Waste Management, Inc.

Transcription

1 Waste Management, Inc. Raymond James Institutional Investors Conference March 6, 2018

2 Cautionary Statement Certain statements provided in this presentation are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of Forward-looking statements are often identified by the words, will, may, should, continue, anticipate, believe, expect, plan, forecast, project, estimate, intend and words of similar nature, and such statements generally contain projections about accounting and finances; strategy, plans and objectives for the future and outcomes from such strategic plans and objectives; projections, estimates, or assumptions relating to our performance; results of investments in new technologies; implementation of innovation and efficiency projects; predictions or assumptions about future trends or conditions in our industry; or our opinions, views or beliefs about the effects of current or future events, circumstances or performance. You should view these statements with caution. These statements are not guarantees of future performance, circumstances or events. They are based on the facts and circumstances known to us as of the date the statements are made. All phases of our business are subject to uncertainties, risks and other influences, many of which we do not control. Any of these factors, either alone or taken together, could have a material adverse effect on us and could cause actual results to be materially different from those set forth in such forward-looking statement. We assume no obligation to update any forward-looking statement, including financial estimates, whether as a result of future events, circumstances or developments or otherwise. Some of these risks and uncertainties are described in greater detail in Waste Management s Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission. Raymond James Conference

3 Non-GAAP Financial Measures This presentation contains non-gaap financial measures under Regulation G of the Securities Exchange Act of 1934, as amended. The Company believes that these non-gaap financial measures are useful to investors to assess the Company s performance, results of operations and cash available for the Company s capital allocation program. These non-gaap measures are meant to supplement, not replace, comparable GAAP measures, and such non-gaap measures may be different from similarly titled measures used by other companies. A reconciliation of these non-gaap financial measures to their most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles can be found in the Appendix at the end of this presentation and under the Investor Relations tab on our website: Raymond James Conference

4 Waste Management Investment Thesis INDUSTRY LEADERSHIP STRATEGIC FOCUS TO DRIVE FINANCIAL AND BUSINESS PROFILE PROVIDES Largest and most diverse asset and customer base Unmatched return on invested capital Experienced and committed management team and employees A customer-centric culture Pricing discipline Volume growth in our highest return businesses Continuous improvement to reduce costs and expand margins Earnings and free cash flow growth Recession-resilient revenues Strong and consistent free cash flow to fund balanced return of cash to shareholders Strong balance sheet that provides strategic flexibility Raymond James Conference Waste Management 2018

5 WASTE MANAGEMENT IN SUMMARY (As of and for the Year Ended December 31, 2017) Waste Management, Inc. (NYSE: WM), based in Houston, Texas, through its subsidiaries is the leading provider of comprehensive waste management and environmental services in North America We dedicate almost 26K acres to wildlife habitat We create enough energy to power more than 500,000 homes every year We manage over 13 million tons of recyclable commodities OPERATIONS 42.3K Employees ENVIRONMENT 114M Tons of waste managed at landfills LANDFILLS Active solid waste landfills +21M Customers 110 Certified conservation sites Active hazardous waste landfills FINANCIALS $1.5B Capital expenditures $1.5B Returned to shareholders ENERGY 6.5K 107 Vehicles that run on alternative energy $3.2B Cash from operations $14.5B Total revenue Natural gas fueling stations; 25 serve the public FACILITIES Traditional recycling facilities; 44 single stream recycling facilities, 11 construction and demolition recycling facilities Organics processing facilities Landfill gas-toenergy facilities Transfer facilities Raymond James Conference

6 Geographic & Operational Diversification Raymond James Conference

7 Broad and Diverse Customer Base Serve over 21 million customers across the US and Canada 2017 REVENUE MIX 11% 2017 COLLECTION REVENUE MIX 5% Waste Management s largest customer accounts for less than 2% of revenue 9% 8% 19% 53% 28% 27% 40% Long-standing customer relationships with significant contracted business Collection Landfill Transfer Recycling Other Commercial Residential Industrial Other Raymond James Conference

8 Asset and Customer Base Produce Strong Earnings and Cash Flow 2017 REVENUE ($=millions) 2017 ADJUSTED INCOME FROM OPS 1 ($=millions) 2017 NET CASH PROVIDED BY OPERATING ACTIVITIES ($=millions) 16,000 3,000 3,500 14,000 12,000 10,000 8,000 6,000 4,000 2,000-2,500 2,000 1,500 1, ,000 2,500 2,000 1,500 1, WM RSG WCN WM RSG WCN WM RSG WCN 1 In the case of WM, see the appendix at the end of this presentation for the reconciliation of this non-gaap financial measure to the most comparable GAAP measure. Source: Company filings Raymond James Conference

9 WM Generates Industry s Best Return on Invested Capital 1 Returns Driven by Earnings Quality and Disciplined Investment 13.0% 12.0% 11.0% 11.3% 11.8% 12.3% 10.0% 9.0% 8.0% 7.0% 6.0% 7.0% 6.4% 8.0% 6.2% 7.7% 6.9% 5.0% 4.0% In the case of WM, see the appendix at the end of this presentation for the reconciliation of this non-gaap financial measure to the most comparable GAAP measure. Source: Company filings WM RSG WCN Raymond James Conference

10 Strategic Execution Our strategy, or how we compete, leverages our unique resources and assets. Successful execution of our strategic priorities will help us achieve our financial and non-financial goals. What we will deliver Operating: Customer service, culture, diversity Financial: EPS, EBITDA, and FCF growth Our unique resources People Disposal Network Technology Growth Engine How we will compete Focused Differentiation & Continuous Improvement Raymond James Conference

11 Disciplined Revenue Growth Drive sustainable, profitable revenue growth through pricing and competing for and securing attractive volumes We continue to focus on our industry-leading yield programs; however, we also focus on improving volumes through: Attractive volume: Foster favorable competitive dynamics and positive market conduct Supports our price leadership strategy Has accretive margins Improving our sales processes, especially for our SMB customers, to attract the right quality and quantity of new customers Expand core customer reach, stickiness and differentiation through technology and e-commerce solutions Reducing current customer losses through improved processes, service quality and customer experience Raymond James Conference

12 Core Optimization and Cost Controls Improve core operations, customer satisfaction and service reliability thereby minimizing customer defections Achieve operating and SG&A cost reduction goals from continued efficiency focus We have maintained strong focus on costs over the last two to three years, and we need to continue that focus and expand it into other areas of the business through: Continued reduction in collection operating costs from Service Delivery Optimization (SDO) maintenance Application of learnings from SDO deployment to fleet maintenance practices to enhance standardization (MSDO) Improved alignment between field operations and call centers Advancing Service Machine 2.0 to continuously improve our standard for customer service excellence Raymond James Conference

13 Recycling Operations Update China has strengthened its strict quality control standards, reduced the number of import licenses, and lowered the amount of recyclables that can be imported. WM will continue to profitably meet our customers recycling and sustainability goals. Over the last several years we have restructured our recycling contracts by removing floor pricing and adding contamination and processing fees Reduce contamination through customer education programs and improving the quality of recyclables delivered to our facilities Continue to streamline our existing operations while we develop the Recycling Plant of the Future Raymond James Conference

14 Using Technology to Improve Customer Service and to Reduce Costs CUSTOMER SOLUTIONS Enhanced WM.com and mobile applications improve customer interactions and increase ease of doing business with WM Complete customer service channel of choice (self-service, chat, phone etc.) DATA & ANALYTICS Customer interaction analytics to enable predictive customer solutions Enhanced pricing tools reduce churn resulting from pricing program OPERATIONAL TECHNOLOGIES Integration of map, traffic and vehicle data to optimize routes Predictive maintenance and parts purchasing Piloting smart bins and containers Raymond James Conference

15 (US$ in millions) Financial Results Indicative of Strategic Execution $13.0 Revenue ($ Billion) $13.6 $14.5 IRG Yield Volume 1.5% 2.1% 2.0% 1.4% 2.1% Defection Rate 11.1% 11.1% 10.1% 9.1% 9.3% % % $3, % 27.7% $3,707 $4, Operating EBITDA 1 % Margin Execution of pricing, disciplined revenue growth, efficiency and continuous improvement strategies drove financial results that exceeded expectations Operating EBITDA reaches an all-time high Operating EBITDA Margin highest we have seen since the merger in The company defines Operating EBITDA as income from operations before depreciation and amortization, and this measure has been adjusted to exclude certain items. See the appendix at the end of this presentation for reconciliation of this non-gaap financial measure. Raymond James Conference

16 (US$ in millions) Significant Cash Generated by Operations Supports Investment in the Business and Return of Cash to Shareholders $3,500 $3,000 $3,006 $3,180 $2,500 $2,528 $2,000 $1,500 $1,233 $1,339 $1,509 $1,000 $500 $695 $726 $750 $ Dividends Capex Operating Cash Flow Raymond James Conference

17 Committed to Growing Shareholder Returns Board of Directors Approves Increase in Quarterly Dividend for 15th Consecutive Year, up 9.4%* $2.00 $1.86 * $1.80 $1.60 $1.40 $1.20 $1.08 $1.16 $1.26 $1.36 $1.42 $1.46 $1.50 $1.54 $1.64 $1.70 $1.00 $0.80 $0.75 $0.80 $0.88 $0.96 $0.60 $0.40 $0.20 $- $ *The Board of Directors approved a 9.4% increase in the future quarterly dividend rate to $0.465 per share. Each future dividend must be separately declared by the Board of Directors. Raymond James Conference

18 Solid Financial Position Provides Strategic Flexibility Best-in-Class Credit Ratings S&P A- (stable) Moody s Baa2 (positive) Fitch BBB (stable) 3.2x 3.1x 3.0x Net Debt / EBITDA 1 Committed to maintenance of strong investment grade credit ratings 2.9x 2.8x 2.7x 2.7x Access to capital markets Competitive advantage, particularly with municipal and large M&I customers Strategic flexibility 2.6x 2.5x 2.4x 2.5x 2.4x Cornerstones of WM credit rating include strong liquidity, modest leverage, a balanced debt maturity profile, and industry leadership 2.3x 2.2x 2.1x 2.0x Measured based on the covenant as defined in the Company s revolving credit facility filed with the SEC. See appendix for reconciliation of this non-gaap financial measure. Raymond James Conference

19 Impact of the Tax Cuts and Jobs Act The lower tax rate should reduce cash taxes by approximately $275 million. Invest in our employees Invest in growing our business $65 million bonus to approximately 34,000 employees that are not eligible for an annual incentive plan Target improvements in driver and technician turnover Analyze the impact of the bonus program over the long term to evaluate the merits of a retention program beyond 2018 Standardize the fleet across the company to reduce maintenance and operating costs and improve our service offering to our customers Improve our customer s digital experience Utilize our strong balance sheet to continue to invest in accretive acquisitions Raymond James Conference

20 Summary 2017 was arguably the best year ever for Waste Management Highest cash from operations and operating EBITDA Returned $1.5 billion to shareholders ROIC expanded 50 basis points 2018 expected to continue that success Expected 9.4% increase in dividends $1.25 billion share repurchase authorization Strong Balance Sheet for acquisition opportunities Raymond James Conference

21 Appendix Financial Information and Reconciliation of Certain Non-GAAP Measures

22 Financial Highlights Amounts in millions, except margins Revenue $14,485 $13,609 $12,961 Operating costs $9,021 $8,486 $8,231 Operating cost margin 62.3% 62.4% 63.5% SG&A $1,468 $1,410 $1,343 SG&A margin 10.1% 10.4% 10.4% Adjusted income from operations 1 $2,630 $2,406 $2,185 1 The reconciliation of this non-gaap financial measure is provided on slide 24 Raymond James Conference

23 Financial Highlights (Cont.) Amounts in millions Net cash provided by operations $3,180 $3,006 $2,528 Capital expenditures $1,509 $1,339 $1,233 Free cash flow 1 $1,770 $1,710 $1,410 Acquisition and investments $218 $632 $574 Cash dividends $750 $726 $695 Common stock repurchases $750 $725 $600 1 The reconciliation of this non-gaap financial measure is provided on slide 25 Raymond James Conference

24 Reconciliation of Certain Non-GAAP Measures Adjusted Income from Operations Amounts in millions Income from operations (as reported) $2,636 $2,296 $2,045 Adjustments (Income)/expense from divestitures, asset impairments and unusual items, net $(17) $108 $77 Restructuring - $2 $8 Multiemployer pension withdrawal costs $11 - $55 Adjusted income from operations $2,630 $2,406 $2,185 1 The Adjusted income from operations measure included here reflects adjustments for earnings contributions of divested businesses. Refer to the tables to the press release filed with our Form 8-K filed on February 18, 2016 for additional information. Raymond James Conference

25 Reconciliation of Certain Non-GAAP Measures Free Cash Flow Amounts in millions Net cash provided by operations $3,180 $3,006 $2,528 Capital expenditures $(1,509) $(1,339) $(1,233) Proceeds from divestitures of businesses (net of cash divested) and other sale of assets $99 $43 $145 Free cash flow $1,770 $1,710 $1,440 Raymond James Conference

26 Return on Invested Capital Amounts in millions, except margins Adjusted income from operations 1 $2,630 $2,406 $2,185 Less: Adjusted provision for income tax 1 $(803) $(679) $(567) After-tax adjusted income from operations $1,827 $1,727 $1,618 Current portion of long-term debt 2 $594 $497 $208 Long-term debt (less current portion) 2 $8,640 $8,927 $8,824 Noncontrolling interests 2 $22 $22 $22 Stockholders equity 2 $5,575 $5,289 $5,380 Less: Cash 2 $(30) $(51) $(175) Total Invested Capital 2 $14,801 $14,683 $14,259 Return on Invested Capital Margin 12.3% 11.8% 11.3% 1 See remainder of this Appendix for the reconciliation of these non-gaap financial measures to the most comparable GAAP measures. 2 Average of previous four quarters. Raymond James Conference

27 Reconciliation of Certain Non-GAAP Measures Adjusted Tax Expense Amounts in millions Provision for income taxes, as reported $242 $642 $308 Adjustments Impact of Tax Cuts and Jobs Act $ Expense from divestitures, asset impairments and unusual items, net $(6) $37 $27 Loss on early extinguishment of debt $2 - $206 Restructuring - - $3 Tax benefits related to equity-based compensation $ Multiemployer pension withdrawal costs $4 - $23 Adjusted provision for income taxes $803 $679 $567 Raymond James Conference

28 Reconciliation of Certain Non-GAAP Measures Operating EBITDA Amounts in millions, except margins Income from operations $2,636 $2,296 $2,045 Depreciation and amortization $1,376 $1,301 $1,245 Withdrawal from a multiemployer pension plan $11 - $55 Restructuring - - $8 (Income) expense from divestitures, asset impairments and unusual items, net $(17) $110 $77 Adjusted Operating EBITDA $4,006 $3,707 $3,430 Revenue $14,485 $13,609 $12,961 Adjusted Operating EBITDA Margin 27.7% 27.2% 26.5% Raymond James Conference

29 Reconciliation of Certain Non-GAAP Measures Net Debt / EBITDA Amounts in millions Balance sheet debt $9,491 $9,310 $8,981 Adjustments for accounting for fair value hedges and discounts $56 $47 $(10) Guarantees of indebtedness of others $5 $6 $7 Numerator 1 $9,552 $9,363 $8,978 Operating EBITDA 2 $4,006 $3,707 $3,430 Less: Restructuring cost - $4 $15 Less: Net income attributable to noncontrolling interests - $(2) $(1) Other $50 $(10) $(39) Denominator - EBITDA 1 $4,056 $3,695 $3,377 Net Debt / EBITDA 1 2.4x 2.5x 2.7x 1 The Numerator and Denominator used for this calculation are based on defined terms for this covenant within the Company's revolving credit facility. 2 See Slide 28 for a reconciliation of this non-gaap financial measure. Raymond James Conference

30 Waste Management, Inc. Raymond James Institutional Investors Conference March 6, 2018