WM Announces Second Quarter 2024 Earnings

Business Wire 24-Jul-2024 4:30 PM

Robust Growth in the Collection and Disposal Business Powers Strong Operating EBITDA and Margin

The Company Closed More than $750 Million of Solid Waste Acquisitions Through July

WM (NYSE:WM) today announced financial results for the quarter ended June 30, 2024.

"Based on our great performance to start 2024 and our confidence in the strength of our business, after the first quarter we raised our full-year outlook for adjusted operating EBITDA and free cash flow by $100 million. Our second quarter results are tracking to this higher trajectory and reflect continued momentum on our pricing programs and cost optimization efforts in our collection and disposal business," said Jim Fish, WM's President and Chief Executive Officer. "Revenue grew by 5.5% this quarter, and our disciplined focus on leveraging our people, technology and processes to reduce our cost to serve continued to drive margin expansion. Our adjusted operating EBITDA increased by 10.3%, and margin expanded by 130 basis points resulting in quarterly margin of 30.0% for the first time ever."^(a)

Fish continued, "We continue to strategically expand our core collection and disposal operations in North America through targeted acquisitions in new geographies like Long Island, New York and through tuck-in acquisitions in growth markets in Florida, North Carolina, and Arizona. Looking forward, we are excited about our planned acquisition of Stericycle, and we are progressing through the customary regulatory reviews. At the same time, we are making significant strides on our sustainability investments, having opened two upgraded recycling facilities this quarter. In our renewable energy business, we are scheduled to complete a total of five projects in 2024, with an additional nine projects currently under construction. The momentum is strong, and we remain focused on execution."

KEY HIGHLIGHTS FOR THE SECOND QUARTER OF 2024

• Total Company revenue grew 5.5%, driven primarily by core price of 6.8% and increases in the value of the recycled commodities the Company sells.^(d)
• Collection and Disposal yield was 4.6%, and Collection and Disposal volume declined 0.3%.^(e)
• Operating expenses as a percentage of revenue improved 130 basis points to 60.9% compared to prior year. This improvement was driven by benefits from price and cost optimization efforts.
• SG&A expenses were 9.3% of revenue, or 9.1% of revenue on an adjusted basis and flat with the prior year.^(a)
• Total Company adjusted operating EBITDA grew 10.3% to $1.62 billion, and margin expanded 130 basis points to 30.0% on an adjusted basis.^(a)
• Operating EBITDA in the Company's Collection and Disposal business grew $200 million to $1.83 billion, and margin expanded to 37.3%. Adjusted operating EBITDA in the Company's Collection and Disposal business grew $203 million to $1.84 billion, and margin expanded to 37.3%.^(a)
• Operating EBITDA in the Recycling Processing & Sales and WM Renewable Energy businesses grew 20.8%, in line with expectations, driven by higher market prices for recycled and renewable energy commodities, partially offset by temporary shutdown costs associated with recycling facility upgrades.^(e)(f)
• In the first half of the year, net cash provided by operating activities increased 21.6% to $2.52 billion compared to the same period in 2023 driven by the Company's strong operating EBITDA growth combined with working capital benefits.
• In the first half of the year, free cash flow before investments in high-return sustainability projects grew 41.1% to $1.63 billion. The Company continues to progress its sustainability growth portfolio with investments in an industry-leading network of renewable natural gas projects and recycling assets. Total Company free cash flow in the first half of the year, including these investments, grew 32.3% to $1.24 billion.^(a)
• The Company's strong first half performance is on track to achieve the increased full-year outlook provided in April for adjusted operating EBITDA of between $6.375 and $6.525 billion and for free cash flow including sustainability growth investments of between $2.0 and $2.15 billion.^(a)(g)
• In conjunction with its second quarter earnings materials, the Company has published additional information elaborating on the strategic rationale and expected financial benefits from its planned acquisition of Stericycle in a supplemental presentation on our investor website.^(h)

Fish concluded, "We are pleased with the progress we've made on our strategic priorities so far in 2024. Our team continues to exceed the high expectations we have set. With our strong performance in the first half of the year, we are confident that we are on track to meet or exceed the midpoint of our full-year financial outlook that we provided in April."

The Company will host a conference call at 10 a.m. ET on July 25, 2024 to discuss the second quarter 2024 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 should register to obtain their dial in and passcode details. This streamlined process improves security and eliminates wait times when joining the call.

ABOUT WM

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 more than 12,000 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 or projections 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, circumstances or performance. This press release contains a number of such forward-looking statements, including all statements regarding future performance or financial results of our business; achievement of financial outlook; growth and margin expansion; drivers of performance, including pricing, cost optimization and cost reduction and other initiatives; results from acquisitions; consummation of the Stericycle acquisition and obtaining regulatory approvals; and timing of sustainability investments and project completions and related results. 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, including the planned Stericycle acquisition, or new lines of business; failure to identify acquisition targets, consummate and integrate acquisitions, including our planned integration of Stericycle; our ability to consummate and finance the Stericycle acquisition and achieve the anticipated benefits therefrom, including cost synergies; legal, regulatory and other matters that may affect the costs and timing of our ability to complete, integrate and deliver all of the expected benefits of the planned Stericycle acquisition; environmental and other regulations, including developments related to emerging contaminants, gas emissions, renewable energy, extended producer responsibility and our natural gas fleet; 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 severe weather and destructive climate events; failure to achieve our sustainability goals or execute on our sustainability-related strategy and initiatives, including within planned timelines or anticipated budgets due to disruptions, delays, cost increases or changes in environmental or tax regulations; focus on, and regulation of, environmental and sustainability-related disclosures, which could lead to increased costs, risk of non-compliance, brand damage and litigation risk related to our sustainability efforts; macroeconomic conditions, geopolitical conflict and large-scale 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; inability to adapt and manage the benefits and risks of artificial intelligence; 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 and margin, adjusted SG&A expenses 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.

In addition, the Company's projected future operating EBITDA and margin 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 and margin. Non-GAAP measures should not be considered a substitute for financial measures presented in accordance with GAAP.