WM Announces Fourth Quarter and Full-Year 2022 Earnings

Full-Year Results Delivered Double-Digit Growth in Income from Operations, Net Income, and Diluted Earnings Per Share

Waste Management, Inc. (NYSE: WM) today announced financial results for the quarter and year ended December 31, 2022.

“In 2022 WM delivered another year of strong financial growth, particularly in our collection and disposal business,” said Jim Fish, WM’s President and Chief Executive Officer. “The collection and disposal business exceeded expectations and overcame high inflation and a tight labor market to deliver double-digit adjusted operating EBITDA growth in both the fourth quarter and for the full year. This translated into total Company adjusted operating EBITDA growth of 8.8% in the fourth quarter and more than 9.5% growth for the full-year.^(a) Throughout the year, we also advanced our strategic priorities—enhancing employee engagement, improving our operations through the use of technology, and investing in sustainability leadership and growth."

Fish continued, “We expect 2023 performance to be driven by another strong year in our collection and disposal business that builds upon our outstanding 2022 results. This robust performance is expected to generate total Company adjusted operating EBITDA growth of 7% at the midpoint of our guidance, which is at the upper end of our long-term operating EBITDA growth expectations.^(a) At the same time, we continue to invest in automation technology to further differentiate WM’s service offerings and drive future performance, and we continue to make large investments to grow our sustainability businesses. Today, we published additional information about our multi-year plan for significant investments in our renewable energy and recycling businesses in a supplemental presentation on our website including announcing that we will be hosting a virtual information session for investors on April 5 to provide more insight into these growth plans.”^(d)

KEY HIGHLIGHTS FOR THE FOURTH QUARTER AND THE FULL YEAR 2022

Revenue

• Core price for the fourth quarter of 2022 was 8.1% compared to 5.1% in the fourth quarter of 2021. For the full year, core price was 7.8% in 2022 compared to 4.8% in 2021.^(e)
• Collection and disposal yield was 7.7% in the fourth quarter of 2022 compared to 3.7% in the fourth quarter of 2021. For the full year, collection and disposal yield was 6.7% in 2022 compared to 3.5% in 2021.
• Total Company volumes decreased 0.7% in the fourth quarter of 2022, or a decline of 0.4% on a workday adjusted basis, compared to an increase of 2.8% in the fourth quarter of 2021, or 2.3% on a workday adjusted basis. For the full year, total Company volumes increased 1.3% in 2022 compared to 2.8% in 2021. There were negligible workday differences for the full year.
• Collection and disposal volumes decreased 0.5% in the fourth quarter of 2022, or a decline of 0.3% on a workday adjusted basis, compared to an increase of 3.2% in the fourth quarter of 2021, or 2.8% on a workday adjusted basis. For the full year, collection and disposal volumes increased 1.8% in 2022 compared to 3.0% in 2021. There were negligible workday differences for the full year.

Cost Management

• Operating expenses as a percentage of revenue were 62.7% in the fourth quarter of 2022 compared to 63.2%, or 63.0% on an adjusted basis, in the fourth quarter of 2021. The improvement in this measure was driven by the collection and disposal business where pricing and operating efficiencies worked to overcome inflationary cost pressures. An estimated 100 basis point improvement from collection and disposal operations was partially offset by a 40 basis point impact from higher fuel prices and a 30 basis point impact from our recycling business. For the full year, operating expenses as a percentage of revenue were 62.4% in 2022 compared to 62.0%, or 61.9% on an adjusted basis, in 2021.^(a)
• SG&A expenses were 9.9% of revenue, or 9.8% on adjusted basis, in the fourth quarter of 2022 compared to 10.5%, or 10.3% on an adjusted basis, in the fourth quarter of 2021.^(a) For the full year, SG&A expenses were 9.8% of revenue, or 9.6% on an adjusted basis, in 2022 compared to 10.4%, or 10.0% on an adjusted basis, in 2021.^(a)

Profitability

• Total Company adjusted operating EBITDA was $1.36 billion, or 27.5% of revenue, for the fourth quarter of 2022, compared to $1.25 billion, or 26.7% of revenue for the fourth quarter of 2021. For the full year 2022, operating EBITDA was $5.51 billion, or 28.0% of revenue, compared to $5.03 billion, or 28.1% of revenue for the full year 2021.
• Operating EBITDA in the Company’s collection and disposal business, adjusted on the same basis as total Company operating EBITDA, was $1.55 billion, or 31.2% of revenue, for the fourth quarter of 2022, compared to $1.39 billion, or 30.8% of revenue, for the fourth quarter of 2021. For the full year 2022, operating EBITDA in the Company’s collection and disposal business, adjusted on the same basis as total Company operating EBITDA, was $6.07 billion, or 31.4% of revenue, compared to $5.52 billion, or 31.6% of revenue for the full year 2021.
• In the fourth quarter of 2022, operating EBITDA in WM’s recycling business decreased by $51 million compared to the fourth quarter of 2021. For the full year, operating EBITDA in the Company’s recycling business decreased by $59 million compared to 2021. The decline in both periods was primarily driven by a sharp decline in market prices for recycled commodities in the fourth quarter and persistent inflationary pressures on operating costs, particularly for labor at non-automated facilities, throughout the year.
• In the fourth quarter of 2022, operating EBITDA in the Company’s renewable energy business declined $5 million compared to the fourth quarter of 2021. For the full year, operating EBITDA in the Company’s renewable energy line of business increased by $19 million compared to 2021 driven by improved pricing for electricity and renewable natural gas.

Free Cash Flow & Capital Allocation

• During the fourth quarter of 2022, $705 million was returned to shareholders, including $439 million of share repurchases and $266 million of cash dividends. For the full year 2022, $2.58 billion was returned to shareholders, including $1.5 billion of share repurchases and $1.08 billion of cash dividends.

2023 OUTLOOK

Revenue Growth & Profitability

• Total Company revenue is expected to grow between 4% and 5.5%, which includes organic revenue growth from the collection and disposal business, excluding fuel, of approximately 5.5%. The Company’s disciplined pricing programs are expected to result in core price of between 6.5% and 7.0% and collection and disposal yield approaching 5.5%. Collection and disposal volume is expected to be flat to 2022.
• Total company adjusted operating EBITDA is expected to be in the range of $5.825 to $5.975 billion for the full year, compared to $5.512 billion in 2022, which is an increase of about $390 million at the midpoint of the range.^(a)
• Adjusted operating EBITDA in the Company’s recycling business is expected to decline approximately $40 to $50 million when compared to the full year 2022. An expected decline in recycled commodity prices is the primary driver of the decrease in operating EBITDA.^(a)(f)
• Adjusted operating EBITDA in the Company’s renewable energy business is expected to decline approximately $30 to $50 million when compared to the full year 2022. An expected decline in market prices for electricity and renewable fuel standard credits are the primary drivers of the decrease in operating EBITDA.^(a)(f)

Free Cash Flow & Capital Allocation

• WM expects to spend in the range of $2.0 to $2.1 billion on capital expenditures to support its normal business activities.
• As outlined in today’s supplemental presentation, WM intends to invest approximately $980 million for capital expenditures on high-return growth projects in its recycling and renewable energy businesses. Additionally, the Company expects to invest about $125 million of capital expenditures to develop infrastructure to grow its plastic film recycling business.
• Free cash flow before these targeted sustainability and automation focused capital investments is projected to be between $2.6 and $2.7 billion. Free cash flow is projected to be between $1.5 and $1.6 billion including the sustainability growth investments.^(a)
• The Board of Directors has indicated its intention to increase the annual dividend by $0.20 per share to $2.80, increasing estimated annual dividends paid to shareholders to $1.1 billion. This will be the 20^th consecutive year of increases in the Company’s per share dividend. The Board of Directors must separately approve and declare each dividend.
• In December 2022, the Board of Directors refreshed the Company’s share repurchase authorization, providing for the repurchase of up to $1.5 billion of the Company’s common stock, signaling confidence in the Company’s cash flow outlook and financial position.

“Our 2022 results established a strong foundation for continued growth in 2023. We expect operational efficiencies and management of discretionary costs, combined with our revenue growth, to deliver 40-80 basis points of adjusted operating EBITDA margin expansion in 2023,” Fish continued.^(a) “Our operating EBITDA growth is again expected to generate significant cash from operations, positioning us to step up our level of investment in sustainability growth opportunities while continuing to return cash to our shareholders through our recently announced 7.7% increase in the planned dividend rate for the year ahead and refreshed share repurchase authorization.”

The Company will host a conference call at 10 a.m. ET on February 1, 2023 to discuss the fourth quarter and full-year 2022 results. Information contained within this press release will be referenced and should be considered in conjunction with the call.

Listeners can access a live audio webcast of the conference call by visiting investors.wm.com and selecting “Events & Presentations” from the website menu. A replay of the audio webcast will be available at the same location following the conclusion of the call.

Conference call participants must register to obtain their dial in and passcode details. This new, streamlined process improves security and eliminates wait times when joining the call.

ABOUT WM

WM (WM.com) is North America's largest comprehensive waste management environmental solutions provider. Previously known as Waste Management and based in Houston, Texas, WM is driven by commitments to put people first and achieve success with integrity. The company, through its subsidiaries, provides collection, recycling and disposal services to millions of residential, commercial, industrial and municipal customers throughout the U.S. and Canada. With innovative infrastructure and capabilities in recycling, organics and renewable energy, WM provides environmental solutions to and collaborates with its customers in helping them achieve their sustainability goals. WM has the largest disposal network and collection fleet in North America, is the largest recycler of post-consumer materials and is the leader in beneficial reuse of landfill gas, with a growing network of renewable natural gas plants and the most gas-to-electricity plants in North America. WM's fleet includes nearly 11,000 natural gas trucks – the largest heavy-duty natural gas truck fleet of its kind in North America – where more than half are fueled by renewable natural gas. To learn more about WM and the company's sustainability progress and solutions, visit Sustainability.WM.com.

FORWARD-LOOKING STATEMENTS

The Company, from time to time, provides estimates of financial and other data, comments on expectations relating to future periods and makes statements of opinion, view or belief about current and future events. This press release contains a number of such forward-looking statements, including but not limited to, all statements under the heading “2023 Outlook”, as well as all statements regarding future performance or financial results of our business; execution of strategic priorities; future capital expenditures, investments and results and returns from such expenditures and investments; future cost structure, cost management and operational efficiencies; results from pricing programs; future market conditions and prices; future dividends and share repurchases; future cash generation; and future sustainability growth opportunities and efforts. You should view these statements with caution. They are based on the facts and circumstances known to the Company as of the date the statements are made. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those set forth in such forward-looking statements, including but not limited to failure to implement our optimization, automation, growth, and cost savings initiatives and overall business strategy; failure to obtain the results anticipated from strategic initiatives, investments, acquisitions or new lines of business; failure to identify acquisition targets, consummate and integrate acquisitions; environmental and other regulations, including developments related to emerging contaminants, gas emissions, renewable energy and ESG performance and disclosure; significant environmental, safety or other incidents resulting in liabilities or brand damage; failure to obtain and maintain necessary permits due to land scarcity, public opposition or otherwise; diminishing landfill capacity, resulting in increased costs and the need for disposal alternatives; failure to attract, hire and retain key team members and a high quality workforce; increases in labor costs due to union organizing activities or changes in wage and labor related regulations; disruption and costs resulting from extreme weather and destructive climate events; failure to achieve our sustainability goals or execute on our sustainability-related strategy and initiatives; public health risk, increased costs and disruption due to a COVID-19 resurgence or similar pandemic conditions; macroeconomic conditions, geopolitical conflict and market disruption resulting in labor, supply chain and transportation constraints, inflationary cost pressures and fluctuations in commodity prices, fuel and other energy costs; increased competition; pricing actions; impacts from international trade restrictions; competitive disposal alternatives, diversion of waste from landfills and declining waste volumes; weakness in general economic conditions and capital markets, including potential for an economic recession; adoption of new tax legislation; fuel shortages; failure to develop and protect new technology; failure of technology to perform as expected; failure to prevent, detect and address cybersecurity incidents or comply with privacy regulations; negative outcomes of litigation or governmental proceedings; and decisions or developments that result in impairment charges. Please also see the Company’s filings with the SEC, including Part I, Item 1A of the Company’s most recently filed Annual Report on Form 10-K and subsequent Form 10-Qs, for additional information regarding these and other risks and uncertainties applicable to its business. The Company assumes no obligation to update any forward-looking statement, including financial estimates and forecasts, whether as a result of future events, circumstances or developments or otherwise.

NON-GAAP FINANCIAL MEASURES

To supplement its financial information, the Company has presented, and/or may discuss on the conference call, adjusted earnings per diluted share, adjusted net income, adjusted income from operations, adjusted operating EBITDA, adjusted operating EBITDA margin, adjusted operating expenses, adjusted SG&A expenses, and free cash flow, as well as projections of adjusted operating EBITDA and free cash flow for 2023. All of these items are non-GAAP financial measures, as defined in Regulation G of the Securities Exchange Act of 1934, as amended. The Company reports its financial results in compliance with GAAP but believes that also discussing non-GAAP measures provides investors with (i) financial measures the Company uses in the management of its business and (ii) additional, meaningful comparisons of current results to prior periods’ results by excluding items that the Company does not believe reflect its fundamental business performance and are not representative or indicative of its results of operations.

In addition, the Company’s projected future operating EBITDA is anticipated to exclude the effects of other events or circumstances that are not representative or indicative of the Company’s results of operations. Such excluded items are not currently determinable, but may be significant, such as asset impairments and one-time items, charges, gains or losses from divestitures or litigation, and other items. Due to the uncertainty of the likelihood, amount and timing of any such items, the Company does not have information available to provide a quantitative reconciliation of such projection to the comparable GAAP measure.

The Company discusses free cash flow and provides a projection of free cash flow because the Company believes that it is indicative of its ability to pay its quarterly dividends, repurchase common stock, fund acquisitions and other investments and, in the absence of refinancings, to repay its debt obligations. Free cash flow is not intended to replace “Net cash provided by operating activities,” which is the most comparable GAAP measure. The Company believes free cash flow gives investors useful insight into how the Company views its liquidity, but the use of free cash flow as a liquidity measure has material limitations because it excludes certain expenditures that are required or that the Company has committed to, such as declared dividend payments and debt service requirements. The Company defines free cash flow as net cash provided by operating activities, less capital expenditures, plus proceeds from divestitures of businesses and other assets (net of cash divested); this definition may not be comparable to similarly-titled measures reported by other companies.

The quantitative reconciliations of non-GAAP measures to the most comparable GAAP measures are included in the accompanying schedules, with the exception of projected adjusted operating EBITDA. Non-GAAP measures should not be considered a substitute for financial measures presented in accordance with GAAP.

Internal Revenue Growth