Waste Management(WM)2023-03-08 18:17Summary of Waste Management, Inc. Conference Call Company Overview - Waste Management, Inc. (NYSE: WM) is the largest solid waste operator in North America, with a strong franchise and robust collection operations [2][5] Core Business Focus - The company has three strategic focal points: 1. Pricing: Emphasized as a key focus, second only to safety. The company has seen significant value from pricing strategies over the past few years [5] 2. Cost Control: Aimed at permanent reductions in operating costs and SG&A, particularly through labor management due to a shrinking labor pool [6] 3. Renewable Natural Gas (RNG) and Recycling: Plans to discuss renewable natural gas plants and recycling facility upgrades in detail during an upcoming Investor Day [6] Financial Performance and Projections - The company projects EBITDA growth from 2019 to 2026/2027 to be between 75% to nearly 100%, which is notable for a mature industry [6][7] - Historical EBITDA growth from 2019 to 2022 exceeded the previously projected range of 5% to 7% [7][46] Inflation and Pricing Strategy - The company faced challenges in 2022 due to rapid inflation, with reported inflation peaking at 9.5%. Labor costs increased significantly, adding $120 million to expenses [10][11] - Approximately 40% of revenue is tied to contracts with a 12-month look-back for pricing adjustments, which delayed the benefits of price increases until 2023 [17][18] Labor and Automation - The labor pool is shrinking, leading to increased turnover rates, which have risen from 15%-20% a decade ago to 20%-25% currently [12] - The company plans to reduce 5,000 to 7,000 roles through automation and technology integration, enhancing efficiency and safety [13][14] Market Position and Volume Growth - The company anticipates flat volume growth in 2023 but remains optimistic about long-term growth due to market share gains from smaller competitors facing labor challenges [29][30] - The business is described as price inelastic, meaning customers are not highly sensitive to price changes, allowing for potential price increases without significant loss of volume [33][34] Green Capital Expenditures (CapEx) - Waste Management is investing $1 billion in recycling, focusing on upgrading facilities with advanced technology to increase capacity and improve material quality [35][36] - The company expects $240 million in EBITDA from recycling upgrades by 2026, with payback periods of 5-6 years [38] Renewable Natural Gas (RNG) Strategy - The company plans to build 20 RNG plants, expecting to generate $500 million in EBITDA by 2026 [27][44] - Waste Management has a competitive advantage due to its 75% natural gas fleet, allowing for better generation of valuable D3 RIN credits [40][41] Investment Tax Credits - The company is looking to capitalize on investment tax credits available for RNG investments, with potential credits estimated around $300 million [47] Conclusion - Waste Management is positioned for significant growth through strategic pricing, cost control, and investments in green technologies, with a clear path to increasing EBITDA and market share in the coming years [46]