10-QPeriod: Q3 FY2021

WASTE MANAGEMENT INC Quarterly Report for Q3 Ended Sep 30, 2021

Filed October 26, 2021For Securities:WM

Summary

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.

Financial Highlights

51 data points
Beta

Revenue

$4.67B

37.7% Gross Margin

Net Income

$538.00M

11.5% Net Margin

EPS (Diluted)

$1.28

Total Assets

$28.84B

Cash & Equivalents

$116.00M

Free Cash Flow

$1.18B

Financial Statements
Beta
Revenue$4.67B
Cost of Revenue$2.91B
Gross Profit$1.76B
SG&A Expenses$469.00M
Operating Expenses$3.86B
Operating Income$806.00M
Net Income$538.00M
EPS (Basic)$1.28
EPS (Diluted)$1.28
Shares Outstanding (Basic)419.50M
Shares Outstanding (Diluted)422.00M

Key Highlights

  • 1Total 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.
  • 2Income 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.
  • 3Net 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.
  • 4Net 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.
  • 5Free 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.
  • 6The company repurchased $1.0 billion of common stock during the nine months ended September 30, 2021, demonstrating a commitment to returning capital to shareholders.
  • 7Long-term debt decreased from $13,259 million at December 31, 2020, to $12,446 million at September 30, 2021, reflecting active debt management.

Frequently Asked Questions

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.

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.

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.

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.