Waste Management Inc., Houston, announced financial results for the third quarter on Nov. 2.
Revenue
In the third quarter, revenue declined $99 million in the company’s collection and disposal business compared to the third quarter of 2019, driven by $192 million in volume declines partially offset by $93 million of growth from yield.
Core price for the third quarter was 3.2 percent compared to 4 percent in the third quarter of 2019 and 1.3 percent in the second quarter.
Collection and disposal yield was 2.6 percent in both the third quarter of 2020 and the third quarter of 2019 compared to 1.6 percent in the second quarter.
Total company volumes declined 5 percent in the third quarter, or 5.1 percent on a workday adjusted basis, compared to growth of 1.9 percent on a workday adjusted basis in the third quarter of 2019 and a decline of 10.3 percent in the second quarter.
Cost management
Company operating expenses as a percentage of revenue improved 110 basis points to 60.4 percent when compared to the third quarter of 2019. According to Waste Management, the improvement was primarily driven by the company’s proactive management of costs, which reduced overtime hours and maintenance expenses. In addition, the company’s strategic focus on increasing the compressed natural gas composition of its fleet, combined with lower market prices for diesel fuel, resulted in lower operating costs and improved margins.
SG&A expenses were 10.8 percent of revenue in the third quarter compared to 9.7 percent in the third quarter of 2019. On an adjusted basis, SG&A expenses were 10.1 percent of revenue in the third quarter compared to 9.7 percent in the third quarter of 2019. The increase in SG&A expenses as a percent of revenue is primarily related to the decline in revenue as well as additional incentive compensation costs and the company’s intentional accelerated spending on technology, the company says.
Profitability
Total company operating EBITDA was $1.1 billion, or 28.5 percent of revenue, for the third quarter. On an adjusted basis, total company operating EBITDA was $1.14 billion, or 29.5 percent of revenue, for the third quarter compared to adjusted operating EBITDA of $1.14 billion and 28.8 percent of revenue for the same period in 2019.
Operating EBITDA in the company’s collection and disposal business, adjusted on the same basis as total company operating EBITDA, was $1.27 billion, or 31.2 percent of revenue, for the third quarter, compared to $1.3 billion, or 30.9 percent of revenue, for the third quarter of 2019.
Free cash flow and capital allocation
In the third quarter, net cash provided by operating activities was $1.03 billion, compared to $952 million in the third quarter of 2019, an increase of $77 million, or 8.1 percent.
In the third quarter, capital expenditures were $343 million compared to $483 million in the third quarter of 2019.
In the third quarter, free cash flow was $691 million compared to $478 million in the third quarter of 2019.
The company also paid $230 million of dividends to shareholders, Waste Management reports.
“We’ve consistently pointed to operating EBITDA as the best measure of the health of our business, and despite the challenging backdrop, we delivered third quarter adjusted operating EBITDA results in line with last year’s record performance and expanded adjusted operating EBITDA margin by 70 basis points,” Waste Management President and CEO Jim Fish says. “This is a testament both to our team’s ability to optimize our business in the new environment as well as the progress of economic recovery in North America.
“In addition to our strong quarterly results, we are also proud to have published our 2020 Sustainability Report last month. Titled ‘Building Value Together,’ the report describes how we are addressing challenges and opportunities related to the environment, social issues and governance, and doing so in close partnership with our customers, suppliers and communities. Amidst the crises of 2020, we remained steadfast to our commitments of putting people first, advocating for inclusion and diversity, protecting the environment, and contributing to a circular economy.”
Waste Management announces that it expects to exceed its 2020 adjusted operating EBITDA margin guidance of 28 percent to 28.5 percent and generate free cash flow in excess of $2 billion.
“We have taken to heart lessons learned during this pandemic such that we will emerge a stronger, more differentiated company,” Fish concludes. “We’ve learned that we can operate our business with a lower cost structure, and we are holding on to operating efficiencies and cost savings as our volumes recover. Our customer service digitalization investments are unquestionably the right approach, and we have accelerated these efforts to reap the benefits sooner. With further contributions from the acquisition of Advanced Disposal that closed last week and our progress in transforming the recycling business, we are well-positioned for a strong finish to the year with positive momentum heading into 2021.”