Waste and recycling companies began feeling the coronavirus pandemic's financial effects in mid-March, only slightly affecting first quarter earnings, but have seen much more notable effects ever since. Second quarter reports showed the worst economic toll of the pandemic's first wave have largely passed. Third quarter results showed multiple signs of ongoing improvement on a regional basis, along with new operational efficiencies companies expect may continue, while also serving as a reminder the broader economic recovery is far from over.

Catch up on the latest results and perspectives from Waste Management, Republic Services, Waste Connections, GFL Environmental, Covanta and Casella Waste Systems. Advanced Disposal Services did not release third quarter results due to the recent completion of its sale to Waste Management.

Waste Management

Q3 Earnings

• Waste Management’s third quarter revenue came in better than anticipated, as pandemic-affected volumes sequentially returned, though the pace of future recovery is uncertain. Executives touted the diversity of their customer base, and a hesitance by governments to do widespread shutdowns again, as potential signs for reassurance.
• An estimated 70% of commercial volumes affected by service suspensions or decreases have now come back, with landfill volumes down 4% as of September. Residential volumes remain above average by single-digit percentages. Permanent cost savings in multiple areas of the businesses are also expected.
• The company said upcoming investments as part of its ESG strategy will be part of normal capital budgets, with an ongoing preference for compressed natural gas vehicles versus electric. Asked about potential effects of a Biden win, CEO Jim Fish said “...regulation is actually in a strange way a good thing for [Waste Management] because we hold ourselves to a very high regulatory standard ...and so any additional regulation actually tends to work in our favor.”
• Future Outlook: Waste Management remains optimistic about the potential to get more than $100 million of synergies from integrating Advanced Disposal Services, despite pandemic effects and higher-than-anticipated divestitures. More detailed financial information about the combined companies will be released with fourth quarter earnings.

Republic Services

Q3 Earnings

• The company took an optimistic tone on the pace of pandemic recovery, with CEO Don Slager saying the results “clearly demonstrate the strength and resiliency of our business.” Annual adjusted free cash flow guidance was raised as a result.
• Overall volumes were down 3.4% in the third quarter, with small container rates down 4.8% and large container rates down 5.4%. Landfill volumes were down 3.1.%. Residential weights remained up by around 10%.
• President Jon Vander Ark said the company would remain “relentless” in its efforts to rework municipal contracts to reflect these higher weights, as part of a years-long push for new pricing indexes and different terms for recycling. He also outlined productivity gains in other areas expected to continue beyond the pandemic.
• Future Outlook: Due to the pending Santek Waste Services and Randy’s Environmental Services deals, Republic raised its annual projected acquisition spend to $850 million to $900 million. Slager also expressed confidence in the potential for further signs of economic recovery heading into next year following the election and other events.

Waste Connections

Q3 Earnings

• Waste Connections exceeded revised revenue expectations for the third quarter, with sequential improvements across each line of business. Solid waste volumes were down 5.7%, with some signs of recovery as 68% of the commercial customers that suspended or reduced service returned in some form.
• The company also launched a new ESG initiative, with $500 million of dedicated capital spending over a period of 15 years, focusing on areas such as landfill gas recovery and alternative fuel vehicles. CEO Worthing Jackman noted if presidential administrations change then “the value of that line of business should go up dramatically.”
• Year-to-date, Waste Connections reported acquiring 16 companies in North America worth an estimated $135 million in annual revenue. Additional deals are expected, driven in part by seller concerns about future tax changes as well as pandemic exhaustion. Jackman projected steady activity will continue regardless of the election outcome.
• Future Outlook: The company projects fourth quarter revenue of $1.335 billion, with expectations to hit a revised annual free cash flow target of $805-835 million. Jackman said the recovery appeared to have largely plateaued, outside of areas that reopened later, and upcoming effects of the coronavirus on operations or customers was uncertain heading into the winter.

GFL Environmental

All financial information in Canadian dollars

Q3 Earnings

• GFL continued its streak of ongoing revenue growth, with positive free cash flow generation, during a quarter that saw some incremental recovery of pandemic-related volume losses. While new restrictions in certain Canadian provinces where it operates could be a new factor, the company did not expect full shutdowns again.
• Overall solid waste volumes were down 1.7% for the quarter, with a 3.6% decline in collection volumes. Bigger impacts for commercial and industrial volumes were offset by heightened residential volumes. "Post-collection" volumes were up 8.5% due to higher MRF volumes, but down 6.9% when excluding recycling activity.
• Following the closure of deals to acquire WCA Waste and a divestiture package from the Waste Management/Advanced Disposal transaction, CEO Patrick Dovigi addressed a short-seller’s efforts to derail those transactions. In an extended rebuke he said the report had not been successful in its goal, and the company’s growth trajectory would continue.
• Future Outlook: As integration of those assets continues, GFL plans to focus on smaller tuck-in deals that complement its newly expanded footprint, with a focus on the Midwest and Florida. The company does not anticipate any other substantial acquisitions in the near future.

Covanta

Q3 Earnings

• Future Outlook: Ahead of earnings, Covanta reported a senior leadership shakeup and wholesale strategic review that could include selling assets or other major moves. During the call, new CEO Michael Ranger said “there are no preset expectations for this review and it has no scheduled end date.” The company is not reinstating future guidance.
• Covanta reported ongoing recovery of commercial and industrial volumes, with multiple markets returning to pre-pandemic levels and pricing up 3% year-over-year. Price growth contributed $5 million in revenue, while lower volumes led to a $1 million headwind.
• Energy revenue was down year-over-year, with some signs that spot energy prices are seeing “modest improvement.” Environmental services revenue was down 2% year-over-year, but profitability was up. The company reported spending $11 million on its new Total Ash Processing system year-to-date.
• Multiple signs of progress were reported in the UK. The Rookery facility is expected to be operational in 2022 and Newhurst is set for 2023. Construction on Earls Gate was delayed due to the pandemic, but has been resumed. Financial close for Protos is targeted by year-end, and more projects could be announced in the future.

Casella Waste Systems

Q3 Earnings

• Casella reported steady recovery from pandemic effects, due in part to its more limited exposure to urban markets, as economic and construction activity incrementally returns. Third quarter volumes were off by 8.4%, but that improved to 4.8% as of September. Landfill volumes were down 9% year-over-year, but landfill revenue was only off by 3%.
• CFO Ned Coletta estimated 65% of the commercial and industrial collection revenue affected by suspensions had returned, with another 10% expected to come back as seasonal winter businesses start up. Recovery for the remaining customers remains uncertain and the company has a conservative outlook on fourth quarter activity.
• Casella has acquired nine companies worth $21 million in annual revenue so far this year, including one that will further expand opportunities in upstate New York. CEO John Casella said the market had become somewhat more competitive with Wheelabrator’s new focus on collection, but expressed confidence in the ability to compete on more deals.
• Other News: The company reported recycling revenue of $12.76 million, up 18.9% year-over-year due to higher commodity values, and ongoing interest in resource solution services. Capital expenditures also ramped back up, with more trucks being purchased this year than planned. Frontline employees recently received $1.8 million worth of bonuses to maintain morale.
• Future Outlook: Casella reinstated annual adjusted free cash flow targets to pre-pandemic levels, citing better than expected results, and is now aiming for $60-65 million. The company raised annual revenue guidance to $760-775 million, among other targets.