Covanta Holding Corporation, Morristown, New Jersey, released its first quarter earnings May 7.
The company reported Q1 revenue of $468 million, which was up from $453 million in Q1 2019. Adjusted EBITDA was $97 million for the quarter, up from $84 million in Q1 2019. Net cash provided by operating activities was $61 million, up from $37 million in the same period the previous year. Free cash flow was $19 million for the quarter, up from $6 million in Q1 2019. Finally, the company noted its tip fee prices were up 5 percent on a same-store basis and profiled waste revenue was up 18 percent in the quarter.
“Our first quarter performance was strong, in particular demonstrating the secular tailwind for waste pricing in our markets," Covanta President and CEO Stephen Jones says. "Towards the end of the quarter, we began to see the effects of the COVID-19 pandemic, and we took decisive steps to protect our employees, keep our facilities operating safely and reliably for our client communities and offset potential financial impacts. Covanta is well-positioned to navigate this storm, and as we look beyond, we have confidence in the long-term growth drivers of the business."
Earnings call highlights
Covanta held its Q1 earnings call May 8. During the call, Jones discussed the company’s financial performance amid the COVID-19 pandemic and its goals for future growth.
Jones on the Covanta’s environmental services division:
“Our Covanta Environmental Solutions (CES) platform was a large contributor in the first quarter, as we saw significant revenue growth in profile waste at our waste-to-energy plant, which was up 18 percent and at our material processing facilities, where revenue grew 7 percent. We revamped the CES sales and customer care team and systems in 2019. And these efforts clearly bore fruit in the first quarter.”
Jones on the impact COVID-19 had on their business in Q1:
“We reacted decisively to mitigate the impact of the COVID-19 pandemic on our employees, facilities, customers and [finances]. As a result, our business continues to operate well in this challenging environment. At its core, Covanta operates critical infrastructure, providing essential services for our host communities and we've continued to do so with minimal operational disruptions.”
Jones on volume fluctuations:
“The majority of our waste and service revenue was stable and largely unaffected by the pandemic. This includes our long-term service fee contracts with municipalities, where we are relatively agnostic to waste volumes, and our tip fee revenues that are generated from processing residential waste, which has remained strong. We are seeing pressure on commercial MSW and profile waste volumes, which is largely generated from industrial and manufacturing sources, given the widespread stay-at-home mandates in our core regions. However, given the location of our assets, our logistics and transfer station capabilities, and the talent of our waste procurement team, we've been successful in backfilling any shortfall volumes to ensure consistent operations.”
Jones on how the company is poised for growth:
“Our initiatives to grow the business are unchanged and we remain focused on these opportunities. Waste-to-energy investments take patience and perseverance, but as we saw [with our recent Dublin facility], they pay off handsomely. In the UK, we remain focused on growth with three facilities in construction and multiple others in development. New development activities in the U.S. are at an earlier stage, but as I've mentioned before, we're seeing more activity. For example, as you may have recently seen in the press, we are in negotiations with our client in Pasco County, Florida, to support the potential expansion of their waste-to-energy plant. This will take time to play out, but it's a positive sign on the potential for domestic growth and of our strong position in the market.