AVALON HOLDINGS CORP

Waste Management Services Segment

The net operating revenues of the waste management services segment decreased to $44.6 million in 2023 compared with $49.8 million in 2022. The waste management services segment includes waste disposal brokerage and management services, captive landfill management operations and salt water injection well operations.

The net operating revenues of the waste disposal brokerage and management services business were approximately $41.6 million in 2023 compared to $47.2 million in 2022. Event work net operating revenues related to multiple projects decreased by approximately $6.3 million during 2023 when compared to 2022. Event work is defined as bid projects under contract that occurs on a one-time basis over a short period of time. Such work can fluctuate significantly from year to year. Event work net operating revenues were approximately 16.2 million in 2023 compared with $22.5 million in 2022. In addition, continuous work of the waste disposal brokerage business increased approximately $0.7 million between years as a result of increased work from multiple customers. Net operating revenues related to continuous work were approximately $25.4 million in 2023 compared with $24.7 million in 2022.

The net operating revenues of the captive landfill management operations were approximately $3.0 million in 2023 compared to $2.6 million in 2022. The net operating revenues of the captive landfill operations are almost entirely dependent upon the volume of waste generated by the owner of the landfill for whom Avalon manages the facility.

Costs of operations related to the waste management services segment decreased to $35.6 million in 2023 compared with $40.4 million in 2022. The decrease in the costs of operations between years for the waste management services segment is primarily due to a decrease in net operating revenues of event work. The overall gross margin percentage of the waste brokerage and management services business was approximately 20% in 2023 compared to 19% in 2022. The higher gross margin percentage during 2023 was attributable to higher gross profit generated from event work during the year.

Income before income taxes for the waste management services segment was approximately $4.0 million in 2023 compared to $4.4 million in 2022. Income before income taxes of the waste brokerage and management services business was approximately $3.7 million in both 2023 compared to $4.3 million in 2022. The decreased income before income taxes is a result of a decrease in event work net operating revenues compared to 2022. Income before income taxes of the captive landfill operations were approximately $0.4 million in 2023 compared to $0.1 million in 2022. The increase in income before income taxes between years was due to higher disposal revenue compared to 2022. For both 2023 and 2022, the salt water injection wells incurred a loss before income taxes of approximately $0.1 million primarily due to legal and professional costs incurred relating to Avalon’s appeal and mandamus processes.