01—Abstract
Summary
Summary of the 10-Q filed July 27, 2021. Cited figures are marked; the original filing is the authoritative source.
Waste Management Inc. (WM) reported a strong second quarter in 2021, demonstrating significant recovery and growth.
Revenue increased by 25.7% year-over-year to $4.48 billiona, largely driven by improved volumes across its collection and disposal segments, the integration of the Advanced Disposal acquisition, and higher commodity prices for recyclables. Despite inflationary cost pressures and increased labor expenses, the company effectively managed its operational expenses, resulting in a notable improvement in operating income to $791 million, up from $527 million in the prior year. This was further bolstered by lower interest expenses due to strategic debt refinancing.
While the company incurred a $220 millionb loss on early debt extinguishment, its robust operating performance led to a net income of $351 million ($0.83 per diluted share), an increase from $307 million ($0.72 per diluted share) in the prior year. The company also generated strong free cash flow of $649 million, reflecting healthy operational cash generation and disciplined capital expenditures, supporting its capital allocation priorities.
02—Key points
Key Highlights
- Revenue surged by 25.7% to $4.48 billion in Q2 2021, driven by volume recovery, the Advanced Disposal acquisition, and higher recycling commodity prices.
- Operating income increased significantly to $791 million from $527 million in the prior year, reflecting improved operational efficiency and revenue growth.
- Net income attributable to Waste Management, Inc. rose to $351 million ($0.83/share) from $307 million ($0.72/share) year-over-year.
- The company successfully managed operating expenses as a percentage of revenue, keeping them at 61.1% despite increased costs, due to strong revenue growth in higher-margin businesses.
- Free cash flow generation was robust at $649 million for the quarter, indicating strong liquidity and ability to fund shareholder returns and investments.
- The acquisition of Advanced Disposal continues to positively contribute to revenue and operations, though integration costs are being managed.
- Strategic debt refinancing activities led to a reduction in interest expense, although a $220 million loss was recognized on early debt extinguishment.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2021, Waste Management Inc kept $0.08.
- Revenue$4.48B100.0%
- Cost of revenue−$2.74B61.1%
- Gross profit$1.74B38.9%
- Operating costs−$949.0M21.2%
- Operating income$791.0M17.7%
- Interest, other & tax−$440.0M9.8%
- Net income$351.0M7.8%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2021filed July 27, 2021Financial Statements
Q2 FY2021 against Q2 FY2020
| Line item | Q2 FY2021Q2 FY2020 | Change |
|---|---|---|
| Revenue | $4.48B$3.56B | +25.7% |
| Cost of Revenue | $2.74B$2.18B | +25.5% |
| Gross Profit | $1.74B$1.38B | +26.0% |
| SG&A Expenses | $445.00M$377.00M | +18.0% |
| Operating Expenses | $3.69B$3.03B | +21.5% |
| Operating Income | $791.00M$527.00M | +50.1% |
| Net Income | $351.00M$307.00M | +14.3% |
| EPS (Basic) | $0.83$0.73 | +13.7% |
| EPS (Diluted) | $0.83$0.72 | +15.3% |
| Shares Outstanding (Basic) | 421.60M422.30M | −0.2% |
| Shares Outstanding (Diluted) | 423.60M423.90M | −0.1% |
05—Questions
Frequently Asked Questions
What was the primary driver of the significant revenue increase in Q2 2021?
The primary drivers of the 25.7% revenue increase were a strong recovery in collection and disposal volumes, the successful integration of the Advanced Disposal acquisition, and higher market prices for recycling commodities. The company also saw improved yield in its collection and disposal lines of business.
How did the company manage increased costs and inflationary pressures?
Waste Management implemented strategic pricing initiatives and focused on operating efficiencies and cost controls. While operating expenses increased due to higher volumes, labor, and inflationary pressures, the company was able to maintain operating expenses as a percentage of revenue at 61.1% by leveraging revenue growth in its higher-margin businesses and through disciplined integration of the Advanced Disposal acquisition.
What is the impact of the Advanced Disposal acquisition on the company's financial performance?
The acquisition of Advanced Disposal continues to be a significant contributor to revenue growth, primarily in collection and disposal services. While there are integration costs and increased depreciation and amortization associated with the acquired assets, the overall impact on revenue and operations has been positive, aligning with the company's strategic growth objectives.
How is the company managing its debt and what was the impact of the recent debt extinguishment?
Waste Management actively manages its debt through strategic refinancing. In Q2 2021, the company issued new senior notes and used the proceeds to retire $1.3 billion of high-coupon senior notes. This resulted in lower interest expense but also incurred a $220 million loss on early debt extinguishment. The company maintains a strong liquidity position with a significant revolving credit facility.
06—Continue