By the numbers: WM Q2
Net income: $785M
Up 8.1% year over year
Operating adjusted EBITDA: $2.03B
Up 5.5% year over year, adjusted margin of 30.4%
Core price: 5.7%
- Financial picture: During WM’s Q2 earnings call on Wednesday, CEO Jim Fish noted revenue growth driven mainly by increased volumes from its recycling and renewable energy businesses, along with higher energy surcharges. “WM's advantage is how all these businesses work together. Our network allows us to operate more efficiently, deliver better customer outcomes, and invest in attractive growth opportunities from a position of strength,” he said.
- Residential volume: Volumes were “softer than we anticipated,” said President John Morris. Residential volumes were down 2.9%, partly due to ongoing shedding of lower-margin contracts, though that trend is now “moderating,” he said.
- Volume trends: Collection and disposal volumes declined 1.8%, which WM attributes to comparisons with the previous year, when wildfire cleanup activities benefitted volumes. When excluding wildfire volumes from comparisons, collection and disposal volume declined 0.4% and landfill volumes grew 1.7% in the quarter. Special waste volumes increased 4.5%, excluding wildfire activity.
- Healthcare Solutions: The segment saw a “strong” quarter after a few quarters of hurdles with Stericycle’s integration, Fish said. “I think we can finally say the business is integrated, and [it] maybe took a bit longer than we initially thought when we bought it,” he said. Cross-selling initiatives have generated $32 million of annual operating earnings before interest, taxes, depreciation and amoitization to date. WM is still on track to reach $300 million in synergies by the end of 2027.
- M&A: Fish said WM completed $235 million of solid waste tuck-in acquisitions during the quarter, all meant to strengthen route density and expand its customer base, he said. Recent acquisitions included residential assets of HBS Trash Services in Colorado in June, and WM closed its acquisition of California-based Waste Resources in May. Fish said there’s an “attractive pipeline” of possible deals on the horizon.
- Recycling facilities: WM opened a new recycling facility in Denver that added about 60,000 tons of annual processing capacity. Fish said WM’s overall recycling automation projects have resulted in a 30% improvement in labor cost per ton compared to its “legacy facilities.” In Q2, WM processed 12% more recyclables year over year. WM has now completed 38 out of the 39 planned recycling facility projects it started a few years ago, said COO Tara Hemmer. The last one is scheduled to come online in 2027.
- Recycled commodity values: Blended average price for recycled commodities in Q2 was about $75 per ton compared to about $84 per ton in the prior year period. WM’s initial full-year outlook for that blended price was about $70 a ton. Hemmer attributed the slightly higher $75 basket in part to better OCC prices, and a “little bit” of positive movement on plastics prices. Higher commodity prices are likely to be offset by operating issues related to a fire at an Arizona MRF.
- RNG work: WM completed three new renewable natural gas facilities, two in South Carolina and one in Florida that together added about 3.5 million MMBtu of expected annual run-rate production, WM said. Fish expects those facilities to start generating gas by the end of the year and noted they were waiting for a third party to finish gas line work.
- AI-powered fleet capabilities: Morris highlighted how recent artificial intelligence capabilities have helped margin growth, specifically its Smart Truck platform, which generated more than $300 million of annual run-rate EBITDA through “service upgrades, optimized routing and lower operating costs.” WM is still in the “early innings of capturing the full value of capabilities by combining AI, automation and operational data at scale,” he added. Future projects could still include looking into autonomous long-haul vehicles and remote-operated heavy equipment, but Morris did not say when WM might pursue those plans.
- Landfill space in Florida: WM recently purchased about 146 acres of land in Medley, Florida, near its existing landfill, a move Hemmer said is “extending our competitive advantage in that market.” Morris added that the existing Medley Landfill has “a decent amount of airspace left” and it would be “years” before WM considered moving over to the new site. “It gives us the latitude to to go about doing what we have to do between now and then and get that site ready well in advance.”
