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Waste Management Q2 – Strong Results with Robust Volumes and Earnings – Despite $400 Million COVID Hit


Waste Management, Inc. (WM) announced solid financial results for Q2 2020 – despite a negative revenue impact of $400 million due to COVID-19-related business interruptions.

The company had a stronger than expected performance and credited its resiliency and focus on capital and cost management. WM noted robust improvements in volumes and earnings each month with June standing out as the strongest month.

Revenues for the second quarter of 2020 were $3.56 billion compared with $3.95 billion for the same 2019 period. Net income for the quarter was $307 million, or $0.72 per diluted share, compared with $381 million, or $0.89 per diluted share, for the second quarter of 2019. On an adjusted basis, net income was $372 million, or $0.88 per diluted share, in the second quarter of 2020, compared with $470 million, or $1.11 per diluted share, in the second quarter of 2019.

“I am proud of how our employees have continued to provide dependable, essential services to our customers and communities during the pandemic,” said Jim Fish, Waste Management’s President and Chief Executive Officer. “While keeping health and safety as the top priority, the team adapted through difficult circumstances, finding ways to improve efficiency across the collection and disposal business and reduce discretionary spending.

The Waste Management and Advanced Disposal revised deal, along with the planned regulatory divestures to GFL Environmental, are still on track to close by the end of the third quarter of 2020.

Highlights for Q2 2020

  • Revenue declined $331 million in its collection and disposal business, driven by $386 million in volume declines partially offset by $55 million of yield growth.
  • Collection and disposal yield was 1.6% in the second quarter of 2020 compared to 2.7% in the second quarter of 2019.
  • WM’s pricing results were muted relative to historical results and its full year expectations due to proactive customer-centric steps to temporarily suspend price increases and certain fees for customers impacted by COVID-19. WM remains committed to its pricing programs.
  • Total company volumes declined 10.3%. Breaks are:
    • Volumes declined almost 11% in the commercial line of business.
    • 16% in industrial, and 18% in landfill, primarily related to the COVID-19 pandemic.
    • Adjusting for natural disaster volumes that occurred in the second quarter of 2019, landfill volumes declined 13% in Q2.
  • WM estimates that business interruptions related to the COVID-19 pandemic had a negative revenue impact of approximately $400 million.
  • Total Company operating EBITDA was $941 million, or 26.4% as a percentage of revenue for the second quarter of 2020. On an adjusted basis, total Company operating EBITDA was $1.03 billion, or 28.8% as a percentage of revenue for the second quarter of 2020 versus adjusted operating EBITDA of $1.13 billion and 28.7% as a percentage of revenue in 2019.
  • The Company grew operating EBITDA in its recycling business by almost $8 million when compared to the second quarter of 2019 by reducing costs and continuing to implement its fee-for-service model.

What’s ahead?

WM has given more guidance on what lies ahead, including:

  • Total revenue for 2020 is expected to decline between 4% and 5% when compared to 2019.
  • Given the strong performance in the second quarter of 2020 and improved volume outlook, WM now expects adjusted operating EBITDA margin to be in the range of 28% - 28.5%, or flat to down 50 basis points on a year-over-year basis.

WM’s management team stressed on its earnings call that it remains focused on managing costs to mitigate the impact COVID-19. Steps include swift labor and route optimization in response to reduced volumes, reducing overtime hours, limiting hiring, eliminating non-essential expenses and costs, and reducing incentive compensation accruals.

WM also stressed its commitment to continuing to digitize its customer service and delivering long-term value to customers and shareholders. Customer churn was 6.9%, which is the company’s lowest on record and loyalty was up 82%. Fish noted early wins this year and wants this trend to continue.

With commercial business showing signs of recovery, MSW volume improved, and overall economic improvements on the horizon, the management team from WM was cautiously optimistic about the remainder of 2020.

Fish ended on a high note, “Despite the challenging backdrop, we’re confident in our ability to continue to meet our commitments to our customers and deliver solid 2020 results. During these unprecedented times, our business model has once again proven its resilience, and we remain focused on using this opportunity and our technology investments to create a differentiated customer experience that puts our customers at the center of everything we do and to increase workplace flexibility for our people.”

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