Waste Management(WM) - 2025 Q2 - Quarterly Report

PART I. Financial Information Item 1. Financial Statements Waste Management, Inc.'s unaudited Condensed Consolidated Financial Statements for Q2 2025 detail balance sheets, income statements, cash flows, and notes on acquisitions, debt, and segment performance Condensed Consolidated Financial Statements The company's financial statements show asset growth, increased revenues, a slight net income decrease, and higher operating cash flow for the first half of 2025 Condensed Consolidated Balance Sheet Highlights (in Millions) | Account | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $4,984 | $4,774 | | Total Assets | $45,722 | $44,567 | | Total Current Liabilities | $5,816 | $6,258 | | Total Liabilities | $36,520 | $36,313 | | Total Equity | $9,202 | $8,254 | Condensed Consolidated Statement of Operations Highlights (in Millions, except per share) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Operating Revenues | $6,430 | $5,402 | $12,448 | $10,561 | | Income from Operations | $1,151 | $1,009 | $2,164 | $2,025 | | Net Income Attributable to WM | $726 | $680 | $1,363 | $1,388 | | Diluted EPS | $1.80 | $1.69 | $3.37 | $3.44 | Condensed Consolidated Statement of Cash Flows Highlights (in Millions) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 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) | Notes to Condensed Consolidated Financial Statements Notes detail financial statement basis, Stericycle integration, revenue recognition, debt structure, income taxes, segment performance, and significant commitments and contingencies - The company completed the acquisition of Stericycle, Inc. on November 4, 2024, which is now presented as the new WM Healthcare Solutions reportable segment[20] - Total debt outstanding was $24.0 billion as of June 30, 2025, up slightly from $23.9 billion at year-end 2024. The company has classified $3.0 billion of debt maturing in the next 12 months as long-term due to its intent and ability to refinance[31][32] - The effective income tax rate for the six months ended June 30, 2025 was 20.5%, down from 21.3% in the prior year period, primarily due to federal tax credits from RNG and low-income housing investments[41][43][46] - The company has temporarily suspended its common stock repurchase program following the Stericycle acquisition to focus on returning leverage to targeted levels[98] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q2 2025 financial performance, highlighting revenue growth driven by acquisitions and yield, operating income changes, liquidity, and capital allocation priorities Overview, Strategy, and Business Environment The company, a leading environmental solutions provider, details its core strategy of differentiation, continuous improvement, and sustainability investments, including the integration of Stericycle - The acquisition of Stericycle on November 4, 2024, added a new reportable segment, WM Healthcare Solutions, expanding services into regulated waste, compliance, and secure information destruction[111] - The core strategy is focused differentiation and continuous improvement, leveraging its asset network and investing in automation and technology to enhance customer experience and efficiency[112] - Sustainability growth strategy includes significant investments in the WM Renewable Energy and Recycling Processing and Sales segments to meet evolving customer and regulatory demands for diversion and waste reduction[112][113] Results of Operations Q2 2025 revenues increased significantly due to acquisitions and internal growth, while operating expenses improved as a percentage of revenue, and net interest expense rose due to acquisition debt Revenue Change Analysis (Q2 2025 vs. Q2 2024) | Component | Amount (Millions) | As a % of Total Company Change | | :--- | :--- | :--- | | Average Yield | $175 | 3.3% | | Volume | $115 | 2.1% | | Internal Revenue Growth | $290 | 5.4% | | Acquisitions | $746 | 13.7% | | Divestitures & Other | $(8) | (0.1)% | | Total Revenue Change | $1,028 | 19.0% | Operating Highlights (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Operating Expenses as % of Revenue | 59.7% | 60.9% | | SG&A as % of Revenue | 10.8% | 9.3% | | Income from Operations (Millions) | $1,151 | $1,009 | | Operating Margin | 17.9% | 18.7% | - The increase in SG&A expenses was primarily due to higher labor costs from acquisitions and consulting fees incurred to support the integration of Stericycle[143] - Net interest expense rose to $232 million in Q2 2025 from $136 million in Q2 2024, mainly due to increased debt from the Stericycle acquisition[153] Segment Performance Q2 2025 segment performance shows growth in Collection and Disposal and Renewable Energy, a decline in Recycling, and an operating loss for the new WM Healthcare Solutions segment Income from Operations by Segment (Q2 2025 vs Q2 2024, in Millions) | Segment | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Collection and Disposal | $1,461 | $1,359 | 7.5% | | Recycling Processing and Sales | $24 | $29 | (17.2)% | | WM Renewable Energy | $38 | $18 | 111.1% | | WM Healthcare Solutions | $(23) | — | N/A | | Corporate and Other | $(349) | $(397) | (12.1)% | | Total | $1,151 | $1,009 | 14.1% | - The West Tier of the Collection and Disposal segment showed strong performance with a 12.3% increase in operating income, benefiting from wildfire clean-up activities[151][152] - The WM Healthcare Solutions segment's operating loss was primarily due to depreciation, amortization, and integration-related expenses following the Stericycle acquisition[152] Liquidity and Capital Resources The company maintains strong liquidity with increased operating cash flow, manages debt post-acquisition, and has temporarily suspended share repurchases to prioritize deleveraging Cash Flow and Liquidity Summary (Six Months Ended June 30, in Millions) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $2,753 | $2,521 | | Capital Expenditures | $(1,563) | $(1,335) | | Proceeds from Divestitures | $103 | $58 | | Free Cash Flow (Non-GAAP) | $1,293 | $1,244 | - Total debt was $24.0 billion as of June 30, 2025. The company has $1.8 billion of available capacity under its $3.5 billion revolving credit facility[158][33] - The share repurchase program was temporarily suspended after the Stericycle acquisition. The company expects to resume repurchases once leverage returns to targeted levels, projected for Q2 2026[166] - Cash dividends paid increased to $669 million in the first half of 2025 from $608 million in the prior year, due to a quarterly dividend increase from $0.75 to $0.825 per share[166] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The principal executive and financial officers concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[174] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[175] PART II. Other Information Item 1. Legal Proceedings Information on legal proceedings, including environmental matters and Stericycle-related litigation, is detailed in Note 6 to the financial statements - Information on legal proceedings is detailed in Note 6 to the financial statements[177] - Key legal matters include environmental proceedings, such as involvement in 74 Superfund sites, and litigation assumed from the Stericycle acquisition, including a now-terminated DPA with the DOJ and an ongoing DEA investigation into a divested business[59][66][67] Item 1A. Risk Factors No material changes to risk factors previously disclosed in the 2024 Annual Report on Form 10-K have occurred - There have been no material changes to the risk factors disclosed in the 2024 Annual Report on Form 10-K[178] Item 5. Other Information This section discloses the adoption of net share settlement plans by two executive officers in May 2025 for the automatic exercise of stock options - On May 20, 2025, Tara J. Hemmer, SVP and Chief Sustainability Officer, adopted a net share settlement plan to exercise up to 53,429 stock options[182] - On May 30, 2025, Charles Boettcher, EVP and Chief Legal Officer, adopted a net share settlement plan to exercise up to 15,072 stock options[183]