WM sees less growth in its collection and disposal volumes year over year

WM, Houston, has reported financial results for its fourth quarter and year ended Dec. 31, 2022, that include growth in its core price while operating earnings before interest, taxes, depreciation and amortization (EBITDA) declined in its recycling and renewable energy businesses.  

“In 2022 WM delivered another year of strong financial growth, particularly in our collection and disposal business,” says Jim Fish, WM president and CEO. “The collection and disposal business exceeded expectations and overcame high inflation and a tight labor market to deliver double-digit adjusted operating EBITDA growth in both the fourth quarter and for the full year. Throughout the year, we also advanced our strategic priorities: enhancing employee engagement, improving our operations through the use of technology and investing in sustainability leadership and growth." 

WM reports its core price for the fourth quarter of 2022 was 8.1 percent compared with 5.1 percent in the fourth quarter of 2021. For the full year, the core price was 7.8 percent in 2022 compared with 4.8 percent in 2021. Collection and disposal yield was 7.7 percent for the recently completed quarter compared with 3.7 percent in the fourth quarter of 2021. For the year, collection and disposal yield totaled 6.7 percent in 2022 compared with 3.5 percent in 2021.  

Total company volumes decreased by 0.7 percent in the recently completed quarter, a decline of 0.4 percent on a workday-adjusted basis, compared with an increase of 2.8 percent in the fourth quarter of 2021, or 2.3 percent on a workday-adjusted basis. For the full year, total company volumes increased by 1.3 percent in 2022 compared with 2.8 percent in 2021. WM says workday differences were negligible for the full year.  

Collection and disposal volumes decreased by 0.5 percent in the fourth quarter of 2022, a decline of 0.3 percent on a workday-adjusted basis, compared with an increase of 3.2 percent in the fourth quarter of 2021, or 2.8 percent on a workday-adjusted basis. For the full year, collection and disposal volumes increased by 1.8 percent in 2022 compared with 3 percent in 2021. Again, workday differences for the year were negligable.  

Operating expenses as a percentage of revenue were 62.7 percent in the fourth quarter of 2022 compared with 63.2 percent, or 63 percent on an adjusted basis, in the fourth quarter of 2021. The company says the improvement in this measure was driven by the collection and disposal business, where pricing and operating efficiencies worked to overcome inflationary cost pressures. An estimated 100 basis point improvement from collection and disposal operations partially was offset by a 40 basis point impact from higher fuel prices and a 30 basis point impact from WM’s recycling business. For the full year, operating expenses as a percentage of revenue were 62.4 percent compared with 62 percent, or 61.9 percent on an adjusted basis, in 2021.  

Selling, general and administrative (SG&A) expenses were 9.9 percent of revenue, or 9.8 percent on an adjusted basis, in the fourth quarter of 2022 compared with 10.5 percent, or 10.3 percent on an adjusted basis, in the fourth quarter of 2021. For the full year, SG&A expenses were 9.8 percent of revenue, or 9.6 percent on an adjusted basis, in 2022 compared with 10.4 percent, or 10 percent on an adjusted basis in 2021.  

Total company adjusted operating EBITDA was $1.36 billion, or 27.5 percent of revenue, for the fourth quarter of 2022 compared with $1.25 billion, or 26.7 percent of revenue, for the fourth quarter of 2021. For the full year 2022, operating EBITDA was $5.51 billion, or 28 percent of revenue, compared with $5.03 billion, or 28.1 percent of revenue, for the full year 2021.  

Operating EBITDA in the company’s collection and disposal business, adjusted on the same basis as total company operating EBITDA, was $1.55 billion, or 31.2 percent of revenue, for the fourth quarter of 2022 compared with $1.39 billion, or 30.8 percent of revenue, for the fourth quarter of 2021. For the full year 2022, operating EBITDA in the company’s collection and disposal business, adjusted on the same basis as total company operating EBITDA, was $6.07 billion, or 31.4 percent of revenue, compared with $5.52 billion, or 31.6 percent of revenue for the full year 2021.  

In the fourth quarter of 2022, the operating EBITDA in WM’s recycling business decreased by $51 million compared with the fourth quarter of 2021. For the full year, operating EBITDA in the company’s recycling business decreased by $59 million compared with 2021. The company says the decline in both periods was primarily driven by a sharp drop in market prices for recycled commodities in the fourth quarter and persistent inflationary pressures on operating costs, particularly for labor at nonautomated facilities, throughout the year.  

In the fourth quarter of 2022, operating EBITDA in the company’s renewable energy business declined by $5 million compared with the fourth quarter of 2021. For the full year, operating EBITDA in the company’s renewable energy line of business increased by $19 million compared with 2021, driven by improved pricing for electricity and renewable natural gas.  

2023 outlook  

WM projects total company revenue will grow between 4 percent and 5.5 percent, which includes organic revenue growth from the collection and disposal business, excluding fuel, of about 5.5 percent. WM says its disciplined pricing programs are expected to result in a core price of between 6.5 percent and 7 percent and a collection and disposal yield approaching 5.5 percent. Collection and disposal volume is expected to be flat in 2022.  

Total company adjusted operating EBITDA is expected to be in the range of $5.825 to $5.975 billion for the full year compared with $5.512 billion in 2022, which is an increase of about $390 million at the midpoint of the range.  

Adjusted operating EBITDA in WM's recycling business is expected to decline by approximately $40 million to $50 million when compared with the full year 2022. An expected decline in recycled commodity prices is the primary driver of the decrease in operating EBITDA.  

Adjusted operating EBITDA in its renewable energy business is expected to decline by approximately $30 to $50 million when compared with the full year 2022. WM says an expected decline in market prices for electricity and renewable fuel standard credits is the primary driver of the decrease in operating EBITDA.  

“We expect 2023 performance to be driven by another strong year in our collection and disposal business that builds upon our outstanding 2022 results,” Fish says. “At the same time, we continue to invest in automation technology to further differentiate WM’s service offerings and drive future performance, and we continue to make large investments to grow our sustainability businesses."