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WM 4Q Results–Finishes the Year Strong & Beats on Revenue
5 Min Read
WM
Waste Management, Inc. (WM) today announced financial results for the quarter and year ended December 31, 2020. WM closed out the year strong with a 5.7% year-over-year (YOY) beat on revenue. The Company’s management team credits its resiliency and disciplined focus on cost and capital management.
WM’s positive momentum from the 3Q20 continued as organic revenue growth in the collection and disposal business was nearly flat YOY and improved 250 basis points sequentially and 890 basis points from the low in the second quarter.
The Company maintained its disciplined focus on cost and capital management. As a result, fourth quarter adjusted operating EBITDA increased 4.1% YOY when normalized to exclude the acquisition of Advanced Disposal as well as timing differences in the government approvals of alternative fuel tax credits. This growth was achieved despite the challenges stemming from the COVID-19 pandemic.
Jim Fish, Waste Management’s President and Chief Executive Officer said, “I am extremely proud of how our team worked through the challenges during 2020 to provide reliable, high quality service, and continued to do so as we welcomed new customers and team members following our acquisition of Advanced Disposal,” “Our focus on operational execution and efficiency allowed us to match the highest full-year adjusted operating EBITDA margin we have ever achieved at 28.4%.”
“Complementing our strong financial performance is the recognition that we continue to receive for leading the way to a more sustainable future. We remain committed not only to managing waste responsibly but also investing in recycling infrastructure and renewable energy projects and collaborating with our stakeholders to create new, sustainable environmental solutions.” Fish expanded on this during the earnings call saying, “Waste Management has emerged as a true leader in sustainability and ESG and does this while focusing on great shareholder return.”
4Q KEY HIGHLIGHTS
Revenue
In the fourth quarter of 2020, revenue increased $185 million in the Company’s collection and disposal business compared to the fourth quarter of 2019, primarily driven by $202 million in acquisition revenue and $79 million of growth from yield partially offset by $93 million in volume declines. For the full year, revenue decreased $141 million in the Company’s collection and disposal business compared to 2019, primarily driven by $669 million in volume declines partially offset by $299 million of growth from yield and $244 million in acquisition revenue.
Core price for the fourth quarter of 2020 was 3.2% compared to 4.3% in the fourth quarter of 2019. For the full year, core price was 2.9% for 2020 compared to 4.2% in 2019.
Collection and disposal yield was 2.3% in the fourth quarter of 2020 compared to 3.2% in the fourth quarter of 2019. For the full year, collection and disposal yield was 2.2% in 2020 compared to 2.8% in 2019.
Total Company volumes declined 2.6% in the fourth quarter of 2020 compared to a decline of 5.1% in the third quarter of 2020 and a decline of 0.4% in the fourth quarter of 2019. For the full year, total Company volumes declined 4.5% in 2020 compared to growth of 2.3% in 2019.
On the recycling front, sales grew by 28% YOY to $308mm
Cost Management
Total Company operating expenses were 61.5% of revenue in the fourth quarter of 2020 compared to 60.2% in the fourth quarter of 2019. The increase was primarily driven by an unfavorable comparison for alternative fuel tax credits of 150 basis points. For the full year, total Company operating expenses were 61.4% of revenue in both 2020 and 2019.
Profitability
Total Company operating EBITDA was $1.09 billion, or 26.8% of revenue, for the fourth quarter of 2020 compared to $1.05 billion, or 27.3% of revenue, for the fourth quarter of 2019. On an adjusted basis, total Company operating EBITDA was $1.14 billion, or 28.1% of revenue, for the fourth quarter of 2020 compared to adjusted operating EBITDA of $1.12 billion, or 29.1% of revenue, for the same period in 2019.(a) The margin decreases were driven by an unfavorable comparison for alternative fuel tax credits of 150 basis points.
For the full year, total Company operating EBITDA was $4.11 billion, or 27.0% of revenue, for 2020 compared to $4.28 billion, or 27.7% of revenue, for 2019. On an adjusted basis, total Company operating EBITDA was $4.32 billion for 2020 compared to adjusted operating EBITDA of $4.38 billion for 2019. Adjusted operating EBITDA was 28.4% of revenue in both years, demonstrating the Company’s strong focus on controlling costs in the lower volume environment.(a)
2021 OUTLOOK
Total Company revenue growth is expected to be between 10.75% and 11.25%. Combined internal revenue growth from yield and volume in the collection and disposal business is expected to be between 4% and 4.5%, primarily driven by the Company’s disciplined pricing programs which are expected to result in core price of 4.0% or greater and yield of approximately 2.5%.
Adjusted operating EBITDA is expected to be between $4.75 and $4.9 billion for the full year.
Synergies from the completed acquisition of Advanced Disposal are included in this measure and are expected to be between $50 million and $60 million in 2021.
When asked about volumes and pricing related to the commercial sector in 2020 and heading into 2021, Fish said, “It does not feel morally right to hit small businesses with fees or pricing increases right now. There are volume-related price increases that we haven’t taken that impact commercial. We are waiting for some volumes and businesses to return. This is a reopening story.“
Fish concluded, “In 2020, we quickly and successfully learned to operate our business with a lower cost structure while maintaining our focus on exceptional customer service. We also completed the acquisition of Advanced Disposal and accelerated our customer service digitalization investments, all while matching our highest adjusted operating EBITDA margin and generating strong cash flow. In 2021, we will continue to make investments in technology that transform our business and integrate the Advanced Disposal business, and we are well-positioned to generate strong returns.”
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