Waste Management reports first quarter revenue up over 2019, ready for challenges of coronavirus in 2020
Waste industry giant taking steps to protect its workforce and service to customers in response to pandemic
Waste Management, Inc. (WM) has reported revenues for the first quarter of 2020 at $3.73 billion, compared with $3.70 billion for the same period in 2019.
Net income for the first quarter (ending March 31, 2020) was $361 million, or $0.85 per diluted share, compared with $347 million, or $0.81 per diluted share, for the first quarter of 2019.
According to WM, as COVID-19 disruptions escalated in the United States and Canada during March, the company took steps to protect its workforce and continue to provide reliable service to its customers.
"I am extremely proud of how our team has worked together to proactively address the challenges we've faced as a result of the coronavirus pandemic," said Jim Fish, President and Chief Executive Officer of Waste Management. "Our top priority as a leadership team has been the health, safety and financial well being of our 45,000 team members. In turn, our team members have continued to provide essential services to customers and communities across North America.
"As a leader in the industry, we also have a responsibility to work with our customers as they defend the health of their businesses," Fish continued. "This is particularly true for small businesses, the lifeblood of our economy."
WM's COVID-19 Response and Impacts
Waste Management has responded to the COVID-19 pandemic by:
-Protecting frontline employees by supplementing customary practices and daily operational routines with social distancing and personal protective equipment enhancements.
-Promoting the health and financial wellbeing of its employees by excusing COVID-19 related absences and providing a guarantee of 40 hours of weekly pay to all full-time employees during the pandemic.
-Leveraging technology to quickly transition approximately 20,000 back-office employees to work from home - enabling these team members to serve customers and support frontline employees remotely.
-Partnering with its customers to adjust service levels and extend payment terms.
-Working with municipalities to address increased residential volumes and recycling challenges in areas where there have been processing disruptions.
Specifically, WM reports the following COVID-19-related business impacts in the first quarter, beginning in March 2020:
-A reduction in landfill and industrial collection volumes. While volume-driven revenue in the commercial collection business held up relatively well in March, service decreases accelerated late in the month and into the second quarter.
-An increase in container weights in the residential line of business, which increased our cost to service these customers.
-A negative revenue impact of approximately $40 million.
-A $6 million increase in SG&A expenses, driven by technology costs incurred to accelerate work-from-home capabilities.
-A decline in operating EBITDA margin of approximately 40 basis points, which the Company attributes to volume declines in our higher-margin lines of business and cost pressures in the residential line of business.
WM is suspending its 2020 financial guidance due to the unprecedented impact of, and uncertainty created by, the COVID-19 pandemic.
"Our business model generates strong cash flow and is resilient in any economic cycle. In past downturns, we have demonstrated the ability to flex spending and manage capital expenditures to generate strong free cash flow and return excess cash to our shareholders. We expect to deliver on these priorities as we continue to provide essential services to our customers during this unprecedented pandemic," Fish said.
"At this time, we cannot forecast with reasonable accuracy the duration of the coronavirus disruptions, particularly for small businesses, or the pace of an eventual recovery. We expect to resume providing financial guidance when we have greater clarity."
Overall, the company anticipates a significant decrease in 2020 revenue from planned levels, as a result of COVID-19, driven by volume declines in landfill and industrial and commercial collection.
To partially offset the impact of this significant revenue decline, WM says it is taking the following steps to manage costs and capital spending without compromising long-term strategic priorities or growth opportunities:
-Leveraging technology to enable swift route optimization,
-Dramatically reducing overtime hours,
-Limiting hiring and optimizing the existing workforce through greatly improved retention and reduced turnover,
Reducing or eliminating certain non-essential costs and expenses like travel and entertainment and consulting costs,
-Reducing incentive compensation accruals, and
-Flexing capital expenditures to a level that is consistent with volume changes.
FIRST QUARTER 2020 Highlights
Financial results for the first quarter were in line with the Company's expectations.
In the first quarter of 2020, WM says revenue growth was driven by yield and volume growth in their collection and disposal business, which contributed $74 million of incremental revenue.
In spite of a 30% decline in recycled commodity prices, reports a growth in operating EBITDA for its recycling business by almost $3 millio,n when compared to the first quarter of 2019, by reducing costs and improving its fee-for-service model.
"Through this unprecedented pandemic, we have managed the impact of the shutdown on our own people, our customers, and our business extremely well," concludes Fish. "We are now turning our focus to managing equally well through the coming re-start and to using this as an opportunity to further differentiate ourselves through permanent enhancements in our business processes and our service offering to our customers. The strength and resiliency of both our people and our business model give us confidence that we can continue to deliver on our commitments to our customers and our shareholders."