Waste Management, Inc.

Good day, ladies and gentlemen, and welcome to the Waste Management First Quarter 2019 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star, then zero on your touchtone telephone. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Ed Eggle, Senior Director of Investor Relations. Sir, you may begin.

Thank you, Lauren. Good morning, everyone, and thank you for joining us for our first quarter 2019 earnings conference call. With me this morning are Jim Fish, President and Chief Executive Officer, John Morris, Executive Vice President and Chief Operating Officer, and Davina Rankin, Senior Vice President and Chief Financial Officer. You will hear prepared comments from each of them today. Jim Fish will cover high-level financials and provide a strategic update. John Morris will cover an operating overview, and Davina will cover the details of the financials. Before we get started, please note that we have filed a Form 8-K this morning that includes the earnings press release and is available on our website at www.wm.com. The Form 8-K, the press release, and the schedules for the press release include important information. During the call, you will hear forward-looking statements which are based on current expectations, projections, or opinions about future periods. Such statements are subject to risks and uncertainties that could cause actual results to differ materially. Some of these risks and uncertainties are discussed in today's press release and in our files with the SEC, including our most recent form, 10-K. Jim and John will discuss our results in the areas of yield and volume, which, unless otherwise stated, are more specifically references to internal revenue growth or IRG from yield or volume. All first quarter volume results discussed are on a workday-adjusted basis. During a call, Jim and Davina will discuss our earnings per diluted share, which they may refer to as EPS or earnings per share. and it will also address operating EBITDA, which is income from operations before depreciation and amortization, and operating EBITDA margin. Jim, John, and Davina will also be discussing the planned acquisition of Advanced Disposal Services Incorporated, which they may refer to as ADVANCED or ADS. Any comparisons, unless otherwise stated, will be with the first quarter of 2018. Net income, effective tax rate, and EPS for the first quarter of 2019 have been adjusted, and projected 2019 results are anticipated to be adjusted to enhance comparability by excluding certain items that management believes do not reflect our fundamental business performance or results of operations. These adjusted measures, in addition to free cash flow, are non-GAAP measures. Please refer to the earnings press release and tables, which can be found on the company's website at www.wm.com for reconciliations to the most comparable GAAP measures and additional information about our use of non-GAAP measures and non-GAAP projections. This call is being recorded and will be available 24 hours a day beginning approximately 1 p.m. Eastern time today until 5 p.m. Eastern time on May 9th. To hear a replay of the call over the internet, access the Waste Management website at www.wm.com. To hear a telephonic replay of the call, dial 855-859-2056 and enter reservation code 4295916. Time sensitive information provided during today's call, which is occurring on April 25th, 2019, may no longer be accurate at the time of a replay. Any redistribution, retransmission, or rebroadcast of this call in any form without the express written consent of Waste Management is prohibited. Now, I'll turn the call over to Waste Manager's President and CEO, Jim Fish.

Thanks, Ed, and thank you all for joining us this morning. We're excited to share two good news stories this morning. Our excellent first quarter results that demonstrate continued strength in our business, as well as the agreement to agreement we announced last week to acquire advanced disposal services. The year is off to a great start with organic revenue growth of more than 6% in our collection and disposal business, translating into about a 7% increase in operating EBITDA in that business. But before diving further into the quarterly results, let me spend some time discussing the compelling strategic and financial benefits we expect from the acquisition of ADS early next year. On April 15th, we announced a definitive agreement to acquire all outstanding shares of ADS for $33.15 per share. The acquisition advances our growth strategy and aligns with our financial goals, including growth in earnings per share, margins, and free cash flow. It will bring to Waste Management a high-quality, complimentary asset network and customer base in both new and existing areas across the eastern half of the United States. We are joining two teams of dedicated employees who are passionate about helping to manage the environmental needs of customers and communities with outstanding service and a commitment to safety. We expect to achieve more than $100 million in annual cost and capital expenditure synergies. We anticipate closing by the first quarter of 2020, subject to the satisfaction of customary closing conditions, including regulatory approvals. We're enthusiastic about this catalyst for long-term value creation for our shareholders in 2020 and beyond. We believe we can leverage benefits of the investments we're making in technology and people to achieve enhanced efficiency across the ADS network in the coming years. ADS has talented and dedicated employees and we look forward to capitalizing on the strengths of both organizations. Moving on to our strong company performance, We remain keenly focused on the execution of our 2019 plan and delivering the strong results we expect for this year. In the first quarter, operating EBITDA was $987 million. We continue to believe that this is the best measure of the health and performance of the business and are pleased with this solid result. The growth in operating EBITDA is underpinned by impressive organic growth with core price of 5.8% Yield of 2.7% and volume of 4.1% in the collection and disposal business. Our operating EBITDA growth translated into excellent free cash flow of $431 million, demonstrating the strength of the cash generating ability of the business. To enhance our performance, we're investing in the same areas that helped make us successful in 2018. Our people, technology, asset network, and the customer. As we've mentioned in the past, we're opening our second state-of-the-art driver and technician training center, extending our commitment to providing centralized training for our drivers and technicians across the organization. Participating in this training not only helps improve retention, it helps make our employees safer. In the first quarter, we saw a meaningful reduction in safety incidents of drivers with less than a year of experience. Focusing on our onboarding process, for new drivers is clearly paying off. We also made strides with respect to technology as we launched a new online buying experience for U.S. commercial and industrial customers. This followed the rollout of a similar online tool for open market residential customers last fall. Engaging with our customers in their channel of choice helps to differentiate our customer experiences and is driving measurable volume increases. In closing, our base business is delivering strong, reliable growth that puts us on track for another banner year, and we're very excited about the new platform for growth with the acquisition of ADS by early next year and the recent addition of PetroWaste in the Permian Basin. With that, I'll turn the call over to John to discuss our operational results for the quarter as well as initial integration planning for the ADS acquisition.