WM sees double-digit growth in first quarter

WM, Houston, has released financial results for the quarter ended March 31, saying it has delivered exceptional core price and yield results and grew profitable volumes.

“The first quarter of every year sets the tone for the rest of the year and our strong first-quarter results really set us up for success in 2022,” says Jim Fish, president and CEO of WM. “The result was double-digit growth in revenue, operating EBITDA (earnings before interest, taxes, depreciation and amortization) and cash from operations.”  

According to WM, the core price for Q1 2022 was 7.3 percent compared with 3.4 percent in Q1 2021. Collection and disposal yield was 5.5 percent in the first quarter of 2022 compared with 2.8 percent in Q1 2021. Total volumes increased 3.6 percent in the first quarter of 2022, or 3.2 percent on a workday adjusted basis, compared with a decline of 3.3 percent in the first quarter of 2021, or a decline of 2.7 on a workday adjusted basis.

The company reported that its EBITDA in the collection and disposal business, adjusted on the same basis as a total company operating EBITDA, of $1.4 billion, or 31.2 percent of revenue, for the first quarter of 2022 compared with $1.3 billion, or 31.8 percent of revenue, for the first quarter of 2021.  

“Our operating EBITDA margin of 27.6 percent was ahead of our plan [for the year], even in the face of record inflation and the delayed approval of the alternative fuel tax credits,” Fish says. “So, we executed extremely well in the first quarter and achieved better results than we anticipated.”  

Operating EBITDA in the company’s recycling line of business, adjusted on the same basis as total company operating EBITDA, improved by $23 million compared with the first quarter of 2021. WM says the improvement primarily was driven by increases in market prices for recycled commodities.  

Operating EBITDA in WM's renewable energy business, adjusted on the same basis as total company operating EBITDA, improved by $13 million compared with the first quarter of 2021. WM says this growth is primarily driven by increases in the value of renewable fuel standard credits, or RINs.  

In Q1 2022, net cash provided by operating activities was $1.26 billion compared with $1.12 billion in the first quarter of 2021. The improvement in net cash provided by operating activities primarily was driven by the increase in operating EBITDA, according to WM.  

Capital expenditures to support the business were $371 million compared with $259 million in the first quarter of 2021. In addition, in the first quarter of 2022, capital expenditures for sustainability growth investments totaled $47 million compared with $11 million in the first quarter of 2021. Free cash flow was $845 million compared with $865 million in the first quarter of 2021. In the first quarter of 2022, free cash flow without sustainability growth investments was $892 million compared to $876 million in the first quarter of 2021.  

“The positive economic activity, combined with WM's diverse customer base, the recession-resilient nature of our business and nearly 75 percent of our revenue that is annuity-like, gives us the confidence to reaffirm the full-year outlook we provided in February,” Fish says.  

Operating expenses as a percentage of revenue increased 120 basis points to 62.3 percent compared with the first quarter of 2021 but improved 70 basis points when compared with the fourth quarter of 2021. The increase in operating expense margin in the first quarter, when compared with the prior year, was primarily due to the impacts of increased wages for front-line employees, higher commodity prices for recyclables and alternative fuel tax credits received in 2021 that have not yet been renewed for 2022.  

The company adds that it plans to further invest in technology as a solution to the ongoing labor crisis. Fish says the company anticipates reducing 5,000 to 7,000 positions over the next four years. WM says in this tight and expensive job market, it makes sense to use technology to reduce dependency on certain high-turnover jobs.  

Finally, while WM says it will use automation and data to its advantage, it plans to invest in training and upskilling of existing employees to prepare them for higher-skilled future roles. Fish adds that WM has successfully decreased its turnover rate since last year.  

“We've set the bar high in our first quarter with our results, and we're confident in our ability to deliver strong performance throughout the remainder of 2022,” he says.