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Waste Management Scores a Solid Q2 – and Raises 2021 Revenue Guidance

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Waste Management (WM) announced its second quarter earnings today. The company continues this industry earnings season strong with revenue of $4.48B. WM once again increased its 2021 financial guidance with confidence based on these strong results.

Jim Fish, Waste Management’s president and CEO, noted on the earnings call, “more than halfway through the year, all parts of our business have performed well above our [Q1-revised] expectations.” He went on to discuss how the additional increase in full-year guidance “clearly shows the earnings potential of our strategy.”

He elaborated, “As a result of our strong performance through the first half of 2021 and our confidence in the continued strength of our business model, we are increasing our full-year revenue, adjusted operating EBITDA, and free cash flow guidance.“

Fish talked about the Q2 success of WM’s core recycling business, with its “best ever financial performance by a substantial margin.” He attributed this growth in part to the “significant technology investments” that have been made. He also noted that, “Our labor costs were 35% lower than comparable MRFs.” Also, WM’s progress in segregating specific plastic types is allowing the Company to “extract more value from these commodities as demand increases.” Looking ahead, WM is accelerating its plan to roll out new operating model across its MRF network.

Fish also highlighted the overall advancement of WM’s sustainability journey and noted continued progress on digital transformation. For instance, the company has “eliminated nearly all manual steps in creating customer accounts, which will save several million annually and increase customer satisfaction,” as well as increase operational efficiency.

Q2 2021 KEY HIGHLIGHTS

Revenue

  • Revenue increased $425 million in the company’s collection and disposal business, when excluding the impact of acquisitions and divestitures, compared to the second quarter of 2020, driven by $307 million in volume increases and $118 million of growth from yield.
  • Acquisitions added $305 million of revenue primarily from the acquisition of Advanced Disposal.
  • Core price for the second quarter of 2021 was 6.2% compared to 1.3% in the second quarter of 2020.
  • Collection and disposal yield was 3.7% in the second quarter of 2021 compared to 1.6% in the second quarter of 2020.
  • Total company volumes improved 9.6% in the second quarter of 2021 compared to a decline of 10.3% in the second quarter of 2020.
     

Profitability

  • Operating EBITDA in the company’s collection and disposal business, adjusted on the same basis as total Company operating EBITDA, was $1.41 billion, or 32.0% of revenue, for the second quarter of 2021, compared to $1.14 billion, or 32.1% of revenue, for the second quarter of 2020.
  • Operating EBITDA in the company’s recycling line of business improved by $56 million compared to the second quarter of 2020. The improvement was driven by an increase in market prices for recycled commodities, investments the Company is making in improved technology and equipment at its materials recovery facilities that are delivering a lower operating cost model and the re-opening of facilities where operations were temporarily suspended during the pandemic.
  • Operating EBITDA in the company’s renewable energy line of business improved by almost $14 million compared to the second quarter of 2020, primarily driven by increases in price.
  • In the second quarter of 2021, the company realized almost $20 million of operating and SG&A cost synergies from the acquisition of Advanced Disposal.

 

Future Outlook

  • Total company revenue growth in 2021 is expected to be 15.5% to 16.0%. 
  • Adjusted operating EBITDA is expected to be between $5.0 billion and $5.1 billion in 2021.
  • Free cash flow is projected to be between $2.5 billion and $2.6 billion in 2021.
  • The company is on target to capture between $80 million and $85 million in cost synergies in 2021 from the acquisition of Advanced Disposal, which is on track to achieve $150 million in total annual run-rate synergies from cost and capital savings.

Fish concluded that, “strong performance across all of our businesses generated outstanding results so far this year,” and that the company expects to continue this momentum into the second half of the year.

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