WASTE MANAGEMENT INC Q3 FY2025 earnings call

• Financial Performance: Strong operating EBITDA growth of over 15% and free cash flow growth nearly 33%. Total company operating EBITDA margin was 30.6% in Q3, the best quarterly result in history. Legacy business operating EBITDA margin was 32%.
• Operational Efforts: Focus on pricing strategies, technology optimization, and tuck-in acquisitions. Integrated WM Healthcare Solutions into existing structure, fostering collaboration. Pursued sustainability investments with recycling and renewable energy showing strong performance.
• Customer Focus: Maximizing customer lifetime value through pricing, cross-selling (e.g., hospital customers increasing spend), and service improvements (e.g., on-time delivery in Healthcare Solutions).

Collection and Disposal: Operating EBITDA grew over 7% with operating EBITDA margins expanding 100 basis points to a record 38.4%. MSW grew 5% and special waste volumes grew 5.5% in the quarter. Organic revenue growth was driven by disciplined pricing and volume trends. WM Healthcare Solutions: Integrated into existing structure, streamlining operations. A top hospital customer increased annual spend by over $5 million. Revenue trends moderated due to customer engagement discipline but synergy capture exceeded expectations. Sustainability Businesses: Recycling segment operating EBITDA grew 18% despite 35% decline in recycled commodity prices. Renewable Energy segment saw higher contributions from new facilities, though sequential growth lower due to RIN sales timing. Revenue contributions: Collection and Disposal contributed over half of the year-over-year increase in operating EBITDA.

• Full year revenue projected at low end of prior range due to recycled commodity prices and Healthcare Solutions revisions. Margin expectations increased to 29.6%-30.2%.
• Free cash flow expected near $3.8 billion in 2026. Sustainability EBITDA target for 2025 expected to be hit. Confidence in achieving incremental sustainability EBITDA goals by 2027.

• Headwinds from alternative fuel tax credit expiration.
• Recycled commodity price fluctuations affecting sustainability businesses.
• ERP implementation challenges in Healthcare Solutions leading to deferred pricing and potential churn.
• Market conditions affecting sustainability businesses, such as virgin plastic prices and RIN market dynamics.

Q: Year-to-date benefit from wildfire cleanup work and charges in quarter?

A: Wildfire volumes had minimal impact in Q3, revenue ~$115M YTD. Charges related to landfill impairment and Natura plant idling due to market conditions.

Q: How has the M&A pipeline looked and valuations?

A: M&A focused on core business. Healthcare Solutions integration ongoing. Traditional solid waste deals completed or planned, with 2026 likely continuing integration of Healthcare Solutions rather than large new deals.

Q: Thoughts on price/cost spread into next year?

A: Core price at 6%, operating expenses below 60% of revenue. Yield may tick down slightly as costs come down, but focus on maintaining delta between cost and price.