Financial report: WM spent nearly $200 million on acquisitions in Q3

WM has released financial results for the quarter ended September 30, 2022.

"As we have seen all year, our team delivered strong results in the third quarter, driven by the strength and resiliency of our collection and disposal business," said Jim Fish, WM's President and Chief Executive Officer. "Organic revenue growth, diligent management of controllable costs, and proactive steps to automate the business translated into an 11 percent increase in adjusted operating EBITDA."

Fish continued, "I am proud of the dedication of our entire team, particularly our team members in Florida who are rising to the challenges from Hurricane Ian to support cleanup efforts for affected communities. The team continues to maintain focus on meeting the service needs of our customers and executing on pricing and cost management plans, and they do all of this while advancing our long-term strategic priorities."

Key highlights for the third quarter of 2022

Revenue

• Core price for the third quarter of 2022 was 8.2 percent compared to 4.6 percent in the third quarter of 2021.
• Collection and disposal yield was 7.1 percent in the third quarter of 2022 compared to 3.6 percent in the third quarter of 2021.
• Total company volumes increased 1.0 percent, or 1.3 percent on a workday adjusted basis, in the third quarter of 2022 and collection and disposal volumes increased 1.4 percent, or 1.7 percent on a workday adjusted basis. Total company volumes improved 3.2 percent in the third quarter of 2021, or 3.0 percent on a workday adjusted basis, and collection and disposal volumes increased 3.4 percent, or 3.2 percent on a workday adjusted basis, in the third quarter of 2021.

Cost management

• Operating expenses as a percentage of revenue were 62.2 percent in the third quarter of 2022 compared to 62.3 percent in the third quarter of 2021. The measure improved 70 basis points in the collection and disposal business as pricing and operating efficiencies worked to overcome inflationary cost pressures. This improvement was largely offset by the impacts of a sharp decline in market prices for recycled commodities.
• SG&A expenses were 9.3 percent of revenue in the third quarter of 2022 compared to 10.1 percent in the third quarter of 2021. On an adjusted basis, SG&A expenses were 9.2 percent of revenue in the third quarter of 2022 compared to 9.7 percent in the third quarter of 2021.

Profitability

• Operating EBITDA in the company's collection and disposal business, adjusted on the same basis as total company operating EBITDA, increased by approximately $174 million to $1.59 billion for the third quarter of 2022. Operating EBITDA as a percentage of revenue in the company's collection and disposal business was 31.8 percent for the third quarter of 2022 compared to 31.2 percent for the third quarter of 2021.
• Operating EBITDA in the company's recycling line of business decreased by $36 million compared to the third quarter of 2021 primarily driven by a 32 percent decline in recycled commodity prices and persistent inflationary cost pressures on operating costs.
• Operating EBITDA in the company's renewable energy business was relatively flat compared to the third quarter of 2021. Results were generally in line with expectations as the company sold about 30 percent of its renewable natural gas under long-term contracts, which moderated the average price per MMBtu.

Free cash flow and capital allocation

• In the third quarter of 2022, net cash provided by operating activities was $1.18 billion, in line with the third quarter of 2021.
• In the third quarter of 2022, capital expenditures to support the business were $547 million compared to $448 million in the third quarter of 2021. In addition, capital expenditures for sustainability growth investments were $210 million compared to $16 million in the third quarter of 2021.
• In the third quarter of 2022, free cash flow was $432 million compared to $773 million in the third quarter of 2021. Free cash flow without sustainability growth investments was $642 million compared to $789 million in the third quarter of 2021. The year-over-year decline in free cash flow was primarily driven by the planned increase in sustainability growth investments and accelerated capital spending to support the business.
• During the third quarter of 2022, $808 million was returned to shareholders, including $541 million allocated to share repurchases and $267 million of cash dividends.

Sustainability update

• The company released its 2022 Sustainability Report earlier this month, providing details on its Environmental Social and Governance (ESG) performance and outlining new 2030 priorities. The Sustainability Report conveys the strong linkage between the company's ESG goals and its growth strategy, inclusive of the planned expansion of the company's recycling and renewable energy businesses.
• The company continues to progress its $1.625 billion sustainability growth investment program and remains on track to invest $550 million in 2022. These growth investments are intended to further WM's sustainability leadership by increasing recycling volumes and growing RNG generation. Two of the 17 new RNG projects and five new or automated material recovery facilities (MRFs) are expected to be complete in 2022. The company expects to provide updates on the timing of future capital investments and earnings contributions associated with this program by its fourth quarter earnings announcement in February.