Organic Revenue Growth Drives Increases in
Income from Operations, Operating EBITDA, and Diluted Earnings per
Share
WM Recognized by Forbes as One of the Best
Employers for Diversity
WM (NYSE: WM) today announced financial results for the quarter
ended March 31, 2023.
Three Months Ended
Three Months Ended
March
31, 2023 (in millions, except per
share amounts)
March
31, 2022
(in
millions, except per share amounts)
As Reported
As Adjusted(a)
As Reported
As Adjusted(a)
Revenue
$4,892
$4,892
$4,661
$4,661
Income from Operations
$825
$828
$768
$803
Operating EBITDA(b)
$1,330
$1,333
$1,250
$1,285
Operating EBITDA Margin
27.2%
27.2%
26.8%
27.6%
Net Income(c)
$533
$535
$513
$540
Diluted EPS
$1.30
$1.31
$1.23
$1.29
“Our performance to start 2023 delivered results in line with
our expectations, keeping us on track to achieve the full-year
guidance provided at the end of January,” said Jim Fish, WM’s
President and Chief Executive Officer. “In the first quarter, our
teams executed well, delivering organic revenue growth in the
collection and disposal business of 7.0%. As we move into the
second quarter where we begin to see the seasonal uptick in our
business, we remain laser focused on our three top priorities for
the year—cost management and leveraging technology and automation
to drive permanent cost reductions, disciplined pricing, and
execution on our sustainability growth investments.”
KEY HIGHLIGHTS FOR THE FIRST QUARTER OF 2023
Revenue
- Core price for the first quarter of 2023 was 7.4% compared to
7.3% in the first quarter of 2022.(d)
- Collection and disposal yield was 6.2% compared to 5.5% in the
first quarter of 2022.
- Total Company volumes increased 1.2%, or 0.9% on a workday
adjusted basis, compared to 3.6% in the first quarter of 2022, or
3.2% on a workday adjusted basis.
- Collection and disposal volumes increased 1.1%, or 0.8% on a
workday adjusted basis, compared to 4.2% in the first quarter of
2022, or 3.8% on a workday adjusted basis.
Cost Management
- Operating expenses as a percentage of revenue increased 80
basis points to 63.1% in the first quarter of 2023 when compared to
the first quarter of 2022, or 70 basis points to 63.0% on an
adjusted basis.(a) The increase in operating expense margin in the
first quarter, when compared to the prior year, was primarily due
to wage increases, the impact of inflationary cost pressures on
repair and maintenance and subcontractor costs, and margin dilutive
impacts from recently closed acquisitions.
- SG&A expenses were 9.7% of revenue compared to 10.5%, or
10.1% on an adjusted basis, in the first quarter of 2022.(a) The
improvement reflects the Company’s progress in lowering SG&A
expenses through technology and automation.
Profitability
- Operating EBITDA in the Company’s collection and disposal
business, adjusted on the same basis as total Company operating
EBITDA, was $1.5 billion, or 30.6% of revenue, for the first
quarter of 2023, compared to $1.4 billion, or 31.3% of revenue, for
the first quarter of 2022.(e)
- Operating EBITDA in the Company’s recycling line of business
declined by $42 million compared to the first quarter of 2022,
largely in line with expectations. The decline was primarily driven
by the approximately 60% decrease in market prices for
single-stream recycled commodities.
- Operating EBITDA in the Company’s renewable energy business
declined as expected by $20 million compared to the first quarter
of 2022, primarily driven by decreases in the value of renewable
fuel standard credits and lower energy prices.
Free Cash Flow & Capital
Allocation
Three Months Ended
March 31,
(in millions)
2023
2022
Net cash provided by operating
activities
$
1,044
$
1,258
Capital expenditures to support the
business
(504
)
(371
)
Proceeds from divestitures of businesses
and other assets,
net of cash divested
11
5
Free cash flow without sustainability
growth investments
551
892
Capital expenditures - sustainability
growth investments
(156
)
(47
)
Free cash flow
$
395
$
845
- Free cash flow declined in the first quarter primarily due to
higher capital expenditures related to sustainability growth
investments and the timing of collection vehicle deliveries,
increased cash interest, and higher incentive compensation
payments.
- During the first quarter of 2023, $639 million was returned to
shareholders, including $350 million of share repurchases and $289
million of cash dividends.
Fish concluded, “In addition to our solid financial performance,
we’re also proud to be named by Forbes as one of the Best Employers
for Diversity in 2023. Inclusion and Diversity are core values at
WM, and we are pleased to be recognized as a company dedicated to
building a culture that welcomes and supports diverse employees at
all levels.”
-----------------------------------------------------------------------------------------------------------------
(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, depletion 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
measuring cumulative price changes net of churn plus price changes
from ancillary fees excluding fuel surcharges. It is 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 first quarter of 2023, the Company
updated its collection and disposal operating EBITDA calculation
with a more accurate allocation of costs to this line of business.
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 on April
27, 2023 to discuss the first quarter results. Information
contained within this press release will be referenced and should
be considered in conjunction with the call.
Listeners can access a live audio webcast of the conference call
by visiting investors.wm.com and selecting “Events &
Presentations” from the website menu. A replay of the audio webcast
will be available at the same location following the conclusion of
the call.
Conference call participants must register to obtain their dial
in and passcode details. This streamlined process improves security
and eliminates wait times when joining the call.
ABOUT WASTE MANAGEMENT
WM (WM.com) is North America's leading provider of comprehensive
environmental solutions. Previously known as Waste Management and
based in Houston, Texas, WM is driven by commitments to put people
first and achieve success with integrity. The company, through its
subsidiaries, provides collection, recycling, and disposal services
to millions of residential, commercial, industrial, and municipal
customers throughout the U.S. and Canada. With innovative
infrastructure and capabilities in recycling, organics, and
renewable energy, WM provides environmental solutions to and
collaborates with its customers in helping them achieve their
sustainability goals. WM has the largest disposal network and
collection fleet in North America, is the largest recycler of
post-consumer materials, and is the leader in beneficial use of
landfill gas, with a growing network of renewable natural gas
plants and the most landfill gas-to-electricity plants in North
America. WM's fleet includes nearly 11,000 natural gas trucks – the
largest heavy-duty natural gas truck fleet of its kind in North
America. To learn more about WM and the company's sustainability
progress and solutions, visit Sustainability.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; and future execution
of strategic priorities, including business optimization,
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,
automation, growth, and cost savings initiatives and overall
business strategy; failure to obtain the results anticipated from
strategic initiatives, investments, acquisitions or new lines of
business; failure to identify acquisition targets, consummate and
integrate acquisitions; environmental and other regulations,
including developments related to emerging contaminants, gas
emissions, renewable energy and environmental, social, and
governance (“ESG”), performance and disclosure; significant
environmental, safety or other incidents resulting in liabilities
or brand damage; failure to obtain and maintain necessary permits
due to land scarcity, public opposition or otherwise; diminishing
landfill capacity, resulting in increased costs and the need for
disposal alternatives; failure to attract, hire and retain key team
members and a high quality workforce; increases in labor costs due
to union organizing activities or changes in wage and labor related
regulations; disruption and costs resulting from extreme weather
and destructive climate events; failure to achieve our
sustainability goals or execute on our sustainability-related
strategy and initiatives; public health risk, increased costs and
disruption due to a future resurgence of pandemic conditions and
restrictions; macroeconomic conditions, geopolitical conflict and
market disruption resulting in labor, supply chain and
transportation constraints, inflationary cost pressures and
fluctuations in commodity prices, fuel and other energy costs;
increased competition; pricing actions; impacts from international
trade restrictions; competitive disposal alternatives, diversion of
waste from landfills and declining waste volumes; weakness in
general economic conditions and capital markets, including
potential for an economic recession; instability of financial
institutions; adoption of new tax legislation; fuel shortages;
failure to develop and protect new technology; failure of
technology to perform as expected; 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,
as updated by subsequent Quarterly Reports on Form 10-Q, 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 operating EBITDA, adjusted operating
EBITDA margin, adjusted operating expenses, adjusted SG&A
expenses, and free cash flow, as well as projections of adjusted
operating EBITDA and free cash flow for 2023. 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.
In addition, the Company’s projected future operating EBITDA is
anticipated to exclude the effects of other events or circumstances
that are not representative or indicative of the Company’s results
of operations. Such excluded items are not currently determinable,
but may be significant, such as asset impairments and one-time
items, charges, gains or losses from divestitures or litigation,
and other items. Due to the uncertainty of the likelihood, amount
and timing of any such items, the Company does not have information
available to provide a quantitative reconciliation of such
projection to the comparable GAAP measure.
The Company discusses free cash flow and provides a projection
of 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, with the exception of projected adjusted operating
EBITDA. 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,
2023
2022
Operating revenues
$
4,892
$
4,661
Costs and expenses:
Operating
3,086
2,903
Selling, general and administrative
476
491
Depreciation, depletion and
amortization
505
482
Restructuring
3
—
(Gain) loss from divestitures, asset
impairments and unusual items, net
(3
)
17
4,067
3,893
Income from operations
825
768
Other income (expense):
Interest expense, net
(120
)
(85
)
Equity in net losses of unconsolidated
entities
(11
)
(15
)
Other, net
2
3
(129
)
(97
)
Income before income taxes
696
671
Income tax expense
164
157
Consolidated net income
532
514
Less: Net income (loss) attributable to
noncontrolling interests
(1
)
1
Net income attributable to Waste
Management, Inc.
$
533
$
513
Basic earnings per common share
$
1.31
$
1.24
Diluted earnings per common share
$
1.30
$
1.23
Weighted average basic common shares
outstanding
407.4
415.7
Weighted average diluted common shares
outstanding
409.0
417.8
WASTE MANAGEMENT, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In Millions)
(Unaudited)
March 31,
December 31,
2023
2022
ASSETS
Current assets:
Cash and cash equivalents
$
257
$
351
Receivables, net
2,608
2,752
Other
506
448
Total current assets
3,371
3,551
Property and equipment, net
15,705
15,719
Goodwill
9,344
9,323
Other intangible assets, net
823
827
Other
2,047
1,947
Total assets
$
31,290
$
31,367
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable, accrued liabilities and
deferred revenues
$
3,520
$
3,980
Current portion of long-term debt
336
414
Total current liabilities
3,856
4,394
Long-term debt, less current portion
15,034
14,570
Other
5,592
5,539
Total liabilities
24,482
24,503
Equity:
Waste Management, Inc. stockholders’
equity
6,794
6,849
Noncontrolling interests
14
15
Total equity
6,808
6,864
Total liabilities and equity
$
31,290
$
31,367
WASTE MANAGEMENT, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In Millions)
(Unaudited)
Three Months Ended
March 31,
2023
2022
Cash flows from operating activities:
Consolidated net income
$
532
$
514
Adjustments to reconcile consolidated net
income to net cash provided by operating activities:
Depreciation, depletion and
amortization
505
482
Other
107
80
Change in operating assets and
liabilities, net of effects of acquisitions and divestitures
(100
)
182
Net cash provided by operating
activities
1,044
1,258
Cash flows from investing activities:
Acquisitions of businesses, net of cash
acquired
(34
)
(9
)
Capital expenditures
(660
)
(418
)
Proceeds from divestitures of businesses
and other assets, net of cash divested
11
5
Other, net
(95
)
(150
)
Net cash used in investing activities
(778
)
(572
)
Cash flows from financing activities:
New borrowings
6,885
2,362
Debt repayments
(6,548
)
(2,471
)
Common stock repurchase program
(350
)
(250
)
Cash dividends
(289
)
(275
)
Exercise of common stock options
12
9
Tax payments associated with equity-based
compensation transactions
(28
)
(34
)
Other, net
(1
)
24
Net cash used in financing activities
(319
)
(635
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash and cash equivalents
—
1
(Decrease) increase in cash, cash
equivalents and restricted cash and cash equivalents
(53
)
52
Cash, cash equivalents and restricted cash
and cash equivalents at beginning of period
445
194
Cash, cash equivalents and restricted cash
and cash equivalents at end of period
$
392
$
246
WASTE MANAGEMENT, INC.
SUMMARY DATA SHEET
(In Millions)
(Unaudited)
Operating Revenues by Line of
Business
Three Months Ended
March 31,
2023
2022
Commercial
$
1,412
$
1,287
Industrial
933
836
Residential
854
805
Other collection
172
153
Total collection
3,371
3,081
Landfill
1,152
1,051
Transfer
540
486
Recycling
358
453
Other
613
575
Intercompany(a)
(1,142
)
(985
)
Total
$
4,892
$
4,661
Internal Revenue Growth
Period-to-Period Change for
the Three Months Ended March 31, 2023 vs. 2022
As a % of
As a % of
Related
Total
Amount
Business(b)
Amount
Company(c)
Collection and disposal
$
244
6.2
%
Recycling and WM Renewable Energy(d)
(e)
(141
)
(28.0
)
Fuel surcharges and mandated fees(e)
44
21.1
Total average yield(f)
$
147
3.1
%
Volume
55
1.2
Internal revenue growth
202
4.3
Acquisitions
43
0.9
Divestitures
(2
)
—
Foreign currency translation
(12
)
(0.2
)
Total
$
231
5.0
%
Period-to-Period Change for
the
Three Months Ended
March 31, 2023 vs.
2022
As a % of Related
Business(b)
Yield
Volume(g)
Commercial
7.2
%
(0.9
)
%
Industrial
10.0
(1.8
)
Residential
5.6
(2.9
)
Total collection
7.2
(1.0
)
MSW
5.4
2.7
Transfer
8.9
1.8
Total collection and disposal
6.2
%
0.8
%
_____________________________________
(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 in both our recycling and WM Renewable Energy
businesses, as well as changes in fees in our recycling
business.
(e)
Beginning in 2023, Recycling and WM
Renewable Energy includes changes in our revenue attributable to
our WM Renewable Energy business. Previously these changes in
revenues were included in fuel surcharges and mandated fees. 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)
Three Months Ended
March 31,
2023
2022
Supplemental Data
Internalization of waste, based on
disposal costs
68.5
%
68.4
%
Landfill depletable tons (in millions)
29.3
29.1
Acquisition Summary(a)
Gross annualized revenue acquired
$
18
$
3
Total consideration, net of cash
acquired
34
6
Cash paid for acquisitions consummated
during the period, net of cash acquired
31
5
Cash paid for acquisitions including
contingent consideration and other items from prior periods, net of
cash acquired
34
4
Landfill Amortization and Accretion
Expenses:
Three Months Ended
March 31,
2023
2022
Landfill depletion expense:
Cost basis of landfill assets
$
142
$
134
Asset retirement costs
36
33
Total landfill depletion expense(b)
178
167
Accretion expense
32
28
Landfill depletion and accretion
expense
$
210
$
195
__________________________
(a)
Represents amounts associated with
business acquisitions consummated during the applicable period
except where noted.
(b)
The increase in landfill depletion expense
during the first quarter of 2023, as compared with the first
quarter of 2022, was primarily due to the reopening of a previously
closed landfill in our East Tier segment
WASTE MANAGEMENT, INC.
RECONCILIATION OF CERTAIN
NON-GAAP MEASURES
(In Millions, Except Per Share
Amounts)
(Unaudited)
Three Months Ended March 31,
2023
Income from
Pre-tax
Tax
Net
Diluted Per
Operations
Income
Expense
Income(a)
Share Amount
As reported amounts
$
825
$
696
$
164
$
533
$
1.30
Adjustments:
Labor dispute
6
6
2
4
Reversal of legacy loss contingency
reserve
(3
)
(3
)
(1
)
(2
)
Restructuring
3
3
1
2
Gain from asset impairments and unusual
items, net
(3
)
(3
)
(1
)
(2
)
3
3
1
2
0.01
As adjusted amounts
$
828
$
699
$
165
(b)
$
535
$
1.31
Depreciation, depletion and
amortization
505
As adjusted operating EBITDA
$
1,333
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, depletion and
amortization
482
As adjusted operating EBITDA
$
1,285
_________________________
(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 2023
and 2022 adjusted effective tax rates were 23.6% and 23.5%,
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, 2023
March 31, 2022
As a % of
As a % of
Amount
Revenues
Amount
Revenues
Adjusted Operating Expenses and
Adjusted Operating Expenses Margin
Operating revenues, as reported
$
4,892
$
4,661
Operating expenses, as reported
$
3,086
63.1
%
$
2,903
62.3
%
Adjustments:
Labor dispute
(6
)
Reversal of legacy loss contingency
reserve
3
Operating expenses, as adjusted
$
3,083
63.0
%
2023 Projected Free Cash Flow
Reconciliation(a)
Scenario 1
Scenario 2
Net cash provided by operating
activities
$
4,600
$
4,725
Capital expenditures to support the
business
(2,015
)
(2,100
)
Proceeds from divestitures of businesses
and other assets, net of cash divested
15
75
Free cash flow without sustainability
growth investments
$
2,600
$
2,700
Capital expenditures - sustainability
growth investments
(1,100
)
(1,100
)
Free cash flow
$
1,500
$
1,600
_________________________
(a) The reconciliation includes two
scenarios that illustrate our projected free cash flow range for
2023. 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,
2023
2022
Amount
Change in Adjusted Operating
EBITDA Margin
Amount
Change in Adjusted Operating
EBITDA Margin
Recycling commodity rebates
$
141
0.9%
$
223
1.4%
Accretion expense
$
32
0.6%
$
28
0.6%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230426005810/en/
WM Website www.wm.com Analysts Ed Egl
713.265.1656 eegl@wm.com Media Toni Werner media@wm.com
Waste Management (NYSE:WM)
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