By the numbers
Q1 net income: $708M
Up 32.8% year over year
Adjusted operating EBITDA: $1.53B
Up 14.6% year over year, with a margin of 29.6%
- Economic outlook: CEO Jim Fish said strong cost savings initiatives and pricing programs helped WM achieve a 29.6% adjusted operating EBITDA margin in what is typically the lowest margin quarter of the year. The company raised the estimated margin for its full-year earnings before interest, taxes, depreciation and amortization to the 29.7% to 30.2% range, which Fish described during the company’s Thursday earnings call as the company’s “highest ever” full-year operating range.
- Operational efficiencies: WM continued its technology and automation efforts to help improve operating costs, particularly in the collection and disposal segment. Driver turnover is at “record lows,” and WM continues to switch to side-loading collection vehicles to eliminate the need for a worker to ride on the back of the truck, “the most dangerous place in our entire operation,” Fish said. Meanwhile, each remodeled recycling facility is expected to provide somewhere between a 30% and 40% reduction in labor costs due to automation.
- Hiring and staffing reductions: WM also continues what Fish describes as a “low-impact” reduction in workforce through attrition. Since 2022, WM’s headcount has decreased by about 2,000 people, and it expects to eliminate about 1,200 additional unfilled positions in 2024. “None of those people were at risk, we just chose not to replace folks,” he said.
- Recycling facility upgrades: WM is continuing work on upgrading recycling facilities, most recently reopening its largest upgraded recycling facility in Germantown, Wisconsin. It’s a $39 million automation update that allows the facility to process 70 tons an hour. Fish noted that planned temporary shutdowns at additional recycling facilities for upgrades could create a headwind of about $30 million in 2024, but he expects that to become a tailwind of around $25 million in 2025 as the rebuilt facilities reopen.
- Recycled commodities: Improved recycled commodity prices could help offset some anticipated headwinds, CFO Devina Rankin said. In Q1, the blended average single-stream recycled commodity price was about $84 per ton, up from around $54 per ton in Q1 2023. WM expects the full-year commodity price to be around $80 per ton, up from its previous estimate of about $70 per ton.
- RNG updates: WM expects to complete five RNG facility projects in 2024, and it recently commissioned a new renewable natural gas facility near Dallas. WM earned $37 million in investment tax credits in Q1 related to RNG projects, and it estimates its full-year ITC benefits to be about $145 million if all five projects are completed. The company does expect some RNG-related headwinds when an alternative fuel tax credit expires at the end of 2024. That's boosted the operating budget by about $55 million each year, Rankin said, but “we really do think the strong traction in labor, repair and maintenance [efficiencies] will more than offset that headwind” across the business.
- PFAS regulations: WM is assessing the costs and business opportunities that come with new PFAS regulations, Fish said. “There's a lot going on on the [PFAS mitigation] technology front that we think we can bolt on to our post-collection sites to be able to really effectively manage that, at a cost that we can pass on to the customer,” he said. At the same time, Subtitle C and D landfills “are still considered to be very viable long-term responsible repositories for PFAS, so we still see it as an opportunity,” he said. Certain U.S. Department of Defense sites are in the process of cleaning up PFAS contamination, and “we’re already doing some of that work now,” he said.
- Updated outlook: WM estimates its adjusted operating EBITDA to be closer to a ceiling of $6.525 billion instead of an earlier estimate of $6.425 billion. However, WM decreased its revenue growth outlook to between 5% and 5.75%, down from an earlier 6% to 7% estimate.
