Waste Management continues revenue growth in first quarter

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Waste Management Inc. (WM), Houston, has announced financial results for its quarter ending March 31, 2018. Revenue for the first quarter of 2018 were $3.51 billion compared with $3.44 billion for the same 2017 period. Net income for the quarter was $396 million, or 91 cents per diluted share, compared with $298 million, or 67 cents per diluted share, for the first quarter of 2017. On an as-adjusted basis in the first quarter of 2017, net income was $291 million, or 66 cents per diluted share.

• “We delivered strong operating and financial results in the first quarter,” Jim Fish, president and CEO of WM, says. “We saw organic revenue growth of 6 percent in our collection and disposal business, which drove the almost 8 percent increase in the company’s operating EBITDA (earnings before interest, taxes, depreciation and amortization). This strong operational performance resulted in robust net cash provided by operating activities and free cash flow, which allowed us to return $456 million to our shareholders in dividends and share repurchases and to spend $248 million on acquisitions.

“The traditional solid waste business is in exceptional health, and we achieved outstanding results despite significant challenges presented by external market factors in the recycling line of business,” Fish says. “The great start to 2018 shows how well we are executing upon our strategic plan, and we will continue with the focus and discipline required to produce strong results in the face of the challenging recycling environment.”

Highlights of the first quarter include:

• Revenue growth:

• In the first quarter, WM says revenue growth was driven by strong yield and volume growth in the company’s collection and disposal business, which contributed $160 million of incremental revenue. This was partially offset by a decline in revenue from the company’s recycling line of business, which fell by $77 million on a year-over-year basis in the first quarter of 2018.
• Core price, which consists of price increases net of rollbacks and fees, excluding the company’s fuel surcharge, was 4.9 percent compared to 5.1 percent in the first quarter of 2017 and 4.8 percent in the fourth quarter of 2017.
• Internal revenue growth from yield for collection and disposal operations was 2.3 percent for the first quarter versus 2 percent in the first quarter of 2017.
• Traditional solid waste internal revenue growth from volume was 3 percent, or 3.4 percent on a workday adjusted basis, in the first quarter of 2018. Total company internal revenue growth from volume, which includes recycling and other ancillary businesses, was 2.6 percent, or 3 percent on a workday adjusted basis, in the first quarter.

• Recycling: Average recycling commodity prices at the company’s facilities were approximately 36 percent lower in the first quarter of 2018 compared to the prior year period. Recycling volumes decreased about 1 percent in the first quarter of 2018. Results in the company’s recycling line of business declined by 8 cents per diluted share when compared to the first quarter of 2017.

• Cost management and profitability: 

• As a percent of revenue, total company operating expenses were 62.2 percent in the first quarter of 2018 compared to 63 percent in the first quarter of 2017.
• As a percent of revenue, selling, general and administrative (SG&A) expenses were 10.6 percent in the first quarter of 2018 compared to 11.3 percent in the first quarter of 2017.
• Operating EBITDA was $955 million for the first quarter of 2018, an increase of $69 million or 7.8 percent, from the first quarter of 2017.

• Free cash flow and capital allocation:

• Net cash provided by operating activities was $809 million in the first quarter of 2018, an increase of $87 million, or 12 percent, when compared with the first quarter of 2017.
• Capital expenditures were $400 million in the first quarter of 2018, a $68 million increase from the first quarter of 2017.
• Free cash flow was $423 million in the first quarter of 2018 compared to $397 million in the first quarter of 2017.
• The company paid $206 million of dividends to shareholders and paid $250 million to repurchase shares in the first quarter of 2018.
• The company spent $248 million on acquisitions of traditional solid waste businesses during the first quarter of 2018.

• Taxes: The company’s effective tax rate for the first quarter of 2018 was approximately 23 percent. WM expects its 2018 full-year tax rate to be between 24 percent and 25 percent, which is lower than previous expectations because of additional clarity on the impacts of tax reform.

“2018 is off to a very good start for us and the results give us confidence that we are on track to achieve our full-year 2018 guidance of adjusted earnings per diluted share of between $3.97 and $4.05 and free cash flow of between $1.95 and $2.05 billion,” Fish says. “Our employees have continued to deliver strong performance and are focused on delivering exceptional customer service, growing profitable volumes and improving our cost structure to produce another successful year for Waste Management.”