Stay in the Know - Subscribe to Our Newsletters
Join a network of more than 90,000 waste and recycling industry professionals. Get the latest news and insights straight to your inbox. Free.
Waste Management, Waste Connections Kickoff Q2’17 Earnings Season with Blockbuster Results
With six months of 2017 in the books, volume and price trends remain robust.
6 Min Read
Waste Management Inc. and Waste Connections Inc. each saw strong year-over-year growth in key metrics across the board during the second quarter, getting the industry’s second quarter earnings season off to a roaring start.
Houston-based Waste Management, the industry’s largest firm, posted revenues of $3.68 billion compared with $3.43 billion for the same 2016 period. Net income for the quarter was $362 million compared with net income of $287 million a year ago.
Meanwhile, Toronto-based Waste Connections posted revenues of $1.18 billion, up from $727.6 million in second quarter of 2016.
Record EBITDA for Waste Management
For Waste Management, EBITDA amounted to $1.03 billion compared to $951 million in the second quarter of 2016. That figure is the highest operating EBITDA posted in the company’s history.
“We’re really pleased that these big financial metrics that we focus on are performing as well as they are,” Waste Management President and CEO Jim Fish said in a conference call with investors this morning.
During the call, Fish also reiterated the firm’s commitment to investing in technology, including revealing that the company was looking to hire a chief technology officer by the end of the year. The firm invests between $100 million and $150 million in technology spending annually.
In the short term, the company plans to invest in customer-facing technologies, including e-commerce and self-service capabilities. Other investments will focus on data analytics to help improve the company’s pricing tools, its ability to conduct predictive maintenance on its fleet and optimize its routing and logistics. Down the line, investments could be things like increased automation, autonomous vehicles and robotics.
“We think we’re the leader in the industry in technology and we continue to invest that way,” Fish said.
It plans to test autonomous vehicles at a MRF, a transfer station and a landfill in the near term, he added. Testing autonomous vehicles for residential collection is a bit farther off.
Fish and Jim Trevathan, Waste Management’s executive vice president and chief operating officer, also talked briefly about China’s recent notification to the World Trade Organization of plans to ban 24 types of solid waste imports.
In the short term, Trevathan and Fish said the impacts would be modest for the company, but the company is keeping an eye on any additional moves.
“N[one] of these categories should materially affect us given current sorting and processing capabilities,” Trevathan said. But “it does create further uncertainty in forecasting future recycling price levels.”
“They are the big buyer in the market,” Fish added later in the call. “When they start tinkering with prices, we have to be aware of that.”
During the call with investors, Fish said he expected 2017 to continue to be a busy year for acquisitions. On an annual basis, Waste Management typically completes between $100 million and $200 million in tuck-in acquisitions. While it was closer to the lower end of that range in 2016, Fish said he expected the firm to be closer to the higher end in 2017.
To that end, for the quarter, Waste Management’s closed acquisitions totaled $48 million. That was up from $37 million during the same quarter last year and $10 million from the first quarter of 2017.
Other highlights from the firm’s results:
Overall revenue increased by 7.4 percent, or $252 million. The revenue increase was driven by positive yield and volume in the company’s collection and disposal business, which contributed $158 million to revenue growth. Higher recycling commodity prices and volumes contributed $90 million of revenue growth.
Income from operations came in at $673 million, up from $611 million in the prior year period.
Core price, which consists of price increases net of rollbacks, plus fees other than the Company’s fuel surcharge, was 4.7 percent. Internal revenue growth from yield for collection and disposal operations was 9 percent.
Internal revenue growth from volume in the traditional solid waste business was 3.2 percent in the second quarter of 2017. Total company internal revenue growth from volume was 3.4 percent in the second quarter of 2017.
For the first half of the year, average yield is up 4.5 percent compared to 1.7 percent in 2016. Volume is up 3.4 percent compared to 0.4 percent. And internal revenue growth was up 7.9 percent compared to 2.1 percent in 2016.
Service increases for the company exceeded decreases for the 14th consecutive quarter. Its churn rate fell to 9 percent.
As a percent of revenue, operating expenses were 62.3 percent in the second quarter of 2017, as compared to 62.2 percent in the second quarter of 2016.
Net cash provided by operating activities was $813 million, compared to $762 million in the second quarter of 2016, an increase of 6.7 percent.
Capital expenditures were $299 million, compared to $312 million in the second quarter of 2016.
Free cash flow was $520 millionin the second quarter of 2017, compared to $461 million in the second quarter of 2016, an increase of 12.8 percent.
Operating revenues from collections amounted to $2.33 billion, up from $2.21 billion in 2016. Broken down by line, commercial collections came to $917 million, residential was $632 million, industrial was $654 million and “other” amounted to $123 million.
Operating revenues for landfills were $864 million, for transfer operations were $414 million and for recycling were $375 million. Waste Management also produced revenue from other operations of $437 million.
Progressive Waste Merger Reaping Dividends
For Waste Connections, revenue from the Progressive Waste acquisition completed on June 1, 2016, was $511.4 million and $174.0 million in the current year and prior year periods, respectively.
Operating income was $206.9 million. This compares to operating income of $63.5 million in the second quarter of 2016, which included $73.2 million of items primarily related to the Progressive Waste acquisition completed in that period.
“Continued strength in solid waste volumes, recycled commodity prices and E&P waste activity enabled us to once again exceed our outlook for the quarter,” Waste Connections Chairman and CEO Ronald J. Mittelstaedt said in a statement. “More importantly, full year adjusted free cash flow, now estimated at approximately $750 million, or almost 52 percent of adjusted EBITDA, is also pacing ahead of initial expectations.”
This compares to operating income of $63.5 million in the second quarter of 2016, which included $73.2 million of items primarily related to the Progressive Waste acquisition completed in that period.
“We are pleased to report that our divestiture program is nearing completion, with the expected benefits greater than initially anticipated,” Mittelstaedt added. “Moreover, we are encouraged by our progress on potential acquisitions, for which we could fully utilize existing cash and projected excess cash flow over the next few quarters. In addition to funding potentially above average acquisition activity, our strong financial profile also positions us for another double-digit percentage increase in our quarterly dividend in October.”
Other highlights from the quarter:
Net income attributable to Waste Connections in the second quarter was $123.7 million. In the year ago period, the company reported net income attributable to Waste Connections of $27.5 million.
Adjusted net income attributable to Waste Connections in the second quarter was $145.5 million versus $93.2 million.
Adjusted EBITDA in the second quarter was $373.6 million, as compared to adjusted EBITDA of $233.6 million in the prior year period.
Adjusted free cash flow came to $156.1 million in the quarter, up from $120.7 million in 2016.
For the six months ended June 30, revenue was $2.27 billion, as compared to revenue of $1.242 billion in the year ago period.
Solid waste internal growth amounted to 6.0 percent.
Core price was up 3.1 percent for the quarter year-over-year. Volume was up 2.0 percent. Recycling was up 1.1 percent.
Solid waste collection revenues amounted to $797.1 million vs. $502.9 million in 2016. Solid waste disposal and transfer revenues totaled $416.2 million versus $256.8 million last year. Solid waste recycling revenues were $43.7 million for the quarter compared to $18.1 million a year ago. E&P waste treatment, recovery and disposal revenues came to $50.0 million, up from $30.7 million in 2016. And intermodal and other revenues totaled $35.4 million versus $22.4 million in 2016.
About the Author
You May Also Like
