Waste Connections, Inc. Q3 FY2025 earnings call

Key Points

• Superior execution led to better-than-expected Q3 financial results, with adjusted EBITDA margin of 33.8%.
• Continued improvement in operating trends, including a 12th consecutive quarter of lower voluntary turnover and new record low safety incident rates.
• Advancement of market selection strategy through acquisition activity, with approximately $300 million in annualized revenues from closed or pending acquisitions year-to-date.
• Board of Directors authorized an 11.1% increase to the regular quarterly cash dividend, the 15th consecutive annual double-digit increase since 2010.
• Progress towards sustainability targets, including emissions reductions, safety performance, and recycling, with several initial targets already achieved.
• Investments in technology for data aggregation, AI utilization, and digitization of the organization, with a goal of total digitization by the end of 2027.

In Q3, solid waste was the key segment. Revenue growth was led by a 6.3% increase in solid waste price, with reported volumes down 2.7%. Adjusted EBITDA margin was 33.8%, up 100 basis points year-over-year excluding certain factors. E&P waste revenues were up 7% year-over-year, driven by the production-oriented R360 Canada business. Recycling and RINs revenues were down 27% year-over-year due to lower pricing, partially offset by contributions at new facilities.

Forward-Looking Statements

• Anticipate mid-single-digit revenue growth in 2026 from price-led organic growth in solid waste and approximately 1% revenue carryover from 2025 acquisition activity, partially offset by commodities headwinds.
• Expect above-average underlying solid waste margin expansion, with offsets from acquisition and commodity impacts, leading to adjusted EBITDA margin expansion in a normalized range.
• Conversion of adjusted EBITDA to adjusted free cash flow expected to improve relative to 2025, positively impacted by ongoing acquisition activity.
• Await formal outlook for 2026 in February, with interest in economic tone, government shutdown, and tariff implications.

Risks

• Commodity price and RINs fluctuations, which have been a headwind and could impact margins.
• Litigation and regulatory compliance related to events like the Chiquita Canyon landfill closure, with uncertainties in associated outlays.
• Potential impact of economic conditions, government actions, and tariffs on business performance and volumes.

Q: Tyler Brown from Raymond James asked about E&P waste performance and run rating for the business.

A: Mary Whitney responded that the production-oriented Canadian business had a sequential increase in Q3, with a $10 million sequential boost from a remediation job, and run rating it would back out that $10 million.

Q: Noah Kaye from Oppenheimer & Company asked about pricing retention from technology tools and 2026 pricing expectations.

A: Mary Whitney said improved pricing retention in 2025 was attributed to deployed tools, and for 2026, expecting less price than 2025 due to CPI-linked market adjustments and cost pressures.

Q: Konark Gupta from Scotiabank asked about Chiquita landfill outlays and volume drivers.

A: Ronald Mittelstaedt updated on Chiquita landfill outlays running ahead of expectations but expected to decrease, and Mary Whitney discussed muted volume trends with some incremental weakness and muted seasonal ramp.

Q: Chris Murray from ATB Capital Markets asked about 2027 RNG investments and volume expectations.

A: Mary Whitney discussed RNG investments timing and RIN values impacting expectations, and Ronald Mittelstaedt talked about labor cost trends and volume drivers.

Q: Tobey Sommer from Truist asked about commodity mix and exposure in the portfolio.

A: Mary Whitney and Ronald Mittelstaedt discussed the mix based on customer needs, market dynamics, and efforts to mitigate commodity impacts through service provision and technology.

Q: Other questions covered topics like truck availability, tariff impacts, contract shedding, capital allocation, regional margin differences, M&A pipeline, pricing technology deployment, and PFAS and plastics economics.