WM, Houston, has released its financial results for the second quarter of 2022, ended June 30. The company reports an increase in earnings before interest, taxes, depreciation and amortization (EBITDA) and a decrease in free cash flow.
According to the report, the core price for the second quarter of 2022 was 7.5 percent compared with 6.2 percent in the second quarter of 2021. Collection and disposal yield was 6.2 percent in the second quarter of 2022 compared with 3.7 percent in the second quarter of 2021.
Total company volumes increased 1.6 percent in the second quarter of 2022, while collection and disposal volumes increased 2.3 percent. Total company and collection and disposal volumes increased 9.2 percent in the second quarter of 2021. This was driven largely by a strong recovery from the pandemic
“In the second quarter, we exceeded expectations as our team delivered outstanding results, building on our first quarter momentum and positioning us to increase our full-year financial outlook,” says Jim Fish, WM president and CEO.
According to the report, operating EBITDA in the company’s collection and disposal business, adjusted on the same basis as a total company operating EBITDA, increased by about $107 million to $1.53 billion for the second quarter of 2022. Operating EBITDA as a percentage of revenue in the company’s collection and disposal business was 31.2 percent for the second quarter of 2022 compared with 32 percent for the second quarter of 2021.
Operating EBITDA in WM's recycling line of business increased by $5 million compared with the second quarter of 2021.
Operating EBITDA in the company’s renewable energy business increased by $14 million compared with the second quarter of 2021, primarily driven by increases in the value of electricity, renewable natural gas and environmental credits.
“Exceptionally strong organic revenue growth, combined with diligent management of our costs, translated into an almost 8 percent increase in adjusted operating EBITDA in the second quarter,” Fish says.
Operating expenses as a percentage of revenue increased 140 basis points to 62.5 percent when compared to the second quarter of 2021. On an adjusted basis, operating expenses as a percentage of revenue increased 130 basis points to 62.4 percent in the second quarter of 2022.
Operating expense margin in the second quarter when compared with the 2021, was 100 basis points higher due to the impacts of higher commodity prices for fuel and recyclables. It was also 30 basis points higher related to alternative fuel tax credits received in the prior year that have not yet been renewed for 2022.
In the second quarter of 2022, net cash provided by operating activities was $1.05 billion compared with $1.04 billion in the second quarter of 2021. Capital expenditures to support the business were $485 million compared with $387 million in the second quarter of 2021. Additionally, capital expenditures for sustainability growth investments were $65 million compared with $9 million in the second quarter of 2021.
Free cash flow was $503 million compared with $649 million in the second quarter of 2021. Free cash flow without sustainability growth investments was $568 million compared with $658 million in the second quarter of 2021. The year-over-year decline in free cash flow was primarily driven by the timing of capital spending.
Fish says the company brought its fifth WM-owned and operated renewable natural gas plant into service in Oklahoma, which is expected to generate about 570,000 metric million Btu of renewable natural gas (RNG). The plant progresses the company toward the 21 million metric million Btu planned increase in RNG generation by 2026. ‘
WM also completed technology and automation upgrades at its materials recovery facility in Houston. Fish says the company plans to bring two more advanced technology recycling facilities online by the end of the year.
Moving forward, WM expects total company revenue growth in 2022 to be about 10 percent, an increase of 400 basis points from the midpoint of prior guidance. Combined internal revenue growth from yield and volume in the collection and disposal business is now expected to approach 8.5 percent. Adjusted operating EBITDA is now expected to be between $5.5 and $5.6 billion in 2022, an increase of $175 million from prior guidance.
Free cash flow is projected to exceed the upper end of the company’s previous guidance range of $2.6 to $2.7 billion, excluding the targeted sustainability growth investments or $2.05 to $2.15 billion, including sustainability growth investments. The company also expects to complete between $300 and $400 million in acquisitions in 2022.