WM announced its second quarter earnings today. The company started off this industry earnings season strong with revenue of $5.03 billion.
WM also increased its full-year financial guidance with confidence based on these solid results.
Jim Fish, WM’s president and CEO noted that “the strength and resiliency of our business was clearly on display in Q2,” as evidenced by the fact that, “our pricing results and sustainability contributions” put revenue over $5 billion for the first time.
“Our strong start to the year gives us confidence,” he said, in increasing the 2022 financial outlook.
Fish also noted that WM was able to return more than a half million dollars to its shareholders and that, the company "continued to see strong volumes, an encouraging sign for economic activity across the areas we serve.”
He went on to highlight “two exciting milestones in our sustainability growth journey.”
The first was the addition of the fifth WM-owned and operated renewable natural gas plant, now operational in Oklahoma. The other milestone was the completion of technology and automation upgrades at WM’s MRF in Houston, which is showing a 30 percent labor savings per ton compared to a single-stream network.
Looking ahead, Fish noted that WM is “well positioned in any economic environment” because of its “diverse customer base, essential nature of service,” and the annuity-like nature of much of its revenue. He indicated that the Company will continue to leverage its sustainability platform for growth and will remain differentiated in the marketplace.
Q2 2022 KEY HIGHLIGHTS
Revenue
- Core price for the second quarter of 2022 was 7.5 percent compared to 6.2 percent in the second quarter of 2021.
- Collection and disposal yield was 6.2 percent in the second quarter of 2022 compared to 3.7 percent in the second quarter of 2021.
- Total company volumes increased 1.6 percent in the second quarter of 2022 and collection and disposal volumes increased 2.3 percent. Total company and collection and disposal volumes increased 9.2 percent in the second quarter of 2021 driven largely by a strong recovery from the pandemic.
Profitability
- Operating EBITDA in the company’s collection and disposal business, adjusted on the same basis as total company operating EBITDA, increased by approximately $107 million to $1.53 billion for the second quarter of 2022. Operating EBITDA as a percentage of revenue in the WM’s collection and disposal business was 31.2 percent for the second quarter of 2022 compared to 32 percent for the second quarter of 2021.
- Operating EBITDA in WM’s recycling line of business increased by $5 million compared to the second quarter of 2021.
- Operating EBITDA in the company’s renewable energy business increased by $14 million compared to the second quarter of 2021, primarily driven by increases in the value for electricity, renewable natural gas and environmental credits.
Cost Management
- Operating expenses as a percentage of revenue increased 140 basis points to 62.5 percent when compared to the second quarter of 2021. On an adjusted basis, operating expenses as a percentage of revenue increased 130 basis points to 62.4 percent in the second quarter of 2022. Operating expense margin in the second quarter, when compared to the prior year, was 100 basis points higher due to the impacts of higher commodity prices for fuel and recyclables and 30 basis points higher related to alternative fuel tax credits received in the prior year that have not yet been renewed for 2022.
- SG&A expenses were 9.7 percent of revenue in the second quarter of 2022 compared to 9.9% in the second quarter of 2021. On an adjusted basis, SG&A expenses were 9.4 percent of revenue in the second quarter of 2022 compared to 9.6 percent in the second quarter of 2021.
Future Outlook
- Total revenue growth in 2022 is expected to be approximately 10 percent, an increase of 400 basis points from the midpoint of prior guidance. Combined internal revenue growth from yield and volume in the collection and disposal business is now expected to approach 8.5 percent.
- Adjusted operating EBITDA is now expected to be between $5.5 and $5.6 billion in 2022, an increase of $175 million from prior guidance.
- WM projected adjusted operating EBITDA margin at the midpoint of its guidance range is 28.1 percent, which includes an estimated 60-basis-point headwind related to increased fuel costs.
- Free cash flow is projected to exceed the upper end of the WM’s previous guidance range of $2.6 to $2.7 billion excluding the targeted sustainability growth investments, or $2.05 to $2.15 billion including sustainability growth investments.
- The company expects to complete between $300 and $400 million of acquisitions in 2022. WM revenue and operating EBITDA guidance provided above exclude incremental contributions from acquisitions.
- The company expects to repurchase an additional $980 million of its common stock in 2022, exhausting the full $1.5 billion of share repurchase authorization previously announced.
Fish wrapped up by thanking “the entire WM team for their hard work and dedication.” He is pleased by its commitment “to diligently manage costs in this inflationary environment while remaining focused on advancing our long-term strategic priorities of providing the best workplace for our employees, investing in technology and automation that differentiates WM and permanently reduces our cost structure, and leveraging our sustainability platform for growth.”