01—Abstract
Summary
Summary of the 10-Q filed April 25, 2019. Cited figures are marked; the original filing is the authoritative source.
Waste Management Inc. (WM) reported its first quarter 2019 financial results, showcasing a revenue increase of 5.3% to $3.7 billiona compared to the prior year period.
This growth was primarily driven by higher volumes from favorable market conditions and strong landfill volume growth, coupled with an increased yield in its collection and disposal business. Despite these top-line improvements, net income attributable to Waste Management, Inc. saw a decrease to $347 millionb ($0.81 per diluted share) from $396 million ($0.91 per diluted share) in the first quarter of 2018. This decline was significantly impacted by a $52 million impairment charge related to an investment in a waste conversion technology business.
Operationally, the company demonstrated robust cash flow generation, with net cash provided by operating activities increasing to $890 millionc from $809 million in the prior year. Free cash flow also saw a slight increase to $431 million.
A significant strategic development announced after the quarter's end was the agreement to acquire Advanced Disposal Services, Inc. for an enterprise value of $4.9 billiond, signaling a strong commitment to inorganic growth. However, the company also noted challenges, including lower market prices for recycling commodities and the absence of certain federal natural gas fuel credits that were present in the prior year, impacting operating results.
02—Key points
Key Highlights
- Revenue increased by 5.3% to $3.7 billion, driven by higher volumes and improved yield in collection and disposal services.
- Net income decreased to $347 million ($0.81/share) from $396 million ($0.91/share) year-over-year, largely due to a $52 million impairment charge.
- Operating cash flow improved to $890 million, up from $809 million in the prior year.
- Free cash flow remained strong at $431 million.
- The company announced a significant agreement to acquire Advanced Disposal Services, Inc. for $4.9 billion, indicating a strategic focus on expansion.
- Recycling commodity prices continued to be a headwind, contributing to lower revenues in that segment.
- Operating expenses increased primarily due to higher volumes, cost inflation, and the absence of prior-year natural gas fuel credits.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2019, Waste Management Inc kept $0.09.
- Revenue$3.70B100.0%
- Cost of revenue−$2.30B62.2%
- Gross profit$1.40B37.8%
- Operating costs−$777.0M21.0%
- Operating income$621.0M16.8%
- Interest, other & tax−$274.0M7.4%
- Net income$347.0M9.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2019filed April 25, 2019Financial Statements
Q1 FY2019 against Q1 FY2018
| Line item | Q1 FY2019Q1 FY2018 | Change |
|---|---|---|
| Revenue | $3.70B$3.51B | +5.3% |
| Cost of Revenue | $2.30B$2.18B | +5.2% |
| Gross Profit | $1.40B$1.33B | +5.4% |
| SG&A Expenses | $409.00M$373.00M | +9.7% |
| Operating Expenses | $3.08B$2.90B | +5.9% |
| Operating Income | $621.00M$608.00M | +2.1% |
| Net Income | $347.00M$396.00M | −12.4% |
| EPS (Basic) | $0.82$0.91 | −9.9% |
| EPS (Diluted) | $0.81$0.91 | −11.0% |
| Shares Outstanding (Basic) | 424.50M433.30M | −2.0% |
| Shares Outstanding (Diluted) | 426.90M435.80M | −2.0% |
05—Questions
Frequently Asked Questions
What was the primary driver of revenue growth in Q1 2019?
Revenue growth was primarily driven by higher volumes from favorable market conditions and strong landfill volume growth, in addition to an increased yield in the company's collection and disposal business.
Why did net income decrease despite revenue growth?
Net income decreased primarily due to a $52 million impairment charge recognized on a minority investment in a waste conversion technology business. This charge was not tax-deductible, further impacting the bottom line.
What is the significance of the announced acquisition of Advanced Disposal?
The acquisition of Advanced Disposal for $4.9 billion represents a major strategic move to expand Waste Management's footprint and service offerings in the solid waste industry. It is expected to close by the first quarter of 2020, subject to regulatory approvals.
What challenges did the company face in the quarter?
Key challenges included lower market prices for recycling commodities, which impacted revenue, and increased operating expenses due to cost inflation and the absence of certain federal natural gas fuel credits that were present in the prior year.
06—Continue