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WM Announces Q1 2020 Earnings, Cites Strong Balance Sheet & Business Model

The industry giant credits its resilient business model and strong balance sheet for positioning the Company well in this challenging environment. 

Waste Management, Inc. (NYSE: WM) announced financial results for the quarter ended March 31, 2020. Revenues for the first quarter of 2020 were $3.73 billion compared with $3.70 billion for the same 2019 period. Net income for the quarter was $361 million, or $0.85 per diluted share, compared with $347 million, or $0.81 per diluted share, for the first quarter of 2019.(a) On an adjusted basis, net income was $395 million, or $0.93 per diluted share, in the first quarter of 2020, compared with $402 million, or $0.94 per diluted share, in the first quarter of 2019.(b) 

The Company’s adjusted first quarter 2020 results exclude a $0.05 per diluted share negative impact from advisory costs incurred in connection with the pending acquisition of Advanced Disposal Services, Inc., $0.02 per diluted share primarily from the non-cash impairment of an unconsolidated investment, and $0.01 per diluted share from costs incurred to support its plan to implement a new enterprise resource planning system. 

COVID-19 Update 

As COVID-19 disruptions heightened in North America during March, Waste Management focused on protecting its workforce and continued to provide reliable service to its customers. 

“I am extremely proud of how our team has worked together to proactively address the challenges we’ve faced as a result of the coronavirus pandemic,” said Jim Fish, president and chief executive officer of Waste Management. “Our top priority as a leadership team has been the health, safety and financial wellbeing of our 45,000 team members. In turn, our team members have continued to provide essential services to customers and communities across North America. 

“As a leader in the industry, we also have a responsibility to work with our customers as they defend the health of their businesses,” Fish continued. “This is particularly true for small businesses, the lifeblood of our economy.” 

COVID-19 Response and Impact 

Waste Management listed their response to the COVID-19, including: 

  • Protecting frontline employees by supplementing customary practices and daily operational routines with social distancing and personal protective equipment enhancements. 
  • Promoting the health and financial wellbeing of its employees by excusing COVID-19 related absences and providing a guarantee of 40 hours of weekly pay to all full-time employees during the pandemic. 
  • Leveraging technology to quickly transition approximately 20,000 back-office employees to work from home – enabling these team members to serve customers and support frontline employees remotely. 
  • Partnering with its customers to adjust service levels and extend payment terms. 
  • Working with municipalities to address increased residential volumes and recycling challenges in areas where there have been processing disruptions. 

Waste Management noted the following COVID-19-related business impacts in the first quarter, beginning in March 2020: 

  • A reduction in landfill and industrial collection volumes. While volume-driven revenue in the commercial collection business held up relatively well in March, service decreases accelerated late in the month and into the second quarter. 
  • An increase in container weights in the residential line of business, which increased our cost to service these customers. 
  • A negative revenue impact of approximately $40 million. 
  • A $6 million increase in SG&A expenses, driven by technology costs incurred to accelerate work-from-home capabilities. 
  • A decline in operating EBITDA margin of approximately 40 basis points, which the Company attributes to volume declines in their higher-margin lines of business and cost pressures in the residential line of business.(c) In its higher-margin lines of business, the Company effectively flexed operating costs with volume changes, particularly labor and fleet costs, mitigating margin pressure. 

Balance Sheet and Cash Flow Considerations 

  • The Company continues to maintain a strong balance sheet and liquidity position, with its current and forecasted leverage ratio well within its revolving credit facility financial covenant and more than $3 billion of available capacity under that credit facility. 
  • The Company expects to generate strong free cash flow and remains committed to its dividend program. 
  • As a prudent step to preserve cash in this uncertain environment, the Company has temporarily suspended share repurchases for the foreseeable future. 


The Company is suspending its 2020 financial guidance due to the unprecedented impact of, and uncertainty created by, the COVID-19 pandemic. 

“Our business model generates strong cash flow and is resilient in any economic cycle. In past downturns, we have demonstrated the ability to flex spending and manage capital expenditures to generate strong free cash flow and return excess cash to our shareholders. We expect to deliver on these priorities as we continue to provide essential services to our customers during this unprecedented pandemic,” Fish said. “At this time, we cannot forecast with reasonable accuracy the duration of the coronavirus disruptions, particularly for small businesses, or the pace of an eventual recovery. We expect to resume providing financial guidance when we have greater clarity.” 

Waste Management anticipates a sharp decrease in 2020 revenue from planned levels as a result of COVID-19, driven by volume declines in landfill and industrial and commercial collection businesses. To partially offset the impact of this revenue decline, the Company is taking the following steps to manage costs and capital spending without compromising long- term strategic priorities or growth opportunities: 

  • Leveraging technology to enable swift route optimization. 
  • Dramatically reducing overtime hours.
  • Limiting hiring and optimizing the existing workforce through greatly improved retention and reduced turnover.
  • Reducing or eliminating certain non-essential costs and expenses like travel and entertainment and consulting costs.
  • Reducing incentive compensation accruals.
  • Flexing capital expenditures to a level that is consistent with volume changes. 

First Quarter 2020 Highlights

Waste Management’s financial results for the first quarter were in line with expectations. 

  • In the first quarter of 2020, revenue growth was driven by yield and volume growth in the Company’s collection and disposal business, which contributed $74 million of incremental revenue. 
  • Core price for the first quarter of 2020 was 5.5%.(d) 
  • Total Company operating EBITDA was $975 million for the first quarter of 2020. On an adjusted basis, total Company operating EBITDA was $1.01 billion for the first quarter of 2020.(b) 
  • In spite of a 30% decline in recycled commodity prices, the Company grew operating EBITDA for its recycling business by almost $3 million when compared to the first quarter of 2019 by reducing costs and improving its fee-for-service model. 
  • In the first quarter of 2020, net cash provided by operating activities was $765 million and free cash flow was $318 million.(b) 
  • The Company paid $236 million of dividends to shareholders and repurchased $402 million of its shares in the first quarter of 2020. 

Fish concluded, “Through this unprecedented pandemic, we have managed the impact of the shutdown on our own people, our customers, and our business extremely well. We are now turning our focus to managing equally well through the coming re-start and to using this as an opportunity to further differentiate ourselves through permanent enhancements in our business processes and our service offering to our customers. The strength and resiliency of both our people and our business model give us confidence that we can continue to deliver on our commitments to our customers and our shareholders.” 

(a)  All references to “Net income” refer to the financial statement line item “Net income attributable to Waste Management, Inc.” (b)  Adjusted earnings per diluted share, adjusted net income, adjusted operating EBITDA and free cash flow are non-GAAP measures. Please see “Non-GAAP Financial Measures” below and the reconciliations in the accompanying schedules for more information. 
(c)  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. 
(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. Beginning with the fourth quarter 2019, the Company has updated its core price calculation. With advancements in technology, the Company began collecting additional transactional customer level data, which provides improved clarity of the impact of the Company’s pricing activities. While this does not change the year-over-year core price performance result, the new measure reflects a more precise calculation in the evaluation of revenue changes. 
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