01—Abstract
Summary
Summary of the 10-Q filed October 26, 2021. Cited figures are marked; the original filing is the authoritative source.
Waste Management Inc. (WM) reported strong revenue growth in the third quarter of 2021, driven by the acquisition of Advanced Disposal, recovery in waste volumes post-pandemic, and a significant increase in recycling commodity prices.
While operating expenses also rose due to these factors, including labor inflation and supply chain disruptions, the company's income from operations and net income attributable to WM showed substantial year-over-year improvements. WM continues to prioritize shareholder returns, demonstrating this through significant dividend payments and share repurchases, supported by robust free cash flow generation. The company's balance sheet reflects a solid position with manageable debt levels.
Despite ongoing inflationary pressures and labor market constraints impacting operational costs, WM's strategic focus on pricing, operational efficiencies, and digital enhancements positions it to navigate these challenges. The ongoing integration of Advanced Disposal and strategic capital allocation remain key priorities for management.
02—Key points
Key Highlights
- Total operating revenues increased by 20.8% to $4,665 million for the three months ended September 30, 2021, compared to $3,861 million in the prior year period, largely driven by the Advanced Disposal acquisition and strong volume and pricing in core services.
- Income from operations increased by 18.5% to $806 million for the three months ended September 30, 2021, compared to $680 million in the prior year period, reflecting improved operational performance.
- Net income attributable to Waste Management, Inc. grew to $538 million ($1.28 per diluted share) for the three months ended September 30, 2021, up from $390 million ($0.92 per diluted share) in the prior year period.
- Net cash provided by operating activities increased by 15.5% to $3,347 million for the nine months ended September 30, 2021, compared to $2,650 million in the prior year period.
- Free cash flow increased significantly to $2,287 million for the nine months ended September 30, 2021, up from $1,432 million in the prior year period.
- The company repurchased $1.0 billion of common stock during the nine months ended September 30, 2021, demonstrating a commitment to returning capital to shareholders.
- Long-term debt decreased from $13,259 million at December 31, 2020, to $12,446 million at September 30, 2021, reflecting active debt management.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2021, Waste Management Inc kept $0.12.
- Revenue$4.67B100.0%
- Cost of revenue−$2.91B62.3%
- Gross profit$1.76B37.7%
- Operating costs−$953.0M20.4%
- Operating income$806.0M17.3%
- Interest, other & tax−$268.0M5.7%
- Net income$538.0M11.5%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2021filed October 26, 2021Financial Statements
Q3 FY2021 against Q3 FY2020
| Line item | Q3 FY2021Q3 FY2020 | Change |
|---|---|---|
| Revenue | $4.67B$3.86B | +20.8% |
| Cost of Revenue | $2.91B$2.33B | +24.6% |
| Gross Profit | $1.76B$1.53B | +15.0% |
| SG&A Expenses | $469.00M$416.00M | +12.7% |
| Operating Expenses | $3.86B$3.18B | +21.3% |
| Operating Income | $806.00M$680.00M | +18.5% |
| Net Income | $538.00M$390.00M | +37.9% |
| EPS (Basic) | $1.28$0.92 | +39.1% |
| EPS (Diluted) | $1.28$0.92 | +39.1% |
| Shares Outstanding (Basic) | 419.50M422.70M | −0.8% |
| Shares Outstanding (Diluted) | 422.00M424.60M | −0.6% |
05—Questions
Frequently Asked Questions
How did the acquisition of Advanced Disposal impact Waste Management's financial results?
The acquisition of Advanced Disposal was a significant driver of revenue growth in the third quarter of 2021, contributing to the 20.8% increase in operating revenues. While it also led to increased operating expenses due to integration and elevated depreciation and amortization, the overall impact was positive, driving higher income from operations and net income.
What is the company's outlook regarding inflationary pressures and labor costs?
Waste Management acknowledges significant inflationary cost pressures, particularly in labor and supply chain. The company is actively addressing this through strategic pricing efforts, operational efficiencies, and investments in technology to mitigate these impacts and maintain margins. Labor availability and cost increases remain a key risk factor.
How is Waste Management managing its debt and returning capital to shareholders?
The company has actively managed its debt, reducing its total debt from $13,810 million at year-end 2020 to $13,047 million by September 30, 2021. Waste Management is committed to returning capital to shareholders through dividends and share repurchases, with $1.0 billion in share repurchases made in the first nine months of 2021 and a continued authorization for future repurchases.
What is the impact of recycling commodity prices on the company's performance?
Recycling revenues saw a significant increase, driven by record-high market prices for recycling commodities. This trend is expected to continue in the near term due to strong demand. The company is also focused on a fee-based pricing model to ensure costs are covered and to manage contamination in the recycling stream.
06—Continue