.2%
Net Income(c)
$513
$540
$421
$450
Diluted EPS
$1.23
$1.29
$0.99
$1.06
“We had an excellent start to the year, as our first quarter
results put us on a path to comfortably achieve our full-year
guidance,” said Jim Fish, WM’s President and Chief Executive
Officer. “I am proud of how we continue to respond to inflationary
pressures in our business. Our teams executed remarkably well,
delivering double-digit growth in revenue, operating EBITDA and net
cash provided by operating activities in the quarter. We also
advanced our long-term strategic priorities of providing the best
workplace for our employees, progressing technology and automation
that differentiates WM and reduces costs, and leveraging our
sustainability platform for growth.”
Fish continued, “In addition, the key leading performance
indicators within our business, such as special waste volumes,
construction and demolition volumes, and new business formation,
point to continued strong economic activity and business
performance for the balance of the year.”
KEY HIGHLIGHTS FOR THE FIRST QUARTER OF 2022
Revenue
- Core price for the first quarter of 2022 was 7.3% compared to
3.4% in the first quarter of 2021.(d)
- Collection and disposal yield was 5.5% in the first quarter of
2022 compared to 2.8% in the first quarter of 2021.(f)
- Total Company volumes increased 3.6% in the first quarter of
2022, or 3.2% on a workday adjusted basis, compared to a decline of
3.3% in the first quarter of 2021, or a decline of 2.7% on a
workday adjusted basis.(f)
Cost Management
- Operating expenses as a percentage of revenue increased 120
basis points to 62.3% when compared to the first quarter of 2021
but improved 70 basis points when compared to the fourth quarter of
2021. The increase in operating expense margin in the first
quarter, when compared to the prior year, was primarily due to the
impacts of increased wages for front-line employees, higher
commodity prices for recyclables, and alternative fuel tax credits
received in the prior year that have not yet been renewed for
2022.
- SG&A expenses were 10.5% of revenue in the first quarter of
2022 compared to 11.1% in the first quarter of 2021. On an adjusted
basis, SG&A expenses were 10.1% of revenue in the first quarter
of 2022 compared to 10.7% in the first quarter of 2021.(a)
Profitability
- Operating EBITDA in the Company’s collection and disposal
business, adjusted on the same basis as total Company operating
EBITDA, was $1.4 billion, or 31.2% of revenue, for the first
quarter of 2022, compared to $1.3 billion, or 31.8% of revenue, for
the first quarter of 2021.(e)
- Operating EBITDA in the Company’s recycling line of business,
adjusted on the same basis as total Company operating EBITDA,
improved by $23 million compared to the first quarter of 2021. The
improvement was primarily driven by increases in market prices for
recycled commodities.
- Operating EBITDA in the Company’s renewable energy business,
adjusted on the same basis as total Company operating EBITDA,
improved by $13 million compared to the first quarter of 2021,
primarily driven by increases in the value of renewable fuel
standard credits, or RINs.
Free Cash Flow & Capital
Allocation
- In the first quarter of 2022, net cash provided by operating
activities was $1.26 billion compared to $1.12 billion in the first
quarter of 2021. The improvement in net cash provided by operating
activities was primarily driven by the increase in operating
EBITDA.
- In the first quarter of 2022, capital expenditures to support
the business were $371 million compared to $259 million in the
first quarter of 2021. In addition, in the first quarter of 2022,
capital expenditures for sustainability growth investments were $47
million compared to $11 million in the first quarter of 2021.
- In the first quarter of 2022, free cash flow was $845 million
compared to $865 million in the first quarter of 2021.(a) In the
first quarter of 2022, free cash flow without sustainability growth
investments was $892 million compared to $876 million in the first
quarter of 2021.(a)
- During the first quarter of 2022, $525 million was returned to
shareholders, including $275 million of cash dividends and $250
million allocated to share repurchases.
Fish concluded, “In addition to our strong financial
performance, we also take pride in being recognized among the
World’s Most Ethical Companies by Ethisphere in March. This was the
13th time WM has received this distinction, and it reflects our
commitment to being a responsible operator that achieves success
with integrity.”
(a)
The information labeled as adjusted in
this press release, as well as free cash flow, are non-GAAP
measures. Please see "Non-GAAP Financial Measures" below and the
reconciliations in the accompanying schedules for more
information.
(b)
Management defines operating EBITDA as
GAAP income from operations before depreciation and amortization;
this measure may not be comparable to similarly-titled measures
reported by other companies.
(c)
For purposes of this press release, all
references to "Net income" refer to the financial statement line
item "Net income attributable to Waste Management, Inc."
(d)
Core price is a performance metric used by
management to evaluate the effectiveness of our pricing strategies;
it is not derived from our financial statements and may not be
comparable to measures presented by other companies. Core price is
based on certain historical assumptions, which may differ from
actual results, to allow for comparability between reporting
periods and to reveal trends in results over time.
(e)
In the fourth quarter of 2021, the Company
updated its collection and disposal operating EBITDA calculation
with a more accurate allocation of costs to this line of
business.
(f)
Beginning in the fourth quarter of 2021,
changes in the Company’s renewable energy revenue are reflected as
components of the changes in revenue attributable to yield
(included in “Fuel & Other”) and volume. The Company has
restated the prior periods to be consistent with the current year
presentation.
The Company will host a conference call at 10 a.m. ET today to
discuss the first quarter results. Information contained within
this press release will be referenced and should be considered in
conjunction with the call.
The conference call will be webcast live from the Investors
section of Waste Management’s website www.wm.com. To access the
conference call by telephone, please dial (877) 710-6139
approximately 10 minutes prior to the scheduled start of the call.
If you are calling from outside of the United States or Canada,
please dial (706) 643-7398. Please utilize conference ID number
3365157 when prompted by the conference call operator.
A replay of the conference call will be available on the
Company’s website www.wm.com and by telephone from approximately 1
p.m. ET today through 5 p.m. ET on Tuesday, May 11, 2022. To access
the replay telephonically, please dial (855) 859-2056, or from
outside of the United States or Canada dial (404) 537-3406 and use
the replay conference ID number 3365157.
ABOUT WASTE MANAGEMENT
WM, based in Houston, Texas, is the leading provider of
comprehensive waste management environmental services in North
America, providing services throughout the United States and
Canada. Through its subsidiaries, the Company provides collection,
transfer, disposal services, and recycling and resource recovery.
It is also a leading developer, operator and owner of landfill
gas-to-energy facilities in the United States. The Company’s
customers include residential, commercial, industrial, and
municipal customers throughout North America. To learn more
information about Waste Management, visit www.wm.com.
FORWARD-LOOKING STATEMENTS
The Company, from time to time, provides estimates of financial
and other data, comments on expectations relating to future periods
and makes statements of opinion, view or belief about current and
future events. This press release contains a number of such
forward-looking statements, including but not limited to all
statements regarding future performance or financial results of our
business; achievement of financial guidance; future volumes and
economic activity; and future execution of strategic priorities,
including pricing, cost reduction, investments and sustainability
projects and growth. You should view these statements with caution.
They are based on the facts and circumstances known to the Company
as of the date the statements are made. These forward-looking
statements are subject to risks and uncertainties that could cause
actual results to be materially different from those set forth in
such forward-looking statements, including but not limited to
failure to implement our optimization, growth, and cost savings
initiatives and overall business strategy; failure to identify
acquisition targets, consummate and integrate acquisitions; failure
to obtain the results anticipated from acquisitions, including
continuing to realize the strategic benefits and cost synergies
from our acquisition of Advanced Disposal Services, Inc.;
environmental and other regulations, including developments related
to emerging contaminants, gas emissions and renewable fuel;
significant environmental, safety or other incidents resulting in
liabilities or brand damage; failure to obtain and maintain
necessary permits; failure to attract, hire and retain key team
members and a high quality workforce; changes in wage and labor
related regulations; significant storms and destructive climate
events; public health risk and other impacts of COVID-19 or similar
pandemic conditions, including related regulations, resulting in
increased costs and social, labor and commercial disruption;
macroeconomic pressures and market disruption resulting in labor,
supply chain and transportation constraints and inflationary cost
pressure; increased competition; pricing actions; commodity price
fluctuations; impacts from Russia’s recent invasion of Ukraine and
the resulting geopolitical conflict and international response,
including increased risk of cyber incidents and exacerbation of
market disruption, inflationary cost pressure and changes in
commodity prices, fuel and other energy costs; international trade
restrictions; disposal alternatives and waste diversion; declining
waste volumes; weakness in general economic conditions and capital
markets; adoption of new tax legislation; fuel shortages; failure
to develop and protect new technology; failure of technology to
perform as expected, including implementation of a new enterprise
resource planning and human capital management system; failure to
prevent, detect and address cybersecurity incidents or comply with
privacy regulations; negative outcomes of litigation or
governmental proceedings; and decisions or developments that result
in impairment charges. Please also see the Company’s filings with
the SEC, including Part I, Item 1A of the Company’s most recently
filed Annual Report on Form 10-K, for additional information
regarding these and other risks and uncertainties applicable to its
business. The Company assumes no obligation to update any
forward-looking statement, including financial estimates and
forecasts, whether as a result of future events, circumstances or
developments or otherwise.
NON-GAAP FINANCIAL MEASURES
To supplement its financial information, the Company has
presented, and/or may discuss on the conference call, adjusted
earnings per diluted share, adjusted net income, adjusted income
from operations, adjusted SG&A expenses, adjusted operating
EBITDA, adjusted operating EBITDA margin, and free cash flow. All
of these items are non-GAAP financial measures, as defined in
Regulation G of the Securities Exchange Act of 1934, as amended.
The Company reports its financial results in compliance with GAAP
but believes that also discussing non-GAAP measures provides
investors with (i) financial measures the Company uses in the
management of its business and (ii) additional, meaningful
comparisons of current results to prior periods’ results by
excluding items that the Company does not believe reflect its
fundamental business performance and are not representative or
indicative of its results of operations.
The Company discusses free cash flow because the Company
believes that it is indicative of its ability to pay its quarterly
dividends, repurchase common stock, fund acquisitions and other
investments and, in the absence of refinancings, to repay its debt
obligations. Free cash flow is not intended to replace “Net cash
provided by operating activities,” which is the most comparable
GAAP measure. The Company believes free cash flow gives investors
useful insight into how the Company views its liquidity, but the
use of free cash flow as a liquidity measure has material
limitations because it excludes certain expenditures that are
required or that the Company has committed to, such as declared
dividend payments and debt service requirements. The Company
defines free cash flow as net cash provided by operating
activities, less capital expenditures, plus proceeds from
divestitures of businesses and other assets (net of cash divested);
this definition may not be comparable to similarly-titled measures
reported by other companies.
The quantitative reconciliations of non-GAAP measures to the
most comparable GAAP measures are included in the accompanying
schedules. Non-GAAP measures should not be considered a substitute
for financial measures presented in accordance with GAAP.
WASTE MANAGEMENT, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In Millions, Except per Share
Amounts)
(Unaudited)
Three Months Ended
March 31,
2022
2021
Operating revenues
$
4,661
$
4,112
Costs and expenses:
Operating
2,903
2,514
Selling, general and administrative
491
458
Depreciation and amortization
482
472
Restructuring
—
1
Loss from divestitures, asset impairments
and unusual items, net
17
17
3,893
3,462
Income from operations
768
650
Other income (expense):
Interest expense, net
(85)
(97)
Equity in net losses of unconsolidated
entities
(15)
(9)
Other, net
3
1
(97)
(105)
Income before income taxes
671
545
Income tax expense
157
124
Consolidated net income
514
421
Less: Net income (loss) attributable to
noncontrolling interests
1
—
Net income attributable to Waste
Management, Inc.
$
513
$
421
Basic earnings per common share
$
1.24
$
1.00
Diluted earnings per common share
$
1.23
$
0.99
Weighted average basic common shares
outstanding
415.7
422.9
Weighted average diluted common shares
outstanding
417.8
424.3
WASTE MANAGEMENT, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In Millions)
(Unaudited)
March 31,
December 31,
2022
2021
ASSETS
Current assets:
Cash and cash equivalents
$
155
$
118
Receivables, net
2,479
2,546
Other
425
405
Total current assets
3,059
3,069
Property and equipment, net
14,298
14,419
Goodwill
9,034
9,028
Other intangible assets, net
868
898
Other
1,960
1,683
Total assets
$
29,219
$
29,097
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable, accrued liabilities and
deferred revenues
$
3,371
$
3,374
Current portion of long-term debt
435
708
Total current liabilities
3,806
4,082
Long-term debt, less current portion
13,052
12,697
Other
5,215
5,192
Total liabilities
22,073
21,971
Equity:
Waste Management, Inc. stockholders’
equity
7,144
7,124
Noncontrolling interests
2
2
Total equity
7,146
7,126
Total liabilities and equity
$
29,219
$
29,097
WASTE MANAGEMENT, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In Millions)
(Unaudited)
Three Months Ended
March 31,
2022
2021
Cash flows from operating activities:
Consolidated net income
$
514
$
421
Adjustments to reconcile consolidated net
income to net cash provided by operating activities:
Depreciation and amortization
482
472
Other
80
63
Change in operating assets and
liabilities, net of effects of acquisitions and divestitures
182
164
Net cash provided by operating
activities
1,258
1,120
Cash flows from investing activities:
Acquisitions of businesses, net of cash
acquired
(9)
(7)
Capital expenditures
(418)
(270)
Proceeds from divestitures of businesses
and other assets, net of cash divested
5
15
Other, net
(150)
(72)
Net cash used in investing activities
(572)
(334)
Cash flows from financing activities:
New borrowings
2,362
—
Debt repayments
(2,471)
(329)
Common stock repurchase program
(250)
(250)
Cash dividends
(275)
(247)
Exercise of common stock options
9
17
Tax payments associated with equity-based
compensation transactions
(34)
(28)
Other, net
24
7
Net cash used in financing activities
(635)
(830)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash and cash equivalents
1
2
Increase (decrease) in cash, cash
equivalents and restricted cash and cash equivalents
52
(42)
Cash, cash equivalents and restricted cash
and cash equivalents at beginning of period
194
648
Cash, cash equivalents and restricted cash
and cash equivalents at end of period
$
246
$
606
WASTE MANAGEMENT, INC.
SUMMARY DATA SHEET
(In Millions)
(Unaudited)
Operating Revenues by Line of
Business
Three Months Ended
March 31,
2022
2021
Commercial
$
1,287
$
1,131
Industrial
836
743
Residential
805
782
Other collection
153
116
Total collection
3,081
2,772
Landfill
1,051
915
Transfer
486
465
Recycling
453
342
Other
575
477
Intercompany (a)
(985)
(859)
Total
$
4,661
$
4,112
Internal Revenue Growth
Period-to-Period Change for
the Three Months Ended March 31, 2022 vs. 2021
As a % of
As a % of
Related
Total
Amount
Business(b)
Amount
Company(c)
Collection and disposal
$
197
5.5
%
Recycling commodities(d)
116
35.7
Fuel surcharges and other(e)
90
46.5
Total average yield(f)
$
403
9.8
%
Volume(e)
148
3.6
Internal revenue growth
551
13.4
Acquisitions
3
0.1
Divestitures
(5)
(0.1)
Foreign currency translation
—
—
Total
$
549
13.4
%
Period-to-Period Change for
the
Three Months Ended
March 31, 2022 vs.
2021
As a % of Related
Business(b)
Yield
Volume(g)
Commercial
7.9
%
3.3
%
Industrial
7.7
1.0
Residential
5.0
(3.5)
Total collection
6.7
1.1
MSW
5.1
5.1
Transfer
3.3
0.4
Total collection and disposal
5.5
%
3.8
%
(a)
Intercompany revenues between lines of
business are eliminated in the Condensed Consolidated Financial
Statements included herein.
(b)
Calculated by dividing the increase or
decrease for the current year period by the prior year period’s
related business revenue adjusted to exclude the impacts of
divestitures for the current year period.
(c)
Calculated by dividing the increase or
decrease for the current year period by the prior year period’s
total Company revenue adjusted to exclude the impacts of
divestitures for the current year period.
(d)
Includes combined impact of commodity
price variability and changes in fees.
(e)
Beginning in the fourth quarter of 2021,
includes changes in our revenue attributable to our WM Renewable
Energy business. We have revised our prior year results to conform
with the current year presentation.
(f)
The amounts reported herein represent the
changes in our revenue attributable to average yield for the total
Company.
(g)
Workday adjusted volume impact.
WASTE MANAGEMENT, INC.
SUMMARY DATA SHEET
(In Millions)
Unaudited)
Free Cash Flow(a)
Three Months Ended
March 31,
2022
2021
Net cash provided by operating
activities
$
1,258
$
1,120
Capital expenditures to support the
business
(371)
(259)
Proceeds from divestitures of businesses
and other assets, net of cash divested
5
15
Free cash flow without sustainability
growth investments
892
876
Capital expenditures - sustainability
growth investments
(47)
(11)
Free cash flow
$
845
$
865
Three Months Ended
March 31,
2022
2021
Supplemental Data
Internalization of waste, based on
disposal costs
68.4
%
68.0
%
Landfill amortizable tons (in
millions)
29.1
27.6
Acquisition Summary(b)
Gross annualized revenue acquired
$
3
$
6
Total consideration, net of cash
acquired
6
9
Cash paid for acquisitions consummated
during the period, net of cash acquired
5
7
Cash paid for acquisitions including
contingent consideration and other items from prior periods, net of
cash acquired
4
8
Landfill Amortization and Accretion
Expenses:
Three Months Ended
March 31,
2022
2021
Landfill amortization expense:
Cost basis of landfill assets
$
134
$
123
Asset retirement costs
33
34
Total landfill amortization expense(c)
167
157
Accretion expense
28
26
Landfill amortization and accretion
expense
$
195
$
183
(a)
The summary of free cash flow has been
prepared to highlight and facilitate understanding of the principal
cash flow elements. Free cash flow is not a measure of financial
performance under generally accepted accounting principles and is
not intended to replace the consolidated statement of cash flows
that was prepared in accordance with generally accepted accounting
principles.
(b)
Represents amounts associated with
business acquisitions consummated during the applicable period
except where noted.
(c)
The increase in landfill amortization was
driven by landfill volume increases and changes in estimates, which
includes changes in the anticipated timing of capping, closure and
post-closure activities.
WASTE MANAGEMENT, INC.
RECONCILIATION OF CERTAIN
NON-GAAP MEASURES
(In Millions, Except Per Share
Amounts)
(Unaudited)
Three Months Ended March 31,
2022
Income from
Pre-tax
Tax
Net
Diluted Per
Operations
Income
Expense
Income(a)
Share Amount
As reported amounts
$
768
$
671
$
157
$
513
$
1.23
Adjustments:
Enterprise resource planning system
implementation-related costs
15
15
4
11
Advanced Disposal integration-related
costs
4
4
1
3
Other, net(c)
16
16
3
13
35
35
8
27
0.06
As adjusted amounts
$
803
$
706
$
165
(b)
$
540
$
1.29
Depreciation and amortization
482
As adjusted operating EBITDA
$
1,285
Three Months Ended March 31,
2021
Income from
Pre-tax
Tax
Net
Diluted Per
Operations
Income
Expense
Income(a)
Share Amount
As reported amounts
$
650
$
545
$
124
$
421
$
0.99
Adjustments:
Enterprise resource planning system
implementation-related costs
6
6
2
4
Advanced Disposal integration-related
costs
16
16
4
12
Loss from divestitures, asset impairments
and unusual items, net
17
17
4
13
39
39
10
29
0.07
As adjusted amounts
$
689
$
584
$
134
(b)
$
450
$
1.06
Depreciation and amortization
472
As adjusted operating EBITDA
$
1,161
(a)
For purposes of this press release table,
all references to "Net income" refer to the financial statement
line item "Net income attributable to Waste Management, Inc."
(b)
The Company calculates its effective tax
rate based on actual dollars. When the effective tax rate is
calculated by dividing the Tax Expense amount in the table above by
the Pre-tax Income amount, differences occur due to rounding, as
these items have been rounded in millions. The first quarter 2022
and 2021 adjusted effective tax rates were 23.5% and 22.8%,
respectively.
(c)
Includes a $17 million charge to increase
the recorded liability for a subsidiary’s estimated potential share
of a proposed environmental remediation plan at a closed site.
WASTE MANAGEMENT, INC.
RECONCILIATION OF CERTAIN
NON-GAAP MEASURES
(In Millions, Except Per Share
Amounts)
(Unaudited)
Three Months Ended
March 31, 2022
March 31, 2021
As a % of
As a % of
Amount
Revenues
Amount
Revenues
Adjusted SG&A Expenses and Adjusted
SG&A Expenses Margin
Operating revenues, as reported
$
4,661
$
4,112
SG&A expenses, as reported
$
491
10.5
%
$
458
11.1
%
Adjustments:
Enterprise resource planning system
implementation-related costs
(15)
(6)
Advanced Disposal integration-related
costs
(3)
(14)
As adjusted SG&A expenses
$
473
10.1
%
$
438
10.7
%
2022 Projected Free Cash Flow
Reconciliation(a)
Scenario 1
Scenario 2
Net cash provided by operating
activities
$
4,525
$
4,675
Capital expenditures to support the
business
(1,950)
(2,050)
Proceeds from divestitures of businesses
and other assets, net of cash divested
25
75
Free cash flow without sustainability
growth investments
$
2,600
$
2,700
Capital expenditures - sustainability
growth investments
(550)
(550)
Free cash flow
$
2,050
$
2,150
(a)
The reconciliation includes two scenarios
that illustrate our projected free cash flow range for 2022. The
amounts used in the reconciliation are subject to many variables,
some of which are not under our control and, therefore, are not
necessarily indicative of actual results.
WASTE MANAGEMENT, INC.
SUPPLEMENTAL INFORMATION
PROVIDED FOR ILLUSTRATIVE PURPOSES ONLY
(In Millions)
(Unaudited)
Diversity in the structure of recycling
contracts results in different accounting treatment for commodity
rebates. In accordance with revenue recognition guidance, our
Company records gross recycling revenue and records rebates paid to
customers as cost of goods sold. Other contract structures allow
for netting of rebates against revenue.
Additionally, there are differences in
whether companies adjust for accretion expense in their calculation
of EBITDA. Our Company does not adjust for landfill accretion
expenses when calculating operating EBITDA, while other companies
do adjust it for the calculation of their EBITDA measure.
The table below illustrates the impact
that differing contract structures and treatment of accretion
expense has on the Company’s adjusted operating EBITDA margin
results. This information has been provided to enhance
comparability and is not intended to replace or adjust GAAP
reported results.
Three Months Ended March
31,
2022
2021
Amount
Change in Adjusted Operating
EBITDA Margin
Amount
Change in Adjusted Operating
EBITDA Margin
Recycling commodity rebates
$
223
1.4%
$
152
1.1%
Accretion expense
$
28
0.6%
$
26
0.7%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220425005912/en/
Waste Management
Website www.wm.com
Analysts Ed Egl 713.265.1656 eegl@wm.com
Media Toni Werner media@wm.com
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Waste Management (NYSE:WM)
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Von Apr 2023 bis Apr 2024