Q2 Earnings

Dive Brief:

• Advanced Disposal Services reported a relatively quiet second quarter, with no acquisitions and ongoing growth for pricing and multiple categories of waste volume. Adjusted EBITDA came in at $110 million and adjusted free cash flow was $76.5 million.
• Two unique events were among multiple factors contributing to the quarterly net loss. The company reported $9.7 million in costs for a pending settlement over allegedly improper service fees with plaintiffs in three states. It also recorded a $9.6 million increase in remediation expenses for a landfill in Georgia.
• Recycling revenues declined further to $2.3 million, as compared to $4.1 million in Q2 2018. The combination of lower commodity values and higher processing costs created a $2.6 million EBITDA headwind for the company.

Dive Insight:

According to Advanced Disposal's 10-Q, average yield increased quarterly revenue by 3.2% — "driven by higher open market price yield as we continue to focus on disciplined pricing and higher price yield in our municipal residential collection business due to the positive impact of higher CPI contract resets."

Organic volume also helped increase revenue by 0.8% due to an uptick in special waste, MSW and C&D disposal volumes. Lower commercial and residential collection volumes offset this slightly.

While the company hasn't reported any additional deals beyond its two Q1 acquisitions for a total of $24.9 million, it did record $2.2 million for a deferred purchase price payment relating to an unspecified deal in Q4 of 2018. Overall, past acquisitions helped increase revenue by 1.5% during Q2.

Advanced also saw double-digit increases for risk management (13.6%) and operating costs (22.6%). The former was due to a "higher frequency and severity of automobile and property liability claims." The latter was driven by multiple factors, including landfill leachate expenses. Wet weather was cited as the main culprit for this issue at sites throughout the company's network.

Leachate issues proved particularly expensive at the Eagle Point Landfill in Georgia, which was the subject of a state consent order earlier this year over slope instability. After already recording $16.2 million in remediation accruals for leachate and gas infrastructure, the company has now upped that total to $25.8 million following an engineering report in May.

This landfill issue — combined with a $13.7 million benefit from a tax audit settlement, the $9.7 million in costs for the service fee settlement and $3.6 million in legal fees related to the pending sale to Waste Management — all amounted to the company's $1 million net loss for Q2. 

This marks the second quarterly earnings report from Advanced Disposal without an earnings call, pending its acquisition. Since the company's Q1 report, Advanced has received support from a majority of shareholders for the deal, cleared up multiple lawsuits attempting to challenge it and continued engaging with the Department of Justice over antitrust approval.