Waste Management(WM) - 2024 Q2 - Quarterly Results

WM Q2 2024 Earnings Release Financial & Operational Highlights WM reported strong Q2 2024 results, driven by robust growth in its core Collection and Disposal business, with revenue increasing by 5.5% to $5.4 billion and adjusted operating EBITDA growing 10.3% to $1.62 billion, expanding margin by 130 basis points to a record 30.0% Q2 2024 Key Financial Metrics (As Adjusted vs. Q2 2023) | Metric | Q2 2024 (Adjusted) | Q2 2023 (Adjusted) | Change | | :--- | :--- | :--- | :--- | | Revenue | $5,402 million | $5,119 million | +5.5% | | Operating EBITDA | $1,618 million | $1,467 million | +10.3% | | Operating EBITDA Margin | 30.0% | 28.7% | +130 bps | | Net Income | $732 million | $617 million | +18.6% | | Diluted EPS | $1.82 | $1.51 | +20.5% | - Total company revenue growth of 5.5% was primarily driven by a core price of 6.8%[5] - Strategic expansion continues with over $750 million in solid waste acquisitions closed through July and progress on the planned acquisition of Stericycle[1][2] - The company is advancing its sustainability investments, having opened two upgraded recycling facilities in the quarter and with five renewable energy projects scheduled for completion in 2024[2] - Based on strong first-half performance, the company is confident it will meet or exceed the midpoint of its full-year financial outlook provided in April[5] Financial Statements The consolidated financial statements show a year-over-year increase in revenues and net income for both the second quarter and the first half of 2024, with total assets growing to $34.0 billion from $32.8 billion at year-end 2023, and net cash from operating activities increasing significantly by 21.6% in the first half of the year Condensed Consolidated Statements of Operations Q2 2024 vs Q2 2023 Income Statement Highlights | Metric (in millions, except EPS) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Operating Revenues | $5,402 | $5,119 | | Income from Operations | $1,009 | $944 | | Net Income | $680 | $615 | | Diluted EPS | $1.69 | $1.51 | H1 2024 vs H1 2023 Income Statement Highlights | Metric (in millions, except EPS) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Operating Revenues | $10,561 | $10,011 | | Income from Operations | $2,025 | $1,769 | | Net Income | $1,388 | $1,148 | | Diluted EPS | $3.44 | $2.81 | Condensed Consolidated Balance Sheets Balance Sheet Summary (in millions) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $4,439 | $3,804 | | Total Assets | $33,999 | $32,823 | | Total Current Liabilities | $4,136 | $4,226 | | Long-Term Debt | $16,501 | $15,895 | | Total Liabilities | $26,548 | $25,927 | | Total Equity | $7,451 | $6,896 | Condensed Consolidated Statements of Cash Flows H1 2024 vs H1 2023 Cash Flow Summary (in millions) | Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,521 | $2,074 | | Net cash used in investing activities | $(2,359) | $(1,339) | | Net cash used in financing activities | $(464) | $(919) | - Net cash provided by operating activities for the first half of 2024 increased 21.6% to $2.52 billion, driven by strong operating EBITDA growth and working capital benefits[5][22] Supplemental Data & Segment Performance The supplemental data provides a detailed breakdown of revenue sources and growth drivers, with the core Collection and Disposal business remaining the primary revenue generator, showing a 4.6% yield increase in Q2, and total company internal revenue growth of 5.3% driven by strong pricing which offset a slight volume decline, while free cash flow grew 32.3% in the first half of the year Revenue by Business Line & Internal Growth Q2 2024 Net Operating Revenues by Line of Business (in millions) | Line of Business | Q2 2024 Net Revenue | Q2 2023 Net Revenue | | :--- | :--- | :--- | | Total Collection | $3,701 | $3,568 | | Landfill | $873 | $846 | | Transfer | $348 | $320 | | Total Collection and Disposal | $4,922 | $4,734 | | Recycling Processing and Sales | $405 | $316 | | WM Renewable Energy | $69 | $62 | Q2 2024 vs. 2023 Internal Revenue Growth | Component | Change as % of Total Company Revenue | | :--- | :--- | | Average Yield | 5.2% | | Volume | 0.1% | | Internal Revenue Growth | 5.3% | | Acquisitions | 0.3% | | Total Revenue Growth | 5.5% | - In the Collection and Disposal business, yield was 4.6% while volume declined by 0.3% in Q2 2024[5][28] Free Cash Flow & Other Key Metrics Free Cash Flow Reconciliation (in millions) | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,521 | $2,074 | | Capital expenditures (ex-sustainability) | $(947) | $(963) | | Proceeds from divestitures | $58 | $46 | | Free cash flow (w/o sustainability investments) | $1,632 | $1,157 | | Capital expenditures (sustainability) | $(388) | $(217) | | Free cash flow | $1,244 | $940 | - Total Company free cash flow in the first half of the year, including sustainability investments, grew 32.3% to $1.24 billion[5][32] - In Q2 2024, the company acquired businesses with $77 million in gross annualized revenue for a total consideration of $237 million[32] Reconciliation of Non-GAAP Measures The company provides detailed reconciliations of GAAP to non-GAAP financial measures to exclude items not reflective of fundamental business performance, with Q2 2024 adjustments increasing reported net income of $680 million to an adjusted net income of $732 million, and raising diluted EPS from $1.69 to $1.82 Q2 2024 GAAP to Non-GAAP Reconciliation Summary (in millions, except EPS) | Metric | As Reported | Adjustments | As Adjusted | | :--- | :--- | :--- | :--- | | Income from Operations | $1,009 | $66 | $1,075 | | Net Income | $680 | $52 | $732 | | Diluted EPS | $1.69 | $0.13 | $1.82 | Q2 2024 Adjusted Operating EBITDA by Segment (in millions) | Segment | Adjusted Operating EBITDA | | :--- | :--- | | Collection and Disposal | $1,838 | | Recycling Processing and Sales | $60 | | WM Renewable Energy | $27 | | Corporate and Other | $(307) | | Total | $1,618 | - Key adjustments in Q2 2024 included $7 million in Stericycle transaction costs and a $58 million net loss from divestitures, asset impairments, and unusual items[36] 2024 Projected Free Cash Flow (in millions) | Metric | Low End (Scenario 1) | High End (Scenario 2) | | :--- | :--- | :--- | | Net cash from operating activities | $5,000 | $5,250 | | Capital expenditures | $(3,050) | $(3,200) | | Proceeds from divestitures | $50 | $100 | | Free Cash Flow | $2,000 | $2,150 | Forward-Looking Statements & Other Information This section contains standard cautionary language regarding forward-looking statements, outlining various risks and uncertainties that could cause actual results to differ from projections, and explains the rationale for using non-GAAP financial measures to provide additional insight into the company's core business performance and liquidity - The company identifies risks including failure to implement business strategy, failure to consummate the Stericycle acquisition, regulatory changes, macroeconomic conditions, and competition[10] - Non-GAAP measures are used to provide additional, meaningful comparisons of current results to prior periods by excluding items not considered reflective of fundamental business performance[11]