14 percent growth for Waste Management surpasses first quarter expectations
Waste Management, Inc. has announced financial results for the quarter ended March 31, 2021, citing an exceptionally strong start to the year, including growth of over 14% (EBITDA). The company said their strong numbers were the result of generating strong yield, flexing down cost structure, and executing on the integration of Advanced Disposal.
Jim Fish, Waste Management's President and Chief Executive Officer, commented, "With this solid performance and our confidence in the strength of our business model, we are increasing our 2021 financial guidance that we provided in February for revenue, adjusted operating EBITDA and free cash flow.
"In addition to the strong performance of our core business, the integration of Advanced Disposal is going remarkably well," continued Fish. "Based upon the success of the integration efforts so far, we believe we will capture synergies above our original expectations. We now expect to achieve $130 million in annual run-rate synergies from operating costs and SG&A savings, which is a more than 60% increase from our initial estimates. The revised estimate includes between $75 million and $85 million in run-rate synergies captured during 2021, up from our prior guidance of between $50 million and $60 million."
WM's Q1 report also indicated some less-than-positive numbers including a revenue decline of $5 million in the company's collection and disposal business, (when excluding the impact of acquisitions and divestitures) compared to the first quarter of 2020, driven by $98 million in volume declines, and partially offset by $93 million of growth from yield. Total Company volumes also declined 2.7% in the first quarter of 2021, or 2.1% on a workday adjusted basis, compared to a decline of 2.6% on a workday adjusted basis in the fourth quarter of 2020 and a decline of 0.4% on a workday adjusted basis in the first quarter of 2020.
However, in the first quarter of 2021, acquisitions, net of divestitures, added $292 million of revenue primarily from the acquisition of Advanced Disposal. Operating expenses as a percentage of revenue also improved 130 basis points to 61.1% when compared to the first quarter of 2020, demonstrating WM's ability to operate under a lower cost structure, according to the company. Also, net cash provided by operating activities was $1.12 billion compared to $765 million in the first quarter of 2020, an increase of $355 million. The improvement in net cash provided by operating activities was primarily driven by the increase in operating EBITDA, lower incentive compensation payments, and improvements in working capital.
Waste Management 2021 financial outlook
According to WM's outlook based on their first quarter results, total company revenue growth is expected to be 12.5% to 13%, and combined internal revenue growth from yield and volume in the collection and disposal business is expected to be 4.5% or greater.
With respect to synergies from the acquisition of Advanced Disposal, WM expects to total $150 million, with $130 million coming from operating costs and SG&A savings and $20 million coming from capital expenditure savings.
Fish concluded, "We've previously discussed that Waste Management is well positioned to benefit as states and provinces emerge from the pandemic. We expect strong results as our commercial, industrial and landfill businesses—our three most profitable lines of business—continue to recover over the remainder of the year."