Waste Management(WM) - 2025 Q2 - Quarterly Results

WM Second Quarter 2025 Earnings Release Financial and Operational Highlights WM reported strong Q2 2025 results with significant growth in revenue and operating cash flow, driven by core business performance and strategic acquisitions Q2 2025 Key Financial Metrics (As Adjusted) | Metric | Q2 2025 (As Adjusted) | Q2 2024 (As Adjusted) | Change | | :--- | :--- | :--- | :--- | | Revenue | $6,430 million | $5,402 million | +19.0% | | Operating EBITDA | $1,923 million | $1,618 million | +18.8% | | Operating EBITDA Margin | 29.9% | 30.0% | -10 bps | | Net Income | $777 million | $732 million | +6.1% | | Diluted EPS | $1.92 | $1.82 | +5.5% | - CEO Jim Fish highlighted robust organic revenue growth and margin expansion in the Collection and Disposal business, which achieved its best-ever operating expense margin[2] - Both the Recycling Processing and Sales and WM Renewable Energy segments experienced double-digit operating EBITDA growth, driven by investments in sustainability businesses[2] - The company released its 2025 Sustainability Report, noting a 22% reduction in greenhouse gas emissions since 2021[2] Business Segment Performance The WM Legacy Business showed strong performance with adjusted operating EBITDA growth, while the newly integrated WM Healthcare Solutions is on track to meet synergy targets Q2 2025 Adjusted Operating EBITDA by Segment ($ in millions) | Segment | Q2 2025 Adjusted Operating EBITDA | Margin | | :--- | :--- | :--- | | WM Legacy Business | $1,813 | 31.3% | | WM Healthcare Solutions | $110 | 17.0% | | Total Company | $1,923 | 29.9% | Q2 2025 Revenue by Segment ($ in millions) | Segment | Q2 2025 Revenue | Growth | | :--- | :--- | :--- | | WM Legacy Business | $5,784 | 7.1% | | WM Healthcare Solutions | $646 | N/A | | Total Company | $6,430 | 19.0% | - The WM Legacy Business's Collection and Disposal segment achieved an adjusted margin of 37.9%, driven by organic growth, cost discipline, and optimized business mix[3] - WM Healthcare Solutions is on track to achieve the upper end of its targeted synergies of $80 to $100 million in 2025[4] Cash Flow and Investments The company generated $2.75 billion in operating cash flow and $1.29 billion in free cash flow in H1 2025, despite increased capital spending on strategic projects Cash Flow Summary - First Half 2025 ($ in millions) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,753 | $2,521 | | Capital expenditures | ($1,563) | ($1,335) | | Free cash flow | $1,293 | $1,244 | - Strong operating EBITDA growth drove the increase in operating cash flow, which was partially offset by higher cash interest related to the Stericycle acquisition funding[11] - During the quarter, three growth projects commenced operations: a new renewable natural gas facility in Illinois, a recycling automation project in Pennsylvania, and a new market recycling facility in Oregon[11] Sustainability and WM Healthcare Solutions Update The company is advancing its sustainability initiatives and the integration of WM Healthcare Solutions is progressing well, with significant synergies expected by 2027 - The company has completed 8 of 20 planned renewable natural gas (RNG) facilities and 29 of 39 planned recycling automation and new market projects[11] - Integration of WM Healthcare Solutions has identified $50 million in operating EBITDA opportunities from cross-selling, with $11 million already secured[11] - Anticipated run-rate synergies from the healthcare business, including cross-selling, are expected to total $300 million of operating EBITDA by 2027[11] 2025 Outlook WM affirmed its full-year EBITDA guidance and raised its free cash flow projection, while slightly lowering its revenue forecast due to commodity price declines Updated Full-Year 2025 Guidance | Metric | Updated 2025 Guidance | Prior Guidance/Note | | :--- | :--- | :--- | | Total Company Revenue | $25.275B - $25.475B | Decreased due to commodity prices | | Adjusted Operating EBITDA | $7.475B - $7.625B | Midpoint of $7.550B affirmed | | Adjusted Operating EBITDA Margin | 29.6% - 29.9% | Increased from 29.2% - 29.7% | | Free Cash Flow | $2.8B - $2.9B | Increased by $125M | - The free cash flow outlook was increased by $125 million, driven by recently enacted tax policy that restores bonus depreciation to 100%[11] - The revenue outlook was lowered primarily due to a recent decline in recycled commodity prices, which is expected to average $80/ton for the year, down from the previous expectation of $85/ton[11][15] Consolidated Financial Statements The consolidated financial statements detail the company's performance, showing H1 2025 operating revenues of $12.45 billion and net income of $1.36 billion Condensed Consolidated Statements of Operations For Q2 2025, WM reported operating revenues of $6.43 billion and net income attributable to the company of $726 million, both up from the prior-year period Q2 2025 Statement of Operations Highlights ($ in millions) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Operating revenues | $6,430 | $5,402 | | Income from operations | $1,151 | $1,009 | | Net income attributable to WM | $726 | $680 | | Diluted EPS | $1.80 | $1.69 | Condensed Consolidated Balance Sheets As of June 30, 2025, the company's total assets stood at $45.72 billion and total equity increased to $9.20 billion from year-end 2024 Balance Sheet Highlights ($ in millions) | Line Item | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total current assets | $4,984 | $4,774 | | Total assets | $45,722 | $44,567 | | Total current liabilities | $5,816 | $6,258 | | Long-term debt | $23,056 | $22,541 | | Total equity | $9,202 | $8,254 | Condensed Consolidated Statements of Cash Flows For the first six months of 2025, net cash from operating activities increased to $2.75 billion from $2.52 billion in the prior-year period Six Months Ended June 30 Cash Flow Highlights ($ in millions) | Line Item | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,753 | $2,521 | | Net cash used in investing activities | ($1,915) | ($2,359) | | Net cash used in financing activities | ($781) | ($464) | Supplemental Data and Non-GAAP Reconciliations This section provides detailed financial data breakdowns and reconciles non-GAAP measures to their most comparable GAAP counterparts for transparency Q2 2025 vs Q2 2024 Internal Revenue Growth | Driver | % of Related Business (Yield) | % of Related Business (Volume) | | :--- | :--- | :--- | | Commercial | 5.3% | (0.1)% | | Industrial | 3.8% | (1.2)% | | Residential | 5.7% | (5.7)% | | Total Collection and Disposal | 4.1% | 1.6% | Q2 2025 Reconciliation of GAAP Net Income to Adjusted Net Income ($ in millions) | Description | Amount | | :--- | :--- | | As reported Net Income | $726 | | Stericycle acquisition and integration-related costs | $29 | | Loss from asset impairments, unusual items and other, net | $22 | | As adjusted Net Income | $777 | - The report provides supplemental information to illustrate the impact of differing accounting treatments for recycling commodity rebates and landfill accretion expense to enhance comparability with peers[53][54][55]