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July 25, 2018

Waste Management Announces Second Quarter Earnings

The Company Raises Full-Year Earnings Per Diluted Share Outlook and Reaffirms Previous Guidance for Other Metrics

HOUSTON — July 25, 2018 — Waste Management, Inc. (NYSE: WM) today announced financial results for its quarter ended June 30, 2018. Revenues for the second quarter of 2018 were $3.74 billion, compared with $3.68 billion for the same 2017 period. Net income for the quarter was $499 million, or $1.15 per diluted share, compared with $362 million, or $0.81 per diluted share, for the second quarter of 2017.(a) On an as-adjusted basis, excluding certain items, net income was $438 million, or $1.01 per diluted share, in the second quarter of 2018.(b)

The Company’s as-adjusted second quarter 2018 results exclude a $0.07 per diluted share tax benefit related to income tax audit settlements and a net $0.07 per diluted share benefit primarily related to the gain on divestiture of an ancillary business.

Jim Fish, President and Chief Executive Officer of Waste Management, commented, “Our traditional solid waste business continued to perform exceptionally well in the second quarter, underpinning our strong financial results. Given the outstanding performance in our traditional solid waste business and a lower than anticipated tax rate, we are increasing our 2018 adjusted earnings per diluted share guidance to a range of $4.05 to $4.10, from $3.97 to $4.05. We also are reaffirming our adjusted operating EBITDA guidance of $4.20 to $4.25 billion and free cash flow guidance of $1.95 to $2.05 billion.(b)(c)”

KEY HIGHLIGHTS FOR THE SECOND QUARTER 2018

Revenue Growth

• In the second quarter, revenue growth was driven by strong yield and volume growth in the Company’s collection and disposal business, which contributed $135 million of incremental revenue. This was partially offset by a decline in revenue from the Company’s recycling line of business, which fell by $85 million on a year-over-year basis in the second quarter of 2018.
• Core price, which consists of price increases net of rollbacks and fees, excluding the Company’s fuel surcharge, was 5.3%, compared to 4.7% in the second quarter of 2017.(d)
• Internal revenue growth from yield for collection and disposal operations was 2.3% for the second quarter of 2018 versus 1.9% in the second quarter of 2017.
• Traditional solid waste internal revenue growth from volume was 2.3% in the second quarter of 2018. Total Company internal revenue growth from volume, which includes our recycling and other ancillary businesses, was 1.8% in the second quarter.

Recycling

• Average recycling commodity prices at the Company’s facilities were approximately 43% lower in the second quarter of 2018 compared to the prior year period. Results for the Company’s recycling line of business declined by $0.07 per diluted share when compared to the second quarter of 2017. The full-year impact from recycling is now expected to be a negative $0.17 to $0.20 per diluted share.

Cost Management & Profitability

• As a percentage of revenue, total Company operating expenses were 61.9% in the second quarter of 2018 compared to 62.3% in the second quarter of 2017.
• As a percentage of revenue, SG&A expenses were 9.8% in the second quarter of 2018 compared to 9.6% in the second quarter of 2017. Current quarter SG&A costs include $9 million of expense related to litigation accruals, which increased SG&A as a percentage of revenue by 30 basis points and decreased earnings by $0.02 per diluted share.
• Operating EBITDA was $1.10 billion for the second quarter. Adjusted Operating EBITDA was $1.06 billion for the second quarter of 2018, an increase of $32 million, or 3.1%, from the second quarter of 2017.
• Operating EBITDA in the Company’s traditional solid waste business increased 6.9%.

Free Cash Flow & Capital Allocation

• Net cash provided by operating activities was $975 million in the second quarter of 2018, an increase of $162 million, or 19.9%, when compared to the second quarter of 2017.
• Capital expenditures were $436 million in the second quarter of 2018, a $137 million increase from the second quarter of 2017, due to acceleration and disciplined execution of the Company’s fleet strategy as well as investment in the Company’s landfills.
• Free cash flow was $621 million in the second quarter of 2018, an increase of $101 million, or 19.4%, when compared to the second quarter of 2017.
• The Company paid $200 million in dividends to shareholders and spent $300 million to repurchase shares in the second quarter of 2018.
• The Company spent $21 million on acquisitions of traditional solid waste businesses during the second quarter of 2018.

Taxes

• The Company’s effective tax rate for the second quarter of 2018 was approximately 18.1%. Adjusting for items excluded from the Company’s as-adjusted results, the tax rate was 23.2%. Favorable tax planning lowered taxes by $7 million in the second quarter of 2018, providing a $0.02 per diluted share benefit over 2017. The Company now expects its 2018 full-year adjusted tax rate to be approximately 24%.(b)

Fish concluded, “Our solid waste business outperformed even our own high expectations. This gives us confidence to raise our full-year adjusted earnings per diluted share guidance. At the halfway mark for the year, we are also well on our way to meeting or exceeding all of our other operating and financial goals for the year.”

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(a) For purposes of this press release, all references to “Net income” refer to the financial statement line item “Net income attributable to Waste Management, Inc.”

(b) Adjusted earnings per diluted share, adjusted net income, adjusted operating EBITDA, adjusted tax rate, and free cash flow are non-GAAP measures. Please see “Non-GAAP Financial Measures” below and the reconciliations in the accompanying schedules for more information.

(c) Management defines operating EBITDA as GAAP income from operations before depreciation and amortization; this measure may not be comparable to similarly-titled measures reported by other companies.

(d) Core price is a performance metric used by management to evaluate the effectiveness of our pricing strategies; it is not derived from our financial statements and may not be comparable to measures presented by other companies. Core price is based on certain historical assumptions, which may differ from actual results, to allow for comparability between reporting periods and to reveal trends in results over time.

The Company will host a conference call at 10:00 AM (Eastern) today to discuss the second quarter results. Information contained within this press release will be referenced and should be considered in conjunction with the call.

The conference call will be webcast live from the Investor Relations section of Waste Management’s website www.wm.com. To access the conference call by telephone, please dial (877) 710-6139 approximately 10 minutes prior to the scheduled start of the call. If you are calling from outside of the United States or Canada, please dial (706) 643-7398. Please utilize conference ID number 2373399 when prompted by the conference call operator.

A replay of the conference call will be available on the Company’s website www.wm.com and by telephone from approximately 1p.m. (Eastern) today through 5p.m. (Eastern), on Wednesday, Aug. 15, 2018. To access the replay telephonically, please dial (855) 859-2056, or from outside of the United States or Canada dial (404) 537-3406, and use the replay conference ID number 2373399.

ABOUT WASTE MANAGEMENT
Waste Management, based in Houston, Texas, is the leading provider of comprehensive waste management environmental services in North America. Through its subsidiaries, the Company provides collection, transfer, disposal services, and recycling and resource recovery. It is also a leading developer, operator and owner of landfill gas-to-energy facilities in the United States. The Company’s customers include residential, commercial, industrial, and municipal customers throughout North America. To learn more information about Waste Management, visit www.wm.com or www.thinkgreen.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 statements regarding 2018 earnings per diluted share; 2018 free cash flow; 2018 operating EBITDA; 2018 tax rate; future performance of the solid waste business, including operating goals and future performance of the recycling lines of business, including impact to earnings per share. 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, increased competition; pricing actions; failure to implement our optimization, growth, and cost savings initiatives and overall business strategy; failure to identify acquisition targets and negotiate attractive terms; failure to consummate or integrate such acquisitions; failure to obtain the results anticipated from acquisitions; environmental and other regulations; commodity price fluctuations; international trade restrictions; disposal alternatives and waste diversion; declining waste volumes; failure to develop and protect new technology; significant environmental or other incidents resulting in liabilities and brand damage; weakness in economic conditions; failure to obtain and maintain necessary permits; labor disruptions; impairment charges; and negative outcomes of litigation or governmental proceedings. 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, for additional information regarding these and other risks and uncertainties applicable to our 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, in some instances, has presented adjusted earnings per diluted share, adjusted net income, adjusted operating EBITDA, adjusted tax rate and free cash flow, and has also presented projections of adjusted earnings per diluted share, adjusted operating EBITDA, adjusted tax rate and free cash flow; these 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) 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 and (ii) financial measures the Company uses in the management of its business.

The Company’s projected full year 2018 earnings per diluted share, operating EBITDA and tax rate are anticipated to exclude the effects of events or circumstances in 2018 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, or 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 adjusted projected full-year earnings per diluted share, operating EBITDA or tax rate to the comparable GAAP measures.

The Company discusses 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 used herein to the most comparable GAAP measures are included in the accompanying schedules, with the exception of projected earnings per diluted share, operating EBITDA and tax rate. Non-GAAP measures should not be considered a substitute for financial measures presented in accordance with GAAP.

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Source: Waste Management, Inc.

Waste Management
Analysts
Ed Egl, 713.265.1656
eegl@wm.com
or
Media
Tiffiany Moehring, 720.346.5372
tmoehrin@wm.com
www.wm.com