Waste Management Aktie

Well, thanks, everybody, for joining. My name is Trevor Romeo. I'm the analyst here that covers waste and recycling at William Blair. Before we start, I'm required to inform you for a full list of disclosures and conflicts of interest, you can visit our website at williamblair.com.

Today, we're very excited to welcome WM to the William Blair Growth Stock Conference. WM, I'm sure many of you know, is the North American leader in waste and recycling services. Very happy to have him here. So I'm pleased to introduce CFO, David Reed; Chief Customer Officer, Mike Watson; and Ed Egl from Investor Relations is out in the audience as well.

So we'll start here. I believe you have a couple of slides, and then we'll do some fireside Q&A. And then after this, there is a breakout session in the Mar Room upstairs for anybody in the audience who would like to ask some questions. So I think just to start, I mean, I think a lot of people are familiar with the green and yellow trucks. I see them around Chicago all the time. But maybe you could kind of speak to where WM is today, what's changed in the story in the last 5 or 10 years? And take it from there.

Absolutely.

No, happy to be here, and thank you for having us. We have a cautionary slide here. I'll move past that. But we have a slide here highlighting some of our investment highlights. Obviously, the company has been around quite a long time. We were founded in 1968, went public in '71. As Trevor mentioned, we are the largest environmental services company in North America. And that's really -- if you look at our asset base, these are really hard to replicate assets. If you think about landfills, some of our recycling facilities, we're the largest recycler in North America as well. If you think about what people like about investing in our business, it's the predictability of our cash flows or revenue stream. About 75% of our revenues have annuity-like characteristics. We also have a lot of protections, and we're very nimble in terms of how we perform in different economic environments.

And so if you think about the recent fuel spike that happened late in the last month or 2, we've had things like fuel surcharges that we're able to absorb those with minimal impact economically to our business. And so really recession-resilient, like qualities, really good cash flow characteristics. We'll talk a lot more about that because to your point about some of the journey we've been on, one of the things we'll talk about is some of the sustainability investments we've been making over the last 4 or 5 years. We've deployed about $3 billion into 2 different verticals. One is recycling automation and new markets to further expand that market. And then also with our landfills, we naturally generate landfill gas. And for many years, for 40-plus years, we've been converting that to electricity. The last handful of years, we've been investing in renewable natural gas plants to convert that. And this is a really good circular story for the company.

We have the largest CNG fleet in North America, heavy-duty CNG fleet in North America. And so this is a way for us to essentially close the loop. And there are several ways we can monetize the value of that renewable natural gas, one being through the RINs market and the other through a voluntary market, which we can talk about. So we're kind of nearing the end of that sustainability push. We also closed an acquisition of Stericycle at the end of 2024. We funded that acquisition with debt. And so for -- from a capital allocation standpoint, we were kind of on hold with our share repurchase program while we were letting the leverage come down. We're now at a point where that leverage is in our long-term targeted range between 2.5 and 3x. And so we -- this year, we did commence our share repurchase program in addition to a nice dividend increase for the year.

And so this is -- we talked about this year being the year of harvest because some of these investments have come to fruition, and you're seeing our free cash flow conversion get back to really normal levels, and we see improvements from here. We're calling for about 46% to 47% free cash flow conversion for this year with a pathway to improve that over time. Move on to the next slide. Just a little bit of snapshot I covered on some of this. But last year, we printed over $25 billion in revenue with EBITDA -- adjusted EBITDA of $7.6 billion. We have about 60,000 employees. You can see that collection and disposal is really the lion share of our business. That's over 80% of our business. And then you can see some of these other growth areas that I referenced, both Healthcare Solutions, which is the Stericycle asset I mentioned, along with recycling and renewable energy. I talked about some of these. I talked about the recession resiliency, recurring revenue. I also talked about the flexible cost and capital spending.

We really can be nimble, even though we're a large company, we can be nimble. And if you think about our customer diversification and our asset base. It's a very local business fundamentally. And so no single event really has a material impact on the business quarter in, quarter out. And so I don't know, Mike, if you want to touch a little bit maybe on the customer base?

No, I think the customer base is quite diverse, and I think it allows us to have flexibility, and we'll talk a little bit more later on today about our opportunities to cross-sell across our different segments. But ultimately, based on any economic impacts to certain segments, we're definitely insulated, whether it's construction, other parts of the business. And I feel that just plays a critical role in our value proposition and steady, consistent earnings and cash flow.

And then our last slide is just -- I always love a map, a good map. And so this one is great. It's obviously a lot of dots on here. One thing that maybe just to point out, and I know, Trevor, I know you've written some research about this, too. But if you think about landfills, those are really hard to replicate. In many geographies, there hasn't been a greenfield landfill permitted in decades. And so we're really good about getting expansions. And if you think about the 253 active landfills that we do have, they are strategically positioned. In 9 of the top 10 MSAs, we feel like we have the best strategically positioned asset.

We're also with -- as you have capacity coming offline in certain geographies, we feel like we're well positioned to absorb incremental volumes in the future, whether it's rail or other mechanisms to get those tons to our landfills. You'll also see that our route count is higher than we previously reported. That is because of the health care solutions. We run about 15,000 commercial traditional collection routes and then about 4,000 additional health care solutions routes as well.

I think the one thing I would add, David, if you look at the medical waste incineration, our post-collection assets, the scarcity of those, it really provides us with an asset network moat and for us to really provide the most comprehensive suite of services across North America and any environmental service, whether it's hazardous waste, medical waste, traditional solid waste or recycling. So we feel we have multiple platforms for growth as well.

So with that, I'll pause and maybe turn it over to you.

Yes. I appreciate that very efficient intro and really honestly, leading right into my first set of questions here, which was on the asset network because you look at these dots on the map and you have an industry-leading portfolio of assets of post-collection assets, which are scarce nowadays. So I guess several different ways you could go with this question, but maybe we'll talk on the pricing side. And I think your MSW landfill yields have been very good lately. You really want to make sure you're preserving that kind of scarce air space. And you also have to balance high-volume customers that bring volumes into your landfills.

So how do you think in a world where you look out 10 years, 20 years, we had many more landfills closing across the country. How does your asset network, your ability to move waste in a variety of different modalities and just the scarcity and quality of your asset base, how does that kind of accrue to WM as a benefit?

One of the things we're doing, and we do this with our customer segments as well, but we're looking at the airspace lifetime value. And so we are evaluating we're forecasting what we think the pricing could look like 10, 15 years out and seeing what the price is today. And are we better off preserving some of that air space, particularly in those close-in landfills or do we take that volume in today. Some of this is new volumes. We have a lane in Florida where we're basically just moving existing WM volumes from a closer in landfill and then transporting instead on rail to a much larger landfill that has a tremendous amount of useful life. And so that's just a trade-off we evaluated and we felt it made sense.

The rail connectivity was already in place. So that's a great example. We also have, to your point about you can lock up strategic long-term customers because you're helping provide solutions that they're facing. We have a landfill in Indiana that we have rail access to, and we're taking volumes out of the Northeast. And that was new volume to WM. So this is -- I think our capabilities in managing complex logistics helps us find new opportunities to grow.

Yes. That's great. So those 2 are great examples. I know you also have a very high quality, I think, rail served landfill in the Pacific Northwest. So maybe, I guess, this is kind of a topic we've had several of your peers here this week, and rail seems to be a topic that's gaining a little steam among the investor base, especially in areas like the Northeast. So maybe you can talk about the economics a little bit there. Like how far away does it have to be for it to economically make sense? What's the CapEx versus OpEx, those kind of kind of decisions that you go through?

Sure. I do think if you start -- if you think about miles, and if you think of like 150 to 300 miles, anything kind of inside that or shorter, you can use transfer stations and over-the-road tractor trailers to transport to a landfill. But when you kind of get beyond kind of 300 miles, you need to start looking at some other alternatives, including rail. The other thing that we have to look at is obviously with the railroads, like what is -- what are your options? What does the turnaround time look like? Because, for instance, if you're able to turn a unit train around in 6 days, that's a different capital story than if it's 2 to 3 weeks in terms of the number of containers that you're going to need in terms of evaluating that. The good news is once you secure some long-dated volume, the actual unit cost really starts to come down.

And so that upfront capital cost to build out the site at your landfill to take the containers off and then get them up the landfill, that starts to absorb away over time if you've got enough volume and it's sticky enough over time.

Great. Maybe I would like to shift over to pricing a little bit. So I know we kind of came through the last few years from a period of higher inflation, and we've been kind of decelerating. Now it looks like at least with energy costs rising, the overall CPI bucket is a little bit higher. So maybe you could kind of talk about -- you have some exposure to CPI kind of index contracts, some open market, how you could see pricing playing out maybe over the next year or 2 given that? And then maybe for Mike, how does WM because you kind of have industry-leading data and analytics capabilities. How do you leverage that? Does AI play into maybe optimizing that further?

Yes. There's a lot in that question. But I think most importantly, as we look at our pricing, we want to make sure we focus, as David mentioned, on the value. And we've taken a customer lifetime value approach, and that's really been our philosophy and really has been a durable and sustainable model for our pricing. But we back that up with making sure we have a price cost spread. And we target about 150 to 200 basis points in that process. And our index-based pricing allows a baseline to protect ourselves. Most of that is CPI, WST.

About 40% of our business is indexed. The other 60% allows us flexibility to earn a premium based on the value propositions that we put forth. A perfect example is what we just talked about in disposal. Our disposal yield for MSW is almost 7% in Q1 with positive 2.7% volume. So we really have a strong understanding of the analytics, the next best alternatives for this business. But as we think about our traditional business, we're using customer analytics. We have artificial intelligence on our trucks that provides us information to help us manage our revenue management. We take customer sentiments, attributes and how they compare to peer groups. That's allowed us to be much more sophisticated in how we price our customers. And that's why I think we've seen a consistent core price over many years, no matter what the environment, but also making sure we understand the trade-offs between rollbacks and defection. But we're always looking for ways to improve automation.

We have a lot of machine learning processes. I mentioned AI and even some predictive analytics that we've been employing in this space for quite some time. We're starting to move those up the customer journey a little bit more to understand how we can increase that willingness to pay.

Great. Okay. And then maybe we can switch to volume for a second. So it's been kind of an area of maybe cautious optimism among some of the peer group that the special waste category at least has started to improve. Now some of the construction activity might still be a little weaker, maybe depends which part of the country you are and so forth. But it's been a tough 3, 4 years for kind of the cyclical pieces of your volume. So maybe you could give us a sense of what you're seeing? Are you hoping for some improvement as we kind of exit this year...

Yes. And I'll try to maybe take it around different parts of our business. I'll start first with residential because there's some intentional actions that we've been taking that are still coming to fruition. And so we've been culling some of that portfolio to remove less profitable work. And so you've seen intentional volume declines for a number of years. Q1 was a little bit higher than we were anticipating or planning for. We did have one -- we did lap one large franchise loss at the end of Q1. We do expect that segment of the business to be down, call it, around 3% for the year. And -- but we do expect those volume losses in '27 and beyond to continue to get smaller and smaller and then potentially turn positive as we move from more of a business improvement mindset to a disciplined growth mindset in that line of business. We've really demonstrated tremendous value in terms of improving margins in that business notably while also actually growing EBITDA even though we're reducing volumes.

So we're making the right decisions for the long-term viability. It's of the 3 collection categories, it's the lowest margin of the 3. Industrial is one we've had some positive volumes of late, and we're still forecasting for this year kind of low single-digit growth. Some of that is related to the Healthcare Solutions business as we're putting more of some of that material on our backs versus third parties. And so we have a little bit of momentum from that, but then there's also some green shoots of potential opportunity of upside there. Commercial is one where it's slightly negative, and it still kind of looks that way this year, but hopefully, it becomes less so. Disposal is a positive story. You mentioned special waste. With us, you have to unpack and maybe one of our competitors, there was that large wildfire event last year in Los Angeles.

We had a lot of volume, particularly in Q2. I think about 75% of that activity shows up in Q2 for us. But if you strip that out in Q1, we did see special waste, call it, close to 7%, which is a really good sight to see. Our pipelines in that line of business also look decent. So that gives us a little bit of constructive optimism as well there.

And special waste can be a little bit of a leading indicator for potential new project activity as well, right?

Yes, it's event-driven and it's -- and so yes, usually your project managers in those -- are bullish when they're pulling the trigger to move those projects forward.

Okay. Excellent. Maybe another question for Mike. I know you had a whole kind of section dedicated to this at the Investor Day last year. But just talk about how you think about the customer experience, sales, go-to-market? What are some things you're doing to kind of increase customer stickiness and sort of unlock better wallet share?

Yes. Ultimately, our goal there is to improve the reliability and responsibility of our customers. That's the overarching goal. But some of the investments we made have been a lot of in the self-service and customer experience side. We've introduced 15 new self-service applications for our customers. That's been met with a lot of fanfare, excitement, utilization. Our self-service has improved just about 25% year-over-year and our high-cost call channels, the phone has come down 20%. So it's been a positive from a customer experience standpoint, a positive from a cost to serve standpoint, but it's also provided us with stickiness with our customers. I think the last point, and I think this is a connection to our focus on our frontline operators and technicians. We've had the lowest turnover we've had in years at [ 17%. ] I think that consistency has really improved our reliability.

So our service has improved dramatically in all the key categories, whether it's miss pickups, reschedules and the like. So I think that component of how we're performing on the street, along with the ability for us to service our customers better, it's really been a good way to keep that stickiness and that customer lifetime value, which plays a role into the pricing that we talked about earlier.

Excellent. Okay. Well, maybe we've got 12 minutes left. I want to make sure we hit on both the sustainability businesses and the health care solutions. So maybe let's take sustainability first. So you're coming toward the end of this multiyear sort of investment cycle. You talked about the $3 billion in RNG and recycling, I guess.

So maybe starting with the RNG. I think you've already announced recently 2 additional projects to the -- incremental to the original 20. We still have plenty of landfills out there on the map that do not have RNG facilities out there. So maybe at this point, we do have a new [ RVO ] out there for the next 2 years renewable volume obligation from the EPA. And how are you kind of thinking about potential future opportunities to monetize some of that landfill gas once this first kind of tranche of projects is finished?

Sure. So these are great projects. They're some of our highest returning projects that we've invested in over the last decade. There's also some additional knock-on benefits that we didn't originally underwrite. If I think about tax credits with these RNG investments, we have both investment and production tax credits that we've been able to monetize that have further enhanced those returns. If I also think about of the 20, particularly, the amount of volume that we're going to be producing, about half of that is going to be consumed in our fleet that I was talking about, so more in the RIN market.

The other half is in voluntary market, which is more of a global market phenomenon where folks are paying to decarbonize or to buy the environmental attributes of that natural gas. And so we've got customers in Japan, U.K., Canada as well as here in the U.S. That's a market that we also look to derisk. And so we have a risk management policy because commodity volatility in that business is a little bit different than our core operations. And so we have a policy or a framework where we're trying to lock in, in the current year, 80% of that price exposure and then in year 2, lock in 40%, year 3, 20% and then continue to manage that as we go forward.

In terms of -- yes, there's still a lot of landfills. We do have over 100 sites that already have some form of beneficial reuse. The majority of that is landfill gas to electricity. And that's actually an interesting kind of full circle phenomenon just given what's going on with data centers and electricity demand in the United States. We're finding that we're evaluating many landfills where we could potentially put more of a landfill gas to electricity operation to again sell power to the grid as well.

And those have lower capital requirements, you can get them faster to start. And so that's something we're also evaluating as well in addition to like looking at incremental RNG projects if the returns make sense and they match up versus our other alternatives for investment.

So it may come down to just sort of what is -- because you're already closing a loop on a lot of I guess, all of your fleet, the CNG fleet may come down to what is sort of the demand for the voluntary RNG market versus what's kind of a data center electricity type.

That's correct.

It will be interesting to see how that plays out, I think.

But I don't think in terms of the -- we spent $1.6 billion on RNG. I don't think investors should expect that it will be anything of that magnitude in the near term.

Yes. Makes sense.

And then on recycling, just real quick, we spent $1.4 billion, and that was broken into 2 different investment stories. One is automation of our existing processing facilities, and this was really to accomplish several things. One is you can think about it as a line of manual labor hand sorting materials to separate material. It was a hard job to fill, if you can imagine. And so it had high turnover. And so we wanted to, one, improve that dynamic, lower our labor cost, with this automation investment, we're able to increase throughput, also improve the quality that's coming out on the back end of that material and sell it at a premium. Those investments have performed really well.

We're also -- some of those investments are being made in geographies where there's strong regulatory backdrop with things like extended producer responsibility or minimum content legislations developing. The other investment wave was in new markets, so broadening -- finding markets where recycling is not as penetrated and building assets there for future growth as well.

And on those new projects, in particular, would you say that the that you've been able to fill up all that capacity, I guess, to the amount that you originally had expected in those new markets?

It's mixed. I mean we've made good headway, and I do think this is kind of the long-term plan. And many of those are also in geographies where we do have the regulatory backdrop. If I point to Canada as a great example. In Ontario, we built 2 plants. And the other benefit of those is that there's no commodity risk that's really a processing fee and it's long-term contracts. And so we just have to make sure when we do make those new investments that we're putting it in positions where we can be successful.

Okay. Great. So then maybe with -- we'll see if we take up the last 7 minutes, but let's move over to the Healthcare Solutions business. So maybe people in this room will be familiar with Stericycle. They used to attend this conference back in the day. It sounds like kind of from a customer perspective, the ERP integration is starting to move along nicely.

The billing process has improved. You've kind of walled off the customer from that in the back end. The customer credit activity that happened kind of in the latter part of last year sounds like it's peaked. So kind of can you just tell us how is the core Healthcare Solutions customer feeling today? What can you kind of do from a price and volume perspective as you move second half and beyond?

Yes, Trevor. I think one thing that's most important is we're very, very excited about the opportunities we have in the health care business when we acquired Stericycle and Shred-it at the end of '24, we are focused on the secular trends of health care, the way we can combine a group of assets that we have demonstrated here that are unparalleled, but also provides us for multiple platforms for growth, and we still feel very strongly about that. We have had some issues with the ERP, which have been stabilized. We've rolled off the customer, as you mentioned, and we're focusing on things that can really set this up as a platform for growth.

As we look at our long-term perspective for this, we expect to have 5% to 6% revenue growth. We're building '26 as a bridge to that, mostly price, a little bit of negative volume as we had some losses in 2025 that crept into 2026. We feel really good about introducing all the things we've talked about that WM does well into this business, and it's been very successful. We're on track for our synergies, which is great. As I look at some of the key customer metrics, our defection is down, our customer satisfaction is up. Our calls to our call center are down 30%. And I think most importantly, we've increased our service reliability from the mid-80s to upper 90s. So all those key metrics make us feel comfortable and confident that we'll be able to use this as a platform for growth that we expected. We still have opportunities on the SG&A side.

When we acquired this business, it was in the upper middle 20s. We brought that down to the upper teens. And we -- that's -- quite a bit of work has been done there, but we still feel very comfortable that we have a plan to bring it down to -- eventually down to where WM is, but it's going to take us some time. We've got some integration opportunities on the technology side that are a little duplicative. But I think overall, the top line, we feel really good about. Cross-sell is a big win for us. We've already been having some success there. About $28 million of EBITDA has been generated from cross-sell in just a short period of time. I think that's a combination of selling WM services to Stericycle customers and vice versa. So really feel good about the trajectory, maybe a little slow out of the blocks on the ERP, but we're really starting to catch our wind. And I think all the impacts that we have are just going to be accelerated as we look into the future?

I think it's been interesting to see if we talk about the -- particularly on the cost side, the $250 million of synergies, as it's been -- those are things we could point to pretty clearly and identify. But as this business has been integrated into our existing area structure, we're seeing a lot of additional ideas come to fruition and particularly given that our areas manage profitability all the way down to the site level. And so they're coming at it from a different angle. And so I do think there's some optimism about continued momentum as well on the cost and opportunity side.

Yes.

Well, that's great. I guess one question that I have over kind of the longer term, you have talked about officially $300 million of total synergies, including the cross-selling. I think Jim on the last call kind of hinted it could be a little bit higher than that. But take all that into consideration, you look out maybe 5 years from now for this Healthcare Solutions business. I know some of the synergies are realized in the collection and disposal line. But what is a realistic margin profile for this business kind of over the very long term?

Yes. It's -- so it's -- right now, it's kind of in the mid-teens or upper teens for this year. We do see a pathway in the next several years to get it to that kind of mid-20s. And then to Mike's point earlier about continuing to make improvements in things like SG&A, we could continue to see to have it march up closer to our company average.

Okay. Great. We've got 2 minutes left. I guess one topic that I think has been discussed a lot with WM in the past has been kind of automation and efficiency. You guys have been working on this for many, many years, obviously. So I think one thing that's gained more steam in the investor discussion lately is AI as well. You touched on this with maybe some of the pricing opportunities, Mike. But from a labor cost side, from an efficiency, from a profitability side, what are some things that you can do to drive higher margins with AI? And is that something that could potentially enhance price/cost spreads? Or is it kind of just the next layer of your automation journey?

The one thing I forgot to mention in the customer experience, we have introduced AI into our customer experience to help that. But if I think about AI over the periods of our evolution, as I mentioned, our Smart Truck technology, which we've been talking about for probably close to 10 years. We've introduced artificial intelligence to help us evaluate hundreds of millions of images and understand what our customers are disposing are they overserviced, -- are they underserviced -- are there revenue opportunities? I think that's kind of on the top line in addition to some of the things we talked on pricing.

We have implemented AI specifically on our driver and safety coaching where they use artificial intelligence on activities and behaviors in the cab, which I think ultimately provides a more safe operating environment, which includes a cost reduction in our recycling facilities, as David mentioned, state-of-the-art. We've invested significantly in a lot of robotics, AI to help identify those commodities and continuously learns on how to extract more and more value. So we have been implementing AI for quite some time. But I think as leaders in the industry, we've always been on the cutting edge of innovation.

And that all plays into whether it's predictive analytics, whether it's the automation, machine learning and/or AI. I think we are well along that journey, and we want to make sure it's fit for purpose for our employees and our customers. And I think that's been our philosophy.

And I think one other thing just to add on to that. What excites me is many of these journeys that we're on, we're kind of still in the midst of them or -- and if you think about the scale of our business and you talk about the 19,000 routes, like we're just starting like with route optimization. We're starting in like the industrial line of business, but you still -- you got other -- health care, you've got commercial, you've got residential that you can apply those to. So there's just -- with the scale, there's -- you can really monetize the value of these investments over time.

Excellent. Well, that was an absolutely perfect use of time. I think you ticked through all my questions. So thank you guys so much. The breakout is Mar for anyone who would like to join.

Welcome back to Day 4 of Oppenheimer's 21st Annual Industrial Growth Conference. I'm Noah Kaye, Managing Director in Oppenheimer's Industrial Innovation Research Practice. We're really happy to welcome back to the conference, the management team of Waste Management, WM. We've got Tara Hemmer, Chief Sustainability Officer and SVP, Mike Watson, Chief Commercial Officer, SVP. Welcome to you both. Thanks so much for the time.

It's great to be here. Thank you.

Thanks for having us.

So I would love to start with solid waste, which is, I think, is still a pretty big part of the business. And maybe just kind of kicking off with looking at this past quarter, the 1Q price yield came in stronger than you previously anticipated. I think on the call, Jim called out resi and MSW as being drivers. So maybe can we benchmark where you are in the journey on shedding unprofitable resi volumes? And how you think about price growth across the collection lines of business on a sustainable basis?

That's a great question. We're really proud of our price performance for Q1. I think the highlight that you mentioned, which I think is really important is our ability to drive both yield and volume in our MSW line. I think that just helps really -- everybody understand how we can leverage our best-in-class assets and making sure we can get the price we deserve for that line of business, but also keep the volume so that upper 6s yield and 2.7% volume is a great story.

But getting back to residential, we really are committed to the strategy we have been for the last several quarters. We've had great core price to the upper 6s. That has been at the expense of some volume degradation. But I'd say we're in probably the last 1/3 of that journey. But when I look at the results of improved margins. Actually, I think John mentioned this on our call, about 200% improvement in EBITDA over the last few years, but we also have grown revenue with less volume. So the profitability there has been great. We've introduced automation, better contract terms and improved revenue per unit. So I think it's a win all the way around the board for our employees, our customers and our shareholders.

But as I look at the back half of 2026, we had some spikes in early in this year around negative volume. That will subside. We'll still be a little bit negative at the tail end of 2026, maybe negative 2% or 3%. But as we look into '27 and '28 and beyond, we'll see that start to level out. But it's a strategy we're committed to, and it's yielded great results. and we're proud of what we've accomplished.

And on the pricing question across the different lines of business here. I mean we used to think about C&I being where you'd see the most sort of natural price growth to see resi pace price is -- again, it's a testament to what you talked about with improving the profitability. But if we sort of normalize through the cycle, and obviously, depending on what's happening with inflation. How do we think about kind of where pricing should be for the different lines of business?

I think the way we're looking at price, frankly, is the price/cost spread, and I think you've heard us talk about that. And for 2026, we looked at about 250 basis points of spread between our core price and inflation. We're actually delivering in excess of that. There are some indices that are pretty clear, whether it's CPI or CPI-WST that have an impact in our business. But for the most part, our goal is to make sure we use our analytics or customer lifetime value to really understand how we can move price where we can, where we can't.

And I think that's been really the success that we've had at WM is utilizing these tools and understanding customer lifetime value, still having a really strong core price but not having the degradation in volume, which I think we've stood out from a volume standpoint compared to our peers, the way I look at it. I think that's just a testament of how we're balancing our price/volume equation.

Yes. You mentioned the MSW volume strength. And I think Jim had talked as well about the increasing tightness in the industry's landfill capacity as a driver. That was the theme at Investor Day as well. But this is a trend that's been going on for decades. So what if any inflections are you seeing now around tightness in capacity? Is that rate of tightness in the industry? Is that increasing as you see it? Is it set to what's driving that? Maybe just some color.

Well we've been pretty clear, we have in 9 of the 10 largest markets, really strong landfill competitive advantage when you look at it across our peer group. And that's something that we're looking to grow and expand.

And what that's going to come down to is as capacity comes off-line in some constrained markets, if you think about New England, primarily the Northeast, but we're seeing it in other spots, too, is how do we make the connection between these large centers of waste to more regional landfills. So we've invested quite a bit and looking at how do we connect the dots between our transfer station network and our landfill network, whether it's through trucking or rail based connections that we've been at for the last 20 years.

We think that if you look forward to 2030 and beyond, we'll be even better positioned then than we are today to be able to ensure that we have longer-term capacity that will meet our customers' needs, something that we've invested heavily in.

So you're kind of tying the link, the logistics linked to these major metro areas. And that's with some of the investments that you've called out. And it's at the same time that the capacity around those markets is shrinking. And that's the best way to think of it going forward that you're investing while like the rest of the market is pulling back basically on this.

I can't speak for what others are doing with their own investment strategy, but I can say that we have a enterprise network planning function now that their sole purpose is to look at this and do scenario planning on when our landfills might be closing when competitors landfills might be closing and making sure that we have the long-term connections between the regional markets. That's going to be a differentiator for us moving forward.

I think it's a great point, Tara. And I think that information of the enterprise network planning group is providing is helping us understand where we have the opportunities for price and volume. I think that's why you're seeing such a staunch performance in both yield and volume, understanding the next best alternative for these waste flows. Short and long term, I think, is where we're making the investments appropriately.

It's a very helpful point. Looking at the January guidance, which assumed volumes of -- headline volumes, right, of 0.2%, 0.6%, you're overcoming I think, 50 basis points wildfire headwind.

So you talked on the call -- on the earnings call about underlying special waste activity as a positive leading indicator this quarter. Can you give us some more color on the drivers for underlying volumes to turn cleanly positive? How that might play out, whether it's this year or following?

So the conversation we just had about landfills and our landfills being strategically positioned. That speaks to what we saw related to special waste volume, but also our MSW volume being so strong. and that's something that we expect to continue through the balance of the year.

For 2026, it's very much a first half, second half story. The first half of the year, we had some significant impacts related to weather that we didn't anticipate. That was about half of the volume impact for the quarter. And then, of course, most of the volume from the wildfires last year was in Q2.

So what we anticipate seeing is volume in the second half of the year be close, if not positive. And that's going to be driven again by special waste and landfill volumes, but also we've talked a lot about residential Shred-it -- shredding -- shedding. Thinking about Shred-it there for a second.

We do Shred-it as well. But residential shedding and we're not at the complete end of that. We still have some customer losses that we're navigating. But what we're really proud of is as that volume has declined, if you look at what's happened with our resi EBITDA and then also our margins, it's been a turnaround story. And it's going to position us well for volume growth with those residential municipalities or other customers.

I think the market is seeing this is a service that is necessary. There's a cost for this service, and it's something that has to be valued moving forward, and those are the markets we're going to play in.

Thinking about and exploring customer value and how you can get and retain more price is actually a good segue to what I want to talk about next. And Mike, I think I'd be very, very curious to hear how you're implementing this.

We've seen some of the industry players in the space, right, implementing AI as a tool to get and retain more price. I think WM has been sort of focused on analytics to drive stronger pricing for -- well, as long as we've been covering you, which is over a decade now.

But can you talk about what you might be using AI for on the pricing front and more broadly at a customer-facing level? And what goals do you have for pricing related to these initiatives?

Yes, that's a really good question. I think first things first, I think there's the utilization of predictive analytics, then machine learning, then AI. And I think we're using those in very different fashions. I think we've been leading, as you mentioned, on a lot of the predictive analytics and really what that comes down to if we think about our ability to get core price and have minimal impacts to rollbacks of those pricing as well as not having significant volume shed excluding the residential, which is much more demonstrative.

I think it kind of -- it comes down to the information that we ascertain in the customer journey, what our customers are experiencing and what they look like compared to their peer groups, what kind of service experience have they had, all of those play a role into our analytics suite, and then we apply some machine learning and some AI around how we implement that.

We do not let the artificial intelligence actually execute the PIs. And I think that's where we want to make sure we have some controls. But as Jim mentioned on the call, too, we've been using artificial intelligence to evaluate the volume that's coming into our containers and ascertaining how much of that is contamination. Do we have overages. So all those mechanisms play a role in, I think, the overarching revenue management approach that we have at a WM.

But I think because we have some maturity, we're bringing that up the customer journey more as far as prioritizing customers, how we provide information to our sales organization to focus on specific sales processes or action. So all the information we are using and really evaluating is help us drive a better customer lifetime value.

And I think there are certain things in the customer lifetime value that are friction points. We're trying to remove those. We also understand that they will have an impact on our customers' willingness to pay or readiness to accept a price increase. So we look at all that information to make sure we aren't exceeding the value that our customers are receiving.

It's never perfect, but I think that's what's helped us maintain a strong core price with minimal impact on volumes.

There's a lot of interesting things I'd like to follow up on there. So you said you don't let the AI execute the price increases. I think we would have assumed that does it help you to generate any kind of base case or sort of estimated -- have you used it as a tool at all to help guide the sales force? Or is this sort of being more applied at sort of a higher level to gauge effectiveness?

Well, the utilization of AI starts to branch into multiple disciplines in the organization, whether that's in our customer experience. We use our artificial intelligence to help our sales team evaluate the calls and the interaction with our customers. So it's just the information. I think that's where AI is -- I'm using the information and you're letting the machine make the decision for you and replace human intelligence. We're using the information to help sort the data like a human, but do it at a much more rapid pace. And because of the scale of the information we have, we're using artificial intelligence to help us make decisions quicker and implement those along the customer journey.

Yes. And you mentioned the friction points. I mean I remember at Investor Day, you had a goal to triple your digital customer transactions. And you talked about these friction points in the customer journey. It's extending customer lifetime value. And you had some real numbers around it, right? I think you said over $100 million over 5 years. So just -- what are the most important friction points to be cognizant of, first of all? And where are you in that journey?

Sure. It's a great question. I think when we think about friction points, I always think about this inside the customer journey with WM. There's -- it's how a customer is onboarded is the container delivered on time in the right location? Are we providing a reliable service throughout that customer journey? And then are there any reschedules? Those are the three main friction points. It's really around reliability. And if we're reliable, we extend the customer lifetime value, but it -- as I mentioned earlier, if we have some reliability issues we had to reschedule due to weather the like that plays a role into some of our evaluation.

But those friction points are something that we focus in on every day, but we review those with our areas every quarter at our corporation, but we've reduced those friction points significantly over the last several years. And that's what I'm really excited about, those friction points are coming down. And if we provide better service, it's an extension of customer lifetime value.

Getting back to the digitalization part, we've invested significantly over the last 5 years in our self-service capabilities, and that's been a big win for us. Win for the customer because they can engage with us with a channel of choice, but it's also reduced our cost to serve. And just a quick stats. Even if I look at compared to last year, our calls in our call center are down 19% quarter-on-quarter year-on-year. Our digital interactions are up 2x that. So we've utilized technology for customers to engage with us quickly on their own time.

We've also -- we've done a lot on our digital chat, artificial intelligence for customers to get their information they need. For example, what's the estimated time of arrival, when is my pickup day I need to exchange my container or I need to order a bulk pick up at my residential home. All those things are quick transactional elements that we've invested in, that has really helped us provide a better customer experience, but also bring down the cost to serve because the call into WM is the most expensive channel. The more we can push to the low cost, very high customer experience channels is a win for us.

But where I would say we're about 1/3 of the way there. My goal is to triple it by the end of 2030. And we're making some great progress. I think it's a little bit of a balance of our customers' choice and us making sure that we can meet them where they are and guide them to a better customer experience in digital transactions. We're constantly trying to make that better and better with technology and AI as well.

I mean I think we all intuitively get the appeal of that as customers, right? I would much rather just punch it up on my phone and find out what my pickup days. I don't want to wait on hold for 5 or 10 minutes to find out. And so that's a win-win, right? And so I think that's a good example.

Thinking about national accounts specifically, they've grown, I think, 12% annually as of your last Investor Day. And you reported a really high retention rate, if I remember right, 99%. This is a $5 billion TAM.

With that strong baseline, what's your ceiling for national accounts growth over the next couple of years? And are you seeing any signs of wallet share saturation among your largest customers?

That's a good question. I think that's been a bright spot for us where we've really differentiated WM in the eyes of our customers. If you think about that national account space, they want a scalable service provider. They want reporting. They want a sustainability partner, which we play a big role in. But the reporting and regulatory support over North America is really the value prop that's allowed us to grow this space.

We think that $5 billion TAM is quite conservative, but what's interesting is you're seeing a lot of consolidation of some of these retail establishments. There's also growth inside of our existing customer base. And lastly, with our connection with Stericycle and Shred-it, it's allowed us to expand a larger addressable market and really provide a comprehensive environmental solutions to these large retailers that might be medical waste, will need document destruction as well as the legacy WM. So being able to provide that is really an exciting augmentation to our cross-sell, which we talked a lot about.

And our pipeline is rich. We've already had a lot of new business coming from cross-selling between legacy WM and now our Healthcare Solutions group and bringing that together has been quite powerful.

So we still feel that there's upside for that got industry consolidation. You've got growth just naturally in the TAM. But I think our value proposition there has been strong, and we're seeing that growth continue in 2026 as well.

Yes. I would love actually to dive into WMHS in a minute, but I did want to ask one more question more broadly on the solid waste customer base. And this may also be a question for Tara. In fact, I'm pretty sure it is.

You've talked about WM's brand as synonymous with sustainability, right? And I think in the past, it's been a clear driver of open market residential and SMB growth.

It is fair to say that some large corporates have paused or in some cases, pulled back on ESG commitments. And so how are you tracking whether sustainability as a sales differentiator is actually strengthening for you? And how are the shifting demand trends around sustainability change your go-to-market approach?

I'll take this one. first. I spend a lot of time with other Chief Sustainability Officers and we all get this question right, given the current climate and environment, in particular, in the United States, what's really happening. And there's a lot of companies who are still doing the work behind the scenes. They're just not as vocal about it for a variety of reasons. But when you pull it back to our business.

For a lot of our customers, sustainability means recycling as a service. And most people still want recycling as a service. Their customers, our customers' customers want recycling as a service, whether it's in their stores or they want to know that at the back of a big box retailer that all that cardboard is getting recycled.

And so WM is in a position where we can help them with those needs. I always like to say the one thing that WM does really well is we do complicated really well. If you're a large customer and you have many different types of waste, whether it's medical waste or hazardous waste or core solid waste or recyclables. We know how to handle it. We know how to get it to the right spots. We know how to track and report for you that what the greenhouse gas emissions might be or how the material ended up getting turned into something else. And that really comes back to being a trusted brand.

So it's -- now there are some customers where that is not their priority sustainability, but I would say all of our customers have one of the same priorities, which is reliability. And WM is incredibly reliable.

If you think about the number of customers we touch every day and our ability to pick up your waste and recyclables every day, day in and day out, and to improve upon that through our routing capabilities, that's something that any customer is going to want.

I think it's well said, Tara, I think the only thing I would add is that when we looked at our brand, we wanted to be synonymous with sustainability. We also wanted to stand out from our peer group as a beacon brand in our industry. And I think we've accomplished that through leadership and sustainability, but that it's wrapped up in responsibility and reliability that Tara mentioned, and that's where we get the brand awareness and favorability that drives the growth.

I think you could talk about super complex sustainability programs that Tara mentioned. But if you think about the average customer, they want reliability and responsibility, but our brand has created that awareness and favorability to drive those sales channels as really a differentiator in the industry. I think that all wraps up into our go-to-market strategy around sustainability leadership.

But if you break that down in simplest form, it's we're responsible and we're reliable and we're a trusted partner. And that's what resonates no matter where you are in that chain of sustainability awareness or part of the business. But they just want a partner to help them with their needs.

Great segue because speaking of reliability, and responsiveness to the customer. Can we talk about WMHS? And specifically, some of the key initiatives to improve the customer experience and customer satisfaction. How are you measuring that progress? And what can you share with us?

Yes. It's -- we're excited and we really are seeing the growth potential in WMHS and the Stericycle, Shred-it being something that's going to give a step function growth, and we're still committed to the 5% to 6% revenue growth that we talked about at Investor Day, getting that stabilized and specifically the ERP is something we've spent pretty much since the close -- and we still have some work to do for further refinement of those processes, but we have stabilized the ERP. And we're seeing that in the conversations we're having with customers, and our customers at risk have come down significantly over the last year.

Our past due balances have come down. Our DSO is reduced by 14, 15 days. over the last couple of quarters. But more specifically, if I think about our satisfaction scores, those improved 5% this year. Our calls into our call center are down 30% and we're starting to see a net positive customer growth in almost all the channels. So I think all the work we've done and we definitely had some history of some inaccurate bills that had some customer impact. And that's having a little bit of a volume impact for 2026. We feel like we've stemmed that tide. And now we've stabilized the system and we're starting to build sales processes, operational improvements that we've proven at WM are starting to integrate into the WMHS, both Shred-it and medical. And even our on-time performance has moved up 5 basis -- really 5%, close to 97%. So all the key -- at least the way I look at the customer initiatives, are we on time servicing our customers, what are our customers telling us when they talk to an agent -- all the key metrics from a overall satisfaction are trending in the right direction.

You said on time has moved up to close to 97%.

97%, and that's moved up significantly.

What was it when you acquired the business?

It was in the upper 80s, lower 90s as far as on-time performance. So that's been -- and that's something we worked on early is how we provided information from the system to the operations team. That was a big improvement because we're moving customers around a lot. It was a big impact to customer satisfaction.

So really excited about how we're performing operationally. That's very solid. We've stabilized the billing. Now we're ready to turn the corner and start to use this as the growth platform that we knew it was, and we're seeing each quarter a better improvement in our net customer growth.

So how does that translate to the ability to go get price. When do you actually start implementing the price increases? And how does that roll out across the customer base?

Well, I think that might be another myth buster. We have been implementing price increases along since the acquisition. It's the opportunity for those price increases that are overshadowed by some of the volume losses that we are experiencing for some of the large hospitals.

So we've been implementing price increases. We have been giving -- I think Jim mentioned on the call some credits back to customers for previous billing periods in '24 and '25. Those are starting to come down each and every quarter. And the way we look at WMHS for 2026, it's a first half, second half, where first half still cleaning up some of the customer credits implementing price increases.

So price increases continue to trend up as we implement WM's pricing activity, credits coming down, and we're starting to see a net customer churn moving in the right direction. So our plan is to really commit to a overall, a little bit less around 3% revenue growth for 2026 as a bridge to 5% to 6% in '27 and '28 as we had through our plan.

Well, mathematically, it would imply that if you're going to go to close to 3% for the full year, you're going to be close to mid-single digits for the back half. Is that not correct?

Yes. And that's going to be mostly price.

So that's your exit rate going into '27 as a base case. So you effectively be running that way?

Yes, if you think about moderate price in second half, pricing increasing in 2026, back half less volume impact, less credits that starts to build the bridge to 5% to 6%.

And I feel really comfortable and confident that the environmental service suite that WM has put together with this business is unparalleled. I think it's really going to set us up for some great growth in '27 and beyond.

Forward to that. I think turning in the last segment to some of the growth initiatives around sustainability, specifically RNG and recycling. In January, you'd guided to 21 million to 22 million MMBtu of RNG production for the year. I think you mentioned some timing considerations on the earnings call last week. So does that production target still roughly hold? And just to give us a sense of how much more incremental production you -- we should expect to see once the fleet is fully built out.

So first and foremost, we're really pleased with how the construction and commissioning has gone related to our plants. We've just experienced through recently some delays in interconnects with the utility to be able to push the renewable natural gas into the pipeline, which has been the cause of some of the volume shortfalls that we're anticipating.

So that 21 million to 22 million, we expect that to come in below the lower end at this point, but will be more than made up by the pricing that we're seeing.

And the most important thing that I want people to take away is that our long-term volume targets are in place, that 27 million to 28 million MMBtus. We're pleased with the performance of the plants and the volume that's coming out of the 20 landfills that -- where we put the RNG assets.

And should we be more or less at that run rate by the time we get to '27, the '27 and '28?

Yes.

Okay. And I think you mentioned on the earnings call that you've already contracted 80% of RNG production for '26. Just -- can you share with us where blended average prices have gone to I think in January, it was 27% per MMBtu.

Sure. So our framework, our risk framework has always been to be between 70% to 90% contracted in the current year. 30% to 50% contracted in the next year and then 10% to 30% contracted in that second, third year out, however you want to view it.

And we're in 80% today, which is exactly where we want to be and roughly on that 80%, a smid shy of $28 per MMBtu, which really speaks to, one, how our team is able to do contracting a little bit forward. And also RIN pricing has held up since the RVO was finalized, and we've been in that $2.40 per RIN range.

So all of this tees up nicely for us to be long term at or above our $26 per MMBtu target that we had really framed up back in late '22, early '23.

Very helpful. And I guess sort of a more strategic look at this is, as you mentioned, there's been a little bit higher demand for RINs following the RVO finalization. There's longer-term visibility on that.

Maybe just walk through the decision-making framework for how much to contract future obligations versus leaving contracted -- and how you might be managing that book in the future? You talked about the framework that you've been applying the 7% to 9%, 10% to 30% for the following year, might you consider increasing that percentage on forward just given we know that the demand is strong.

The short answer is no. I mean I think we're pretty comfortable with our risk framework. And basically, if you look at it over 3 years, it has us 50% contracted and 50% uncontracted. So it still leaves some ability to get the upside of RIN prices, if RIN prices were to improve and also to give us some upside on the voluntary market as the voluntary market further evolves.

As a reminder, roughly -- it's roughly half and half. Half of our volume will be in the transportation market and half of it will be in the voluntary market. So that gives us the ability to get some benefit as prices rise.

Makes sense. And then just around the CapEx that you've been investing. I think you said $85 million on the call around sustainability CapEx for two RNG facilities and recycling project. Just kind of help us understand the IRR hurdle you're applying to these new growth projects. And if at all, that threshold has evolved given commodity price movements.

Well, I'll start this question by talking a little bit about our new CFO, David Reed. And what I will say about David is he is no less disciplined than Devina Rankin was. And so we're putting these investment decisions through a similar lens.

But I would also say that we're -- now these projects they're competing against other WM capital projects. And it's important to remember that with new RNG projects, we really have to look at them in the transportation -- sorry, the voluntary market. And that's going to be a lower price point compared to the transportation market. And the payback periods, if you look at the RNG projects, there are probably any future ones and these two, in particular, are probably going to be more like in the 4- to 5-year range as opposed to 3 to 4 years previously.

Recycling projects are a little bit different because our investments, the one recycling project that's on the page here is one in Edmonton, which is really in response to extended producer responsibility. And those projects, the two that we just did and completed in Ontario, they have almost no commodity price risk. And we've demonstrated those two projects are performing extremely well for us, exceeding our expectations. So those payback periods are in the 6- to 7-year range, which is what the recycling projects were before.

Very helpful. Tara, thank you. So I think we're about at the end of our scheduled time here. There's a lot more that we could and will be talking about in the future with the company. It's great to see the progress on these initiatives.

Tara, Mike, thank you both for the time. And we hope everyone has a great rest of the day and the rest of the week at the conference. Thank you.

Thank you so much, Noah. Appreciate it.

Thank you.

Thank you for standing by, and welcome to the WM's First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Ed Egl, Vice President, Investor Relations. Please go ahead, sir.

Thank you, Jonathan. Good morning, everyone, and thank you for joining us for our first quarter 2026 earnings conference call. With me this morning are Jim Fish, Chief Executive Officer; John Morris, President and Chief Operating Officer; and David Reed, Executive Vice President and Chief Financial Officer. You will hear prepared comments from each of them today. Jim will cover high-level financials and provide a strategic update. John will cover an operating overview, and David will cover the details of the financials.

Before we get started, please note that we have filed a Form 8-K 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 of 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. All forward-looking 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 filings with the SEC, including our most recent Form 10-K and Form 10-Qs. Jim and John will discuss our results in the areas of yield and volume, which unless stated otherwise, are more specifically references to internal revenue growth or IRG from yield or volume. During the call, Jim, John and David will discuss operating EBITDA, which is income from operations before depreciation, depletion, amortization and accretion.

Beginning this year, landfill accretion expense was moved from operating expense to depreciation, depletion, amortization and accretion to enhance comparability and better reflect operating performance. For comparability purposes, 2025 actuals have been updated to reflect that change. Any comparisons, unless otherwise stated, will be with the prior year period. Net income, EPS, income from operations and margin, operating EBITDA and margin, operating expense and margin and SG&A expense and margin have been 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 our 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.

This call is being recorded and will be available 24 hours a day beginning approximately 1:00 p.m. Eastern Time today. To hear a replay of the call, access the WM website at www.investors.wm.com. Time-sensitive information provided during today's call, which is occurring on April 29, 2026, 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 WM is prohibited.

Now I'll turn the call over to WM's CEO, Jim Fish.

All right. Thanks, Ed, and thank you all for joining us. The WM team again delivered strong quarterly results with earnings and cash flow results that achieved our expectations. What continues to set us apart is our ability to consistently achieve strong performance regardless of external factors. Q1 operating EBITDA grew by nearly 6% compared to the first quarter of 2025, driven by solid performance in our collection and disposal business and further supported by growth in our sustainability businesses and ongoing optimization of health care solutions.

This momentum to start the year, combined with our proven operational execution and resilient business model, reinforces our confidence in achieving our full year financial guidance. In the first quarter, our results clearly advanced each of our 4 strategic priorities for 2026. First, we grew our collection and disposal business, achieving 6.4% operating EBITDA growth, supported by our focus on customer lifetime value, operational excellence and network advantages. Our strategically positioned post-collection network is driving profitable MSW volume growth, while our technology leadership leads to differentiated services and lower costs.

Additionally, our people-first culture and disciplined approach to retention are driving meaningful improvements in safety, service reliability and operational efficiency. As we look ahead, we continue to see opportunities for tuck-in acquisitions that complement our existing portfolio that we expect to close in 2026. Second, our sustainability investments continue to generate meaningful returns, underscoring the value of the capital we've deployed over time. In renewable energy, operating EBITDA more than doubled in the quarter, driven by the completion of 7 new renewable natural gas facilities since the first quarter of 2025.

In the Recycling segment, even though pricing for single-stream commodities declined 27%, operating EBITDA grew by 18% as we realized automation benefits that lower labor costs and higher quality material and processed 9% more volume. In 2026, we're on track to substantially complete the sustainability capital expenditure program we laid out in 2023. Third, in Healthcare Solutions, we continue to advance the business towards scalable accretive growth. While revenue was impacted by volume losses from last year, effective cost management and synergy capture drove operating EBITDA growth of nearly 12% in the quarter. Importantly, we expect an inflection in revenue growth in the second half of 2026 as the ERP has stabilized and the benefits of our integrated offering become more evident.

And finally, turning to capital allocation. Our strong operating performance translated into significant free cash flow generation with Q1 free cash flow of $920 million, nearly doubling from the prior year. This enabled us to return about $730 million to shareholders through dividends and share repurchases. As we close out the first quarter, our performance reinforces both the strength of our strategy and its alignment with the long-term trends shaping our business.

We're delivering consistent results in our core operations, realizing returns from years of disciplined investment in sustainability, advancing health care solutions towards scalable growth and pairing that execution with a thoughtful shareholder-focused approach to capital allocation. As we progress through 2026, we're well positioned to continue to produce strong results and harvest the benefits of our investments. I want to thank our employees for their continued dedication and hard work.

Now I'll turn the call over to John to discuss our operational results.

Thanks, Jim, and good morning. The first quarter once again demonstrated the strength and resilience of our operating model and the progress we continue to make in optimizing our business. Despite a softer volume environment driven largely by winter weather impacts and the absence of last year's wildfire-related volumes, we delivered strong financial performance by remaining focused on disciplined price execution, technology-enabled efficiency and cost control. This is clearly visible in our collection and disposal business, where we delivered operating EBITDA growth of more than 6% year-over-year with margin expanding approximately 110 basis points.

From a cost perspective, our focus on operational excellence continues to drive meaningful results. Operating expenses as a percentage of revenue improved 70 basis points and came in below 60% for the fifth consecutive quarter, underscoring the durability of the structural changes we're making across the business. Automation and technology continue to help us flex costs and drive efficiency as volumes fluctuate. As an example, whole dollars repair and maintenance costs were actually lower year-over-year and improved by approximately 30 basis points as a percentage of revenue. This improvement reflects innovative solutions and disciplined fleet actions, including the use of augmented reality tools to improve technician efficiency and continued benefits from rightsizing the fleet.

Together, these initiatives are improving asset utilization and delivering sustainable cost savings. Equally important, our people-first approach continues to show up in our results. Total driver and technician turnover, both voluntary and involuntary, remained low at 17.2%, improving 130 basis points year-over-year. The strong retention supports safer operations, higher service reliability and greater efficiency across the business. And notably, our first quarter safety performance was our best ever Q1 performance for safety-related incidents, which is particularly impressive given the challenging winter weather conditions.

Together, these results reflect the engagement, consistency and dedication our teams bring to executing our strategy every day. Turning to the top line. Pricing execution remains strong. Each of collection and disposal core price of 6.3% and yield of 3.9% exceeded our expectations with pricing dollars up year-over-year. Core price growth in our commercial and landfill lines of business each exceeded 7.5%, reflecting the value of our service offerings, consistent execution in the field and focus on price-to-cost spread.

Shifting to volumes. We began the year softer than expected with about half of the shortfall in collection and disposal volumes driven by severe winter weather. We did see several areas of underlying strength and stability. MSW volumes were 2.7% and special waste volumes were 6.7% when excluding wildfire volumes from the prior year. Industrial collection volumes returned to modest growth in the quarter, supported by continued internalization of solid waste from Healthcare Solutions customers. While volumes were a headwind early in the year, we expect improvement from seasonality as well as the lapping of a couple of larger low-margin contract losses in the balance of the year. In Q1, our energy surcharge program recovered the increase in both direct and indirect fuel costs we saw in the first quarter. Higher revenue from fuel recovery created a 20 basis point drag on operating EBITDA margin. Putting together these pieces on pricing, volume and energy surcharges, we expect to achieve our full year revenue guidance in 2026.

Turning to Healthcare Solutions. We continue to see the benefits of integration into our core operating structure. Operating EBITDA margin improved by 200 basis points in the quarter, while SG&A costs decreased roughly 20% year-over-year, reflecting discipline, operational alignment and the benefits of WM's integrated business model. We remain on track to achieve a run rate of $300 million of total synergies at the end of 2027 with results reflected across all of our business segments.

So in closing, I want to thank our teams for their continued focus, discipline and commitment to serving our customers. The strong start to the year reinforces our confidence in our strategy, operating model and ability to perform consistently in a dynamic operating environment.

And with that, I'll turn the call over to David to walk through our financial results in more detail.

Thanks, John, and good morning. We are pleased with our strong start to 2026, particularly when looking at the drivers of our first quarter operating EBITDA margin expansion, which reflects solid contributions from across the business. The collection and disposal business expanded margin by 110 basis points, driven by strong pricing and our success using technology and automation to reduce costs. This growth includes the 20 basis point headwind John mentioned from the impact of higher fuel prices. Our recycling and renewable energy businesses together contributed approximately 50 basis points of margin expansion, reflecting accretive growth from investments in renewable natural gas facilities and recycling automation and new market projects.

Healthcare Solutions contributed another 20 basis points of margin expansion due to effective cost management and synergy capture. These contributions partially offset -- were partially offset by 40 basis points of increased spending on technology initiatives and 70 basis points related to higher cost and timing-related impacts from incentive compensation and employee benefit costs. The strong execution translated into robust cash generation. Operating cash flow was $1.5 billion in the quarter, an increase of nearly $300 million compared to the first quarter of 2025. The increase was driven by working capital improvements and our strong earnings growth.

Capital expenditures totaled $650 million in the quarter, including $61 million directed to sustainability growth investments. Capital spending was approximately 22% lower year-over-year as expected, reflecting normalized spend on collection vehicles and lower sustainability capital as several projects reached completion during 2025. Combining all of this, first quarter free cash flow nearly doubled to $920 million, putting us on track to achieve our full year guidance. As Jim mentioned, we allocated the majority of our free cash flow to shareholder returns in the first quarter. We returned $385 million to shareholders in dividends, and we resumed share buybacks, repurchasing $344 million of our shares.

Our leverage ratio at the end of the quarter was 2.94x, returning to within our target range of between 2.5x and 3x. Our effective tax rate was approximately 18% in the first quarter, lower than planned, driven largely by the benefit of production tax credits related to our renewable natural gas business. During the quarter, the IRS clarified the qualification for these credits, and we now expect to realize benefits during the next several years, another value add from our strategic decision to grow our renewable natural gas portfolio. That benefit is approximately $27 million for the 2025 tax year and $30 million to $35 million annually from this year through 2029.

As a result of receiving 2025 and 2026 production tax credits, we now expect a full year effective tax rate of approximately 23% in 2026. In closing, I want to thank the entire WM team for their continued focus and execution. Their dedication has driven a strong start to the year and positions us well to deliver on our full year financial guidance. Through our disciplined approach to operations, capital allocation and investment, we remain confident in our ability to create long-term value for shareholders.

With that, Jonathan, let's open up the line for questions.

And our first question comes from the line of Jerry Revich from Wells Fargo.

I just want to unpack the really strong margin performance despite the lower volumes in the quarter, really nice price cost. As we think about the volume cadence over the balance of the year, can we just double-click on what gives us confidence that volume trends will be better in the back half of the year? Can we just expand on how you would quantify the weather impact? And I don't know if you want to talk about it month by month or just give us more visibility on that point.

Yes, go ahead on the margin piece, David.

Yes. Just in terms of the margin trajectory for the back half of the year, I mean, you do know that Q2 will be a tough comp for us with the wildfire volumes, but we do expect EBITDA margin to lift nicely from there in the second half and follow a pattern similar to what we saw in 2025. And we had obviously a strong start to our pricing plan for the year, and that also gives us confidence with the margin trajectory.

Yes. And then, Jerry, as far as volume goes for the remainder of the year, I mean, first quarter, because of the weather impact, and look, we don't normally talk about weather because it happens every year. But this year, in particular, along that East Coast, 3 feet of snow in Boston is -- I don't think they've had that in 15 years. So it did impact us, and we had a number of facilities that were shut down. John could tell you the more direct numbers. But I think some of our facilities were shut down for as many as 10 days, including, by the way, our Stericycle facilities that were shut down. So it did have a significant impact on volume.

As we look at volume going forward, there's a couple of things that give us reasons to be optimistic. Specifically, and John mentioned it, special waste, which we knew was going to be a difficult comp because of Southern California fire volume last year. Including the fire volume, it was down, I think, about 1.5%. But excluding it, as John mentioned, it was actually up 6.7%. And the reason that's meaningful is because it gives us an indication of what special waste will look like. What's the pipeline look like? And what is -- what are the special -- what will they look like? What do the special waste volumes look like when we anniversary this fire volume, which is for the most part at the end of Q2.

We did get some fire volume in Q3 in the month of July, and then it almost all went away at the end of July. So we will get to kind of a clean year-over-year for special waste by the time we get to the month of August. And this gives us a bit of an indication that, that special waste volume should be pretty strong for us. 6.7% is a pretty decent number. And then John also mentioned MSW volume. Just looked at the numbers for last week, MSW volume was over 4% positive for us. So that's a positive for us.

And then the other one that I would mention is industrial volumes, which have finally shown a reversal of probably a 6- or 7-quarter trend. We've been negative on roll-off volumes for at least kind of 1.5 years. And we finally got to a point where we're showing -- it was -- I think the real number was like 0.2% positive. So it was just slightly positive. And last year it was like 1.5% negative. So I think we're fairly encouraged with volume numbers. Are we going to hit our guidance for the year? Don't know, and we'll give -- we'll really kind of take a refresh of our guidance numbers at the end of Q2. But we are encouraged with what we're seeing on the volume side.

Okay. I appreciate the color. And then just to unpack the comments about the tough margin comp in 2Q, David, I think normally, you folks are up somewhere around 150 to 200 basis points margins 2Q versus 1Q. And given the weather that we just stepped through, it does look like you should be in a position for good year-over-year margin expansion in 2Q even with the tough comps from a wildfire standpoint, just given the run rate in 1Q. I just want to make sure we're on the same page with you and not missing any moving pieces in the 1Q results as we think about the normal seasonality for 2Q.

Yes, Jerry, I would tell, it's John. I think the outsized impact of the wildfires in Q2 is really worth noting again. I think the revenue number was $85-ish million and probably strong flow-through on that EBITDA. So if you take that out, what I would point you to, if you look back in the tables, you can see whether it's collection, disposal, recycling, renewable energy, health care, you can see the margin improvement in Q1. But I think net of the wildfire headwinds, I think we're going to see good margin improvement in Q1 and Q2, but it will be muted somewhat by that volume not repeating in the landfill line of business.

Our next question comes from the line of...

[Technical Difficulty]

Can you hear me?

Yes, we can hear you now.

Yes, overall, really strong margin expansion in the quarter. The only item that sort of jumped out at us in a negative way was just the magnitude of the increase in corporate expense. I think you had been flagging that, that was going to be up because of some technology-related investments. Just curious if the level of increase in 1Q is sort of appropriate for 2Q or if maybe we think about that sort of moderating throughout the year?

Yes. No, thanks for the question. Like you said, we did expect Q1 to be a tougher comp in this segment, and I'll break it down into 2 pieces. There was a health and welfare cost aspect to an unusually favorable Q1 last year. So we had some onetime benefits, and so that made the year-over-year comp a bit difficult. We also had higher annual incentive compensation and annual wage increases, along with the increased technology costs that you mentioned. And those costs are to support strategic initiatives of other -- that benefits other segments. And so if you look at the overall performance of those other segments, I think you're seeing some of the returns on those investments.

In terms of your question about kind of the cadence for the rest of the year, Q1 is indicative. It's a normalized kind of rate for the remainder of the year. It's pretty flat throughout the rest of the year at that level in Q1.

Okay. Understood. And then just, John, you mentioned some surcharges for rising fuel costs. Do you anticipate any drag on EBITDA in 2Q given maybe potential timing differences between rising costs and surcharge implementation? Or is this sort of happening in real time?

It's almost real time, [ Brian ]. I mean we've got -- there's a little bit of drag. We said 20 basis points on the margin side. But based on the way our billing cycles work, we said it's about a month lag, but it's really -- from an EBITDA standpoint, it's not going to be anything material.

And our next question comes from the line of Jim Schumm from TD Cowen.

Just looking at the solid waste volumes up quite a bit and transfer station volumes down. What's driving that? Does that have something to do with WM Healthcare?

No, Jim. Probably -- the transfer volume, honestly, that's probably as much about the Northeast and the weather. I know that in -- for instance, in the New York metro area, there was obviously a significant impact due to the weather. So that's really what's driving the transfer volume, not the Healthcare business.

Okay. I see. And then on the Healthcare business, can you just give us a sense of -- you talked about some customer credits in the past. And just what did that look like in Q1? What does it look like in Q2? How is that trending?

Well, so we knew that customer credits, we said they peaked in Q4, which they did, and then fell off a little bit in Q1 and Q2, and then they will really reverse when we get to Q3 and Q4. So the year-over-year comp becomes quite a bit different, quite a bit easier in Q3 and Q4. I think overall, Jim, as I look at the Healthcare business, it's really turning out to be exactly what we hoped it would be with EBITDA improving by almost 12%. We were better than our own business plan by about 3%. And just about everything we look at, whether it's pricing, which we did say back last quarter that the year on the top line was largely going to be about price, not about volume. That volume would be negative.

And that was mostly a function of losing -- I think we projected to lose 3 hospitals. We actually only ended up losing 1. So that was a real positive for us. I think the reason we only lost one is because our customers are now getting a very payable invoice. And so all the work that continues to happen, by the way, we're still working on ERP, but all of that is behind the scenes. And so it's kind of been visible to the customers, and that's a real positive for them. So the ERP is progressing, but what we really wanted to make sure was that it was not visible to the customer. And then we would continue to do the technology work, the systems work and the process work, which is ongoing.

We think a lot of that will be done by the end of the year. Some of it will carry over into next year. But my biggest concern was with the customer, and now the customer is getting a good bill. So that's why I think we only ended up losing 1 of the 3 hospitals. And then I guess, as I think about -- you didn't ask about the cross-selling or synergies, but I'll go ahead and as I'm talking about WMHS, cross-selling has been a positive for us. We had 2 big cross-selling closes for the quarter that kind of benefited -- half of it benefited Healthcare Solutions, half of it benefited solid waste.

Pricing is right on track with where we thought it would be, and that's a good thing, and we think pricing continues to improve even as we get into the rest of the year. Synergies are at or even potentially ahead of plan. We're moving fleet maintenance in-house. That should be a positive on the cost line. So I think overall, we're very pleased with this. And you mentioned the credit memos. I mean, look, I think the -- that in large part was -- in Q4 was really kind of cleaning up the mess from prior periods.

And that mess should, for the most part -- I mean, we will always have credit memos. We have credit memos on our regular business, on the solid waste business. But if you look at things like DSO down 14 days, that is a major, major change for us. If you look at past due receivables down by 2/3. I mean the balance has come down 2/3 over less than a year. So all of those are positive signs, and we think that the Healthcare Solutions business is shaping up to be exactly what we hoped it would be when we bought it.

Great. And Jim, since you brought it up, on the synergies on the path to $300 million, like roughly where are you now? Are you in $130 million, $140 million? Or where are you?

Well, so the total number, which we think -- we said would be $300 million, and I think $50 million of that was cross-selling benefits. So -- and as I said, we're on track with that number. And you could argue that maybe we're even ahead of that number a little bit. Right now, we're targeting $300 million still. But we think that potentially, we could end up ahead of that number and maybe as high as $325 million.

And our next question comes from the line of Faiza Alwy from Deutsche Bank.

So I wanted to ask what you're seeing from a recycling commodity pricing perspective. Just given higher oil prices, I'm curious if you're expecting an improvement in those prices? And if you could help sort of frame that for us in terms of upside. I know you're typically hedged. So I just want to understand potential upside to revenue and EBITDA.

Sure. This is Tara Hemmer. We were pleased with where we exited the quarter. March was at about $69 a ton. And as you recall, what we guided to was $70 a ton. So we feel positive about where that's heading. Two things I just want to point out. One is about 80% of our commodities stay domestic between the U.S. and Canada. But we do have some exposure to what's happening globally, which really is about freight disruptions given what's going on in the Middle East. So we have no qualms about demand for our products. It's really about us tracking what those freight costs might look like, and that's going to be really a function of how long this goes on in the Middle East. So that being said, we feel really positive about the $70 a ton that we guided on. We'll give more of an update in Q2 on where we think it could head up or down.

All right. And then just a follow-up on the Healthcare cross-selling opportunities. Could you frame for us how much of the improvement that you're seeing on the industrial volume side is kind of related to the cross-selling benefits? And kind of how much better are you doing relative to like the underlying market there?

That's a good question. I don't know that I know the answer to that. So we'll have to get back to you on how much of that cross-selling actually impacts the industrial line of business. I can tell you that the number in terms of an annualized EBITDA benefit was about $27 million from cross-selling. But I can't -- I don't know offhand how much of it was in the industrial line of business.

And our next question comes from the line of Trevor Romeo from William Blair.

I wanted to ask one on collection disposal pricing. I think you said both core price and yield were coming in a little bit ahead of what you'd expected. So maybe first, where are you kind of seeing pricing stick a little better than you thought? What are the drivers of that? And then if you think about CPI maybe starting to trend higher, we'll see what happens with the Middle East and maybe it takes a while for some of your contracts to reset higher CPI. But would just love your thoughts on ability to price to get into a little bit of a higher inflationary environment. Could we see those pricing and spread metrics sort of move up maybe moving into '27?

Sure. So I'll take the second part of your question first on CPI. We tend to say that there's about a 2-quarter lag -- 1- to 2-quarter lag on the adjustments for CPI. So as CPI trends up, which it has a bit, that is -- tends to be -- most of our resets there in terms of price and about -- I think about 40% to 45% of our total revenue is based on an index, and those indexes tend to reset on a quarterly basis, and it often takes 2 quarters for that reset to take place. So any movement in CPI that we would have seen in Q1 probably won't have much of an impact on us until we get to the back half of the year. So that's the second half of your question.

The first half of your question is really about price as a whole. Two of the lines of business that -- I think, first off, everything was on track for us with 2 exceptions, which are resi and MSW, and those were actually ahead of our expectations. Resi yield was up 110 basis points versus Q1 of 2025 and yield was 6.3%. That's really strong for residential. We've been talking about residential for quite a long time as we've really tried to pare down some of the unprofitable business there. And so that is certainly part of that exercise. MSW was another -- MSW might have been the single most kind of impressive performer for the entire quarter, both on the volume line and on the price line. The MSW yield was 6.9%.

I think what you're seeing with MSW yield, and this takes place slowly over a period of years, we talked about it last June on Investor Day. But as you see landfill capacity slowly come offline for the industry or some of it doesn't come offline, but it moves to more kind of center of the U.S. locations away from these big cities. But as you see that happening, we end up in a better position because our lives -- our landfill lives are a bit longer than the rest of the industry. And it gives us the ability to raise price to preserve airspace really. And that's what you're seeing with MSW going up by 6.9% is a bit of cost recovery, but also airspace preservation. So those were both surprises to the upside. The rest were pretty much on track.

Okay. That is helpful color. And then I would love to get either maybe your perspective or John's perspective on AI and new technologies. Obviously, WM has been leaning into automation for a long time at this point. But just in terms of AI, there's a lot of hype out there. So would love your views on whether there are any new tools you're looking at that could accelerate your efficiency going forward?

Yes, it's a good question. I think, obviously, we've spoken to where we've embedded technology into the business, right? And a lot of what we're doing in the recycling facilities that Tara and team have talked about with AI and robotics and automation, what we're doing from a routing and logistics perspective with the now, call it, 19,000 trucks we have on the street with the Healthcare business. And by the way, worth noting that a lot of the technology benefits that we've -- we're seeing in our traditional collection and disposal business are yet to show up in the Healthcare business. So we see some other upside there.

But I would tell you, we still feel like we're in the early innings in terms of our ability to embed technology to drive not only efficiency. But if you think about things like making these jobs more palatable, look at our turnover, it's 17-plus percent. That's the lowest it's ever been. I think part of it is we're changing the scope of these roles and making them less labor dependent, if you will. If you look at our safety results, I mentioned in my earlier comments that those are -- that's the best Q1 safety numbers we've posted. And part of what's helping us do that is we're using AI as one example from a coaching perspective with the 20-plus thousand drivers we have. So as much benefit as we've seen that showing up in our OpEx numbers and our collection and disposal margins, I think we still see a good bit of runway there to continue to accelerate those investments.

And our next question comes from the line of Noah Kaye from Oppenheimer.

Well, that last question took a little bit of thunder, but I'm going to continue on the same thread, John. We're sitting here with risk management at 1.5% of sales, which is very good. But we think about that as a lagging indicator of safety performance. So just how sustainable are kind of some of these gains on safety in your view? Could we get further benefit? And then how should we think about that translating to kind of risk management going forward?

Well, I think, no, what I would tell you is this is not something that happens over a quarter or 2 or a year. I think what you've seen is slow and steady improvement in our safety results. And to your point, you're starting to see it show up in the risk numbers over time. So while we're -- I think our recordable injury rate for the quarter was about 2.7. It was under 3, which is a big milestone for us. We still see plenty of opportunity with respect to that. And I think to your point, it's going to translate to our risk going forward in a positive way.

Question on Renewable Energy segment contributions, maybe for David or Tara. Just you had the projects come online, but how did sort of the mix of lower RIN and higher energy commodities impact results in the quarter?

Well, if you look at the quarter, we doubled -- almost doubled our renewable energy production from our renewable natural gas plants, which was excellent and what we were anticipating coming out of 2025 with the plants that had come online in that year. We didn't have any new plants come online in Q1. We expect 3 more to come online in Q2 and then the rest of them in the back half of the year. We did see higher pricing, and that is a testament to what the team has been able to do locking in volumes. And we are now -- 80% of our volume is locked in for the year. That's up from 60% when we announced guidance in January. So really pleased with our performance, how we're tracking and seeing the benefit of some higher commodity prices, too.

Okay. Just one quick one for David. I just may have missed the exact answer before, but the weather headwinds in the quarter, I think you said those were half of the delta on volumes. Was that basically half of the 1.5% volume decline or kind of half of the delta versus what you'd originally thought on volumes? I just want to clarify.

It's half of the 1.5%.

And our next question comes from the line of Connor Cerniglia from Bernstein.

I know we already had a question on AI investments, but I just wanted to follow up. Others in the industry have talked about some of the benefits they've seen from a pricing standpoint. I think there's been commentary that there's -- they expect a 100 basis point improvement in margins over the next few years. Have you all seen similar benefits mainly on pricing? And do you have a sense of maybe what that number could be? Or it sounds like it's a bit still too early to tell, but any color there would be helpful.

As it relates to AI and pricing, we've been using AI-enabled cameras, for example, on trucks to -- it both helps us with the quality of the material. So as you think about a can being dumped into -- a recycled can being dumped into the top of a truck, we've been using these AI-enabled cameras now for probably 6 or 7 years on. And it is interesting watching the word because they're able to identify pretty accurately nonrecycled materials coming out of that can. And then we're able to contact the customer and clean up their recycle stream. So -- and if they choose not to clean up the recycle stream, then we'll bill them for it. So it has been a positive on the price line. It's also been a positive on the quality of the material coming into the recycle plants.

And our next question comes from the line of Rob Wertheimer from Melius Research.

You touched on Healthcare a couple of times. And you mentioned, I think, in your opening remarks, 2H revenue growth as the ERP stabilizes. If you were to sort of break that down, is that mostly the absence of customer credit? Or are you seeing more price and volume opportunity come through already as you improve service quality? And if not, when do those 2 factors start to make a bigger difference?

Yes, Rob, I think it's all of the above. Certainly, credits improve as these pass-through receivables are cleaned up, and I mentioned that they've dropped by 2/3 in a fairly short period of time. And we will continue to see the year-over-year change on that be positive, particularly as we get to the back half of the year. So that's part of it. But pricing -- I mean, if you think about pricing last year, it was -- we were kind of getting our sea legs a little bit last year. And this year, I think we're in a very good spot. We understand the customer a lot better than we did last year. I think our customer service stats are as good, if not better, than some of our solid waste customer service stats, and that gives you the ability to put a price increase.

It's a little hard to put a price increase through to a customer if your customer service has been very poor. And I think we've completely turned that corner. So part of it is credit, part of it is price. And we think part of it is volume as well. I mentioned a couple of the cross-selling opportunities that are starting to manifest themselves, and that manifests on not only the top line but on the volume line, too. And then, of course, those losses that presented, I think we said a $40 million headwind to us coming into '26. That was mostly going to be a front half of the year issue.

So if I think about Healthcare Solutions, really, we are super optimistic about this because it really does -- we knew it was going to be a front half versus the back half, whether you look at volume, whether you look at credits, whether you look at just about any metric, and we are encouraged with that. We think it's going -- we absolutely believe that the story we were telling last year of front half and back half is starting to show up for us.

And our next question comes from the line of Sabahat Khan from RBC Capital Markets.

And maybe if I could just follow up on the discussion there on the Healthcare side. I think you're talking to roughly flattish type volumes, most of the gains coming from pricing this year. And I think longer-term number is about 3% to 5% sort of top line growth. I guess based on what you've learned about the business, the customer mix and the progress you've made, how are you thinking about the price versus volume opportunity going forward? Over the medium term, does this align more with the solid waste business where still maybe primarily pricing driven? Just some comments on the long-term mix of the top line.

Yes. I think what we're seeing with price, particularly as we think about what Q2, Q3, Q4 will look like, that looks about like what we would expect for the long term. Volume, we knew was going to be the one where we'd have the most ability to improve. And so that's why we're encouraged about that front half, back half. I think the front half, we knew was going to be soft from a volume standpoint, whether it was with customer losses, encouraged, by the way, as I mentioned early on, that those customer losses are lower than we thought they would be. So I do think that this becomes a -- over the -- probably as we get into next year where we don't have this kind of front half, back half thing, a business where we really can expect a nice level of volume growth. And then the top line is not just solely reliant on price. But the price component was quite good and volume, we see it coming.

Great. And then just maybe sort of clarifying the commentary on sort of the back half of the year guidance and the outlook there. With RINs and commodities maybe in a better position than we were a few months ago, from your perspective in terms of the guide, are you assuming volume probably okay in line with what you were initially expecting with potential upside from RINs and commodities through the back half? Or do you see those maybe as offsetting at this point of the year? Just wondering if there is upside in the back half, could that come from those 2 sort of areas outside of just the core business?

Well, just to clarify on the sustainability-related businesses, we're still expecting to come in at that $240 million to $250 million benefit to EBITDA from the sustainability businesses. And while we expect, at least on the renewable energy side, pricing to come in a bit better, one of the things that we're tracking is we feel confident that our plants will commission. We're just navigating some interconnect delays with the utilities that might have been unexpected. All of that said, we're in a great spot to achieve our goals for 2026 and really positions us nicely for 2027 when all the plants are online and our ability to meet or exceed the $26 per MMBtu number. So how that stacks with the rest of the business, David can speak to.

Yes. I think it's still in line with what we guided to last quarter in terms of -- it's a little bit more weighted in the second half in terms of the contribution from EBITDA. And then we talked earlier about the margin trajectory for the remainder of the year does look similar to 2025 in terms of the slope. You do see sequential and year-over-year improvements in the back half of the year on margin as well.

And our next question comes from the line of Konark Gupta from Scotia Capital.

First of all, my condolences for Dean Buntrock for his legacy. Maybe the first question on the volume side. The residential volumes have been obviously soft as you guys are shedding. Just curious where do you see the shedding kind of maybe slowing down substantially? Is it still more like a second half story or more of a 2027 now? And the industrial rebound wasn't a lot, but still positive in Q1. Do you think that would be an indication along with the special waste volume turnaround you're seeing of the macro turning more positive?

I'll kind of answer those backwards. I think Jim mentioned it, and I mentioned in my prepared remarks about what strength we saw in the special waste line, net of the benefit of the wildfires last year. And we just did our quarterly business reviews of all our 16 areas last week, and there was some optimism around the special waste pipeline. So we feel good about that for the balance of the year. On residential, I know we posted, I think it was about a 5% negative volume for the quarter. And again, that does fluctuate.

But I went back and I looked at 2023 and every quarter since 2023 with about a 3.5% volume decrease, we have seen revenue and EBITDA improvement. And to put it in perspective, if you go to Q1 of '23 to Q1 of '26, our EBITDA was up 211%. So while we've traded off some volume, we've obviously seen the financial benefit. We've seen it in a bunch of different ways. We've automated the majority of that fleet. We've seen improved safety numbers, efficiency numbers. We focused on quality of revenue, contract terms, et cetera.

And to the first part of your question, we did say at the end of the year that we do see some moderation in that coming in the second half of the year, not to positive, but we're going to see some positive movement as we move through Q2 and Q3 in terms of the volume degradation. But to this -- to date, if you go back, like I said, every quarter for the last 3 years, we've shown substantial positive EBITDA dollar and margin improvement. So I feel good about where we are, but we do see it becoming more of a tailwind over the next handful of quarters as opposed to the negative headwind on the volume front.

Okay. And as a follow-up on the margin side, I think you mentioned the fuel is being a headwind of about 20 basis points for now. When you look out for the full year, I know the EBITDA dollars are not impacted much given the fuel revenue and the fuel costs are roughly an offset. But do you think the top end of the guidance range for margin, which was I think 31% for the full year, do you think that still is attainable in this fuel environment or that might be a little bit impacted just given the mathematical influence?

Yes. I mean, based on where we're at right now, we're very comfortable with the whole range that we gave for margin. Just to give a little bit of context on surcharge revenue, about $1 increase in the price of diesel equates to about $200 million of annualized surcharge revenue. And if you assume like a one-to-one trade-off with fuel cost in surcharge revenue, that's about a 20 to 25 basis point headwind. But we do have that factored into our overall forecast for the remainder of the year and still feel comfortable with our guidance range.

And our next question comes from the line of Adam Bubes from Goldman Sachs.

I appreciate all the clarity on drivers of higher corporate expense year-over-year. How should we be thinking about what normalized corporate expense as a percent of sales looks like beyond 2026 and your ability to achieve leverage on that line item beyond 2026?

Yes. I think because it is showing up in that segment, but the benefits are showing up elsewhere. I do think that at least for the Q1 print that we had in terms of corporate and other for the remainder of this year, that is relatively stable. But you kind of have to look at the whole picture in terms of the returns that we're getting, particularly on the technology investments we're making in our business. So that's where I would point you to. It may mean that like SG&A as a percentage of revenue is more in that kind of 10% range long term versus something south of that. But you would hope to see the improvements in OpEx to -- so the overall margin improvement of the business as a result of those investments.

Part of that 10%, David, is having the Stericycle business on board because prior to Stericycle, the number was approaching 9%. If you recall that Stericycle's number was actually as high as, I think, 25%. So now we've chopped away at that. And I think, David, that's down to 17%...

Yes, high teens.

High teens. So -- but it still is -- it's certainly not down where the business was prior to the acquisition. So I think David's number of 10% is a reasonable -- actually quite good number considering you've got a high teens business there at Stericycle. As we continue to get synergies and a lot of the synergies do come out of the SG&A line, we think it's possible to get the WM Healthcare Solutions business down in the low teens and maybe even below that. Devina used to talk about getting it down to our own number. And so I think there's a long-term pathway to getting total SG&A back in that kind of low 9s. But for now, we're still focused on sub-10% because of the Stericycle business.

Got it. And then just wondering if you could talk about free cash flow conversion trajectory from here. I think excluding growth investments as a percent of EBITDA, you'd be at high 40s this year. Where can that trend beyond 2026? You'll have landfill gas, which is high free cash flow conversion ramping and continuing to focus on working capital improvements in Stericycle. You talked about some incremental production tax credits. So just wondering about the trajectory there.

Yes. I mean, obviously, just given the quarter we had with the $920 million of free cash flow, it is actually close to 50% for the quarter. I know it's just 1 quarter. But for the year, it's around 46%, including all investments. We do see a path to continuously improve that. And I do think 50% is a good number to aspire to. And I think we're charging forth in terms of our plans and our investments that should enable us to do that.

And our next question comes from the line of Toni Kaplan from Morgan Stanley.

This quarter, it looks like you started -- restarted your buyback program with over $340 million of buybacks. I was hoping you could just refresh us on your capital deployment strategy going forward and how you're thinking about M&A and also just the pipeline for deals and how you're sort of -- how you'd want to balance M&A versus buybacks?

Sure. Yes, we commenced our share repurchase program right after our earnings call last quarter, and we are on track for the $2 billion for the year. It's going to be a little bit more back-end weighted, call it, 55% to 60% in the second half of the year. Our capital allocation strategy for this year is really balanced. It is a year of harvest. And so we're really focused on returning that cash to shareholders. Over 90% of our free cash flow will be deployed in the form of dividends and share repurchases this year.

We do have a decent tuck-in pipeline. We previously said $100 million to $200 million. It's likely we'll be at the high end of that, if not above that, but we'll give more guidance next quarter in terms of that. And then there was a reference to our leverage target being back within our long-term range. That gives us a lot of capacity and a lot of flexibility in terms of acquisitions longer term. But again, this year, I think it's primarily focused on the harvest theme.

David, one thing I'd add to your point on -- we did talk about a few acquisitions, Toni, that we're going to either close in Q4 or Q1, and they obviously haven't closed yet, but we expect in the next days or weeks, one of those will close. But to one of some of the other questions, that was a little bit of the revenue headwind in Q1. It was just under $20 million of a headwind. So we expect that we're not going to get that $20 million back, but it's going to be part of our run rate going forward here sometime in Q2.

That's helpful. And just as a follow-up on the technology and automation theme, you talked about that a few times during the prepared remarks in terms of the benefits that you're seeing in terms of reducing costs from those initiatives. And I was hoping you could maybe just talk about which initiatives, whether it's robotics or automation or the cameras and the coaching that you talked about, just which of the technology benefits are you seeing the most benefit right now and sort of when you look forward continuing to benefit from those?

Yes, I'll try and be brief because that could be a really long answer. But if you think what I commented on earlier, if you look at what we've done in the recycling business, right, and Tara commented on despite really low commodity prices, we're still making more money and better margins. A lot of it has to do with the fact that we've structurally lowered the operating cost model in those recycling plants, and we're a lot less susceptible to commodity prices now than we were. And that's really -- that's not so much robotics, but it's automation and forms of artificial intelligence that we put in those plants. Jim mentioned, you've heard us talk about smart truck, right?

We've got all of our commercial and residential trucks outfitted with technology that allows us to capture over 300 million images a year. We could never do that manually. We couldn't put enough people anywhere to be able to do that, but we're using different forms of technology and AI to process about 95% of those images without a human having to touch them, and it's given us tremendous amounts of data that we can use, whether it's to evaluate safety, contamination, pricing opportunities, overserviced, underserviced customers, et cetera. And those have been in place for years. That technology on the truck I'm speaking of has been around for probably closer to a decade.

And then you think from a safety perspective, I think a lot of what we're able to do using artificial intelligence to capture data on how our folks are operating inside the cab has given us the information to go out and coach our folks. And I do think that's a true contributor to the historically low rates we're seeing or the high retention rates we're seeing, if you will, and turnover rates being as low as they've ever been. So those are all in place. Going forward, I think we've got tremendous opportunity in terms of routing and logistical capabilities that our folks continue to work on. We're actively right now piloting remote heavy equipment in a number of spots. We see that as a potential pathway down the road to forms of autonomy at some of our landfills, et cetera, et cetera. I can go on, Toni, but those are a few sort of examples that are in place now and a few that we see as driving benefits as we move forward.

And our next question comes from the line of Tami Zakaria from JPMorgan.

Probably a question for Tara. Your sustainability EBITDA dollars was robust, but margin sequentially ticked down to, I think, 45% from 50% in 4Q. Is that due to seasonality? And related to that, what margin are you expecting in 2Q and for the rest of the year for sustainability?

So we saw strong margin improvement year-over-year on both the Renewable Energy business and the Recycling business, and we were really pleased at where we came in. What we had said previously was on the recycling line of business that we would anticipate roughly 300 basis points of margin expansion this year, and we're still on track for that. And the Renewable Energy business, what we were anticipating was 200 basis points of margin expansion related to the growth investments. And that might be offset slightly related to our third-party fuels program. What I'll say is, given that pricing is a bit higher in the Renewable Energy business than we anticipated, we would expect that margins would tick up a bit based on what we had guided to. So all in all, what I would say is we're in a really good spot. We're performing the way that we had anticipated and feel positive about where we're headed this year.

Understood. That's very helpful. And I appreciate all the color on the Healthcare business. I was wondering if you could quantify the price versus volume you saw in Healthcare this quarter?

I probably can't do that. I don't know. Maybe Ed and Heather could offline take that.

Yes. We can answer offline on how we're handling that right now.

And our next question comes from the line of Seth Weber from BNP.

Just a quick one. Just I'm curious on the special waste strength. In your experience, is that typically -- have you seen that as a good leading indicator of just sort of the broader macro? Or how do you kind of think about special waste as an indicator of the business?

Yes, I think you're right on with that. That is one of the leading indicators for us is the special waste business because the customers, while they have these special waste projects, they have some flexibility in terms of timing. And so when we see that pipeline start to materialize in the form of volume growth for us, that is a good sign. It tells us that our customer base is relatively optimistic. So yes, I would say that's one of the best forward-looking metrics that we have.

And our next question comes from the line of Shlomo Rosenbaum from Stifel.

Could you talk a little bit about the current price/cost spread within collection and disposal and where that's running versus your outlook and maybe how we should think about that spread running as we go through the year?

Yes. Good question. I think, first and foremost, you could see what the collection and disposal margins have done. EBITDA margins up 110 basis points, and that's overcoming a 20 basis point headwind from the fuel side. I think when you look at operating expenses being again sub-60% and in the 59% range for Q1, obviously, we're showing good spread between the 2. I think what we've talked about 150 to 200 basis points, it's probably a little bit more than that over 200 basis points now. And what that's translated to is the 70 basis point EBITDA margin you saw across the business.

And as I mentioned, 110 basis points in the collection and disposal business. I think Jim touched on CPI. I think from an inflationary standpoint, 3%, 3.5% is sort of the range that we're still experiencing a little bit more pressure on the labor side, probably closer to 4% for obvious reasons, just the scarcity of some of that talent we need to keep bringing in. I do think that's part of where the -- we talked about safety and turnover where that's showing up. I think what I back up from is I look at what our core price performance has been quarter in and quarter out, how that's translated to yield and how it's translated to margin. And I think we feel good about our ability to still continue to drive some margin expansion as we go forward.

Okay. And then if I could just follow up, can you comment a little bit about the churn rate in the quarter versus last quarter and then year-over-year? And maybe the role of technology and the AI advancements and how does that play into the improvements in customer and price stickiness?

So I think from a -- we didn't comment on the service increases were still positive for the quarter. So that's always something that we look at. The churn rate, I don't have it in front of me, but I think it was right around 10%. It varies quarter in and quarter out. National account business can affect that, but we haven't seen any wide swings there. I think what's encouraging, again is if you look at our price performance across all the collection and disposal lines, we're driving strong core price, strong yield conversion, and we're doing without really driving defection.

And I think, as Jim mentioned, if you look at a few spots, our MSW volume, our special waste volumes continue to be net of some of the anomalies we spoke to, continue to be strong. From an AI perspective, I would tell you it's a little broader. We do use some artificial intelligence in our process, but it's really about our predictive analytical capability that our customer teams worked on building over the years and using a lot of that data that we're gathering, filtering it through those technology tools and being able to give our folks a better predictive position to make decisions on when and where pricing is warranted and how it will be received and accepted by the customer. And I think you're seeing the results of that show up in our financial performance.

And our next question comes from the line of William Grippin from Barclays.

I'll just keep it to one here. But coming back to the Renewable Energy business, the EPA obviously recently finalized the RVO for '26 and '27. Just wondering if you could provide some color on maybe how that's impacted your discussions with customers in terms of forward selling of RNG and also in terms of pricing expectations on voluntary offtake.

Sure. So we were really somewhat pleased with what the EPA did with the RVO because they slightly raised the renewable volume obligation. And you've really seen prices hold and stay steady at $2.40 per RIN, and that's good for us and well above what we had anticipated for our long-term investment thesis at $2. You've seen us be able to go into the market and forward-sell RINs, and the fact that we have 80% of our volume locked up for 2026. Some of that is in the RIN market. What we're tracking more broadly is what's happening in the voluntary market.

Roughly half of our long-term offtake will be in the transportation market and the other half in the voluntary market. And we've seen outside the U.S., whether it's Canada, the U.K., Europe, even Asia have strong voluntary markets that we can tap into. And then we're continuing to look at what public utilities might do in the U.S. They're passing along what they can to ratepayers and having more options in the U.S. voluntary market. All that being said, we feel confident that we can sell all of our volume in the voluntary market, and that will come in at or above our $26 investment thesis.

And our final question for today comes from the line of Kevin Chiang from CIBC.

Maybe this is also for you, Tara. Just wondering what you're seeing in the recycled plastics market. I mean virgin plastic has gone parabolic here since the onset of the conflict in the Middle East. And you did shutter a facility, I guess, the Natura plastic film processing facility. Just wondering if the economics of that facility changes just given what we've seen in the broader plastics market.

Yes. Brent would love your word parabolic. That's the new one to some other words for what's happened in the plastics market. Clearly, what's happening in the Middle East and what's happening with virgin pricing will potentially have some impact on recycled commodities, and it could be positive. We're tracking that closely, and it's starting to creep back up, but the word that I would emphasize is creep. So we're not anticipating any significant benefit from plastics pricing right now nor would it change our tune on some of the facilities that we've shuttered at this point.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Jim Fish, President and CEO, for any further remarks.

Okay. Thank you. Well, I guess one last comment here. We didn't really talk much about kind of the geopolitical environment. But even with all of the geopolitical uncertainty and then some of what we did talk about, which is weather, what we're most proud of here is that our 60,000 folks have been able to produce good results for us, and we're on track to hit our guidance for the year. So we're very proud of that. Thank you all for joining us, and we look forward to talking to you next quarter.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Good day, and thank you for standing by. Welcome to the WM Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Ed Egl, Vice President of Investor Relations. Please go ahead.

Thank you, Olivia. Good morning, everyone, and thank you for joining us for our fourth quarter and full year 2025 Earnings Conference Call. With me this morning are Jim Fish, Chief Executive Officer; John Morris, President and Chief Operating Officer; and David Reed, Executive Vice President and Chief Financial Officer.

You'll hear prepared comments from each of them today. Jim will cover high-level financials and provide a strategic update. John will cover our operating overview, and David will cover the details of the financials. Before we get started, please note that we have filed a Form 8-K 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 of 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. All forward-looking 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 filings with the SEC, including the most recent Form 10-K and Form 10-Qs. John will discuss our results in the area of volume, which unless stated otherwise, are more specifically references to internal revenue growth or IRG from volume. During the call, Jim, John and David will discuss operating EBITDA, which is income from operations before depreciation, depletion and amortization.

References to the legacy business are total WM results, excluding the Healthcare Solutions segment. Any comparisons, unless otherwise stated, will be prior year period, net income, EPS and income from operations and margin, operating EBITDA and margin, operating expense and margin and SG&A expense and margin have been 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.

This call is being recorded and will be available 24 hours a day beginning approximately 1:00 p.m. Eastern time today. To hear a replay of the call accessed the WM website at www.investor.wm.com. Time-sensitive information provided during today's call, which is occurring on January 29, 2026, 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 WMs prohibited. Now I'll turn the call over to WM CEO, Jim Fish.

Okay. Thanks, Ed, and thank you all for joining us. We're pleased to report another year of outstanding results in 2025, including a record performance in operating expenses as a percent of revenue. This performance, combined with our disciplined approach to pricing drove full year operating EBITDA margin 150 basis points higher in the legacy business.

Strong [indiscernible] performance translated to double-digit growth in cash flow from operations and nearly 27% growth in free cash flow. Our results highlight the strength and momentum we built in our business model through operational excellence, scaling sustainability businesses and integration of health care solutions. You've heard me talk about the strength of our collection and disposal business with our differentiated assets and the best people in the industry.

All of these were on display in 2025 and as we drove our best ever operating leverage in our collection and disposal business, reflecting the intentional investments we've made in our people, technology and fleet. Better frontline retention and a decreased average age of our trucks delivered improvements in labor and maintenance costs. Meanwhile, we continue to drive organic revenue growth from both price and volume. By using data and analytics, we're offering pricing that reflects the premium value of our service, our leading commitment to environmental sustainability and the strength of our asset network.

It's our unmatched network, particularly our transfer and disposal assets that drove volume growth in 2025, more than offsetting the residential volume declines as we shed some low-margin business. In our Healthcare Solutions business, 2025 was a year of teamwork, focus and execution to build momentum to our integration. Our service delivery metrics and customer service scores have improved to levels above our legacy business.

Customer call volume has been trending down and the standardization and enhancement of customer-facing processes and invoices are all leading to rising customer satisfaction. Just last week, we received an acknowledgment from one of our largest health care solutions customers for the improvements we've made on invoicing, which is a great indicator of the significant progress we've made in the last year in our systems and back-office processes.

At the same time, we continue to significantly reduce SG&A and operating costs, streamline our operations and greatly improved asset efficiencies. While there's still work to do, the progress we've made to date puts us in a good position to grow the earnings and cash flow from this business with a lean and efficient cost structure a healthy pricing environment and new opportunities for volume growth through both cross-selling and market share expansion. On the sustainability front, we drove notable strategic expansion in our sustainability businesses. We commissioned 7 new renewable natural gas facilities, expanding our renewable energy network and further positioning WM as a leader in environmental sustainability.

We completed automation upgrades at 5 recycling facilities and added facilities in 4 new markets, which are enhancing the performance of our recycling network and creating new opportunities with customers. The value of our recycling investments is clear, particularly when you consider our recycling segment delivered over 22% operating EBITDA growth despite nearly 20% lower commodity prices in 2025. This combination of operational excellence and strategic investment across our business has produced record margin performance and accelerated cash duration. As we enter 2026, we're well positioned to convert more of our earnings into long-term shareholder value.

Turning to our outlook. We expect continued strong growth in the year ahead. Our guidance is operating EBITDA growth of 6.2% at the midpoint or 7.4% when you normalize for wildfire cleanup volumes in 2025. Free cash flow is expected to grow nearly 30% at the midpoint, reflecting structural earnings strength and the benefit of our investments.

As announced in December, our Board approved a 14.5% increase in the planned quarterly dividend rate in 2026, our 23rd consecutive year of dividend growth. We also authorized a new $3 billion share repurchase program. We plan to return about $3.5 billion to shareholders through dividends and share repurchases in 2026, representing more than 90% of free cash flow we expect to generate. We will continue to balance these returns with disciplined reinvestment, tuck-in M&A and a solid investment-grade credit profile.

Looking ahead, our priorities are clear: First, growing the core business by leveraging our focus on customer lifetime value, operational excellence and network advantages; second, capturing and maximizing returns from our investments in our recycling and renewable energy businesses; and third, driving accretive growth in health care solutions as we take the business from integration to scalable growth.

Finally, executing our disciplined capital allocation plan to deliver compelling long-term shareholder value. Our results reflect the hard work of our entire team who serve our customers with pride every day. Their commitment fuels our performance and sets the foundation for the opportunities ahead. In 2026, we will build this momentum strengthening the core, scaling our growth platforms and creating meaningful value for all our stakeholders. I'm incredibly proud of what we've accomplished and excited for what's ahead.

And with that, I'll turn the call over to John to provide more detail on our operational performance.

Thanks, Jim, and good morning. WM delivered another fantastic quarter to close 2025, driven by disciplined pricing and continued cost efficiencies across the business. In the fourth quarter, operating EBITDA in our collection and disposal business grew more than 8% and operating EBITDA margin expanded by 160 basis points, supported by strong execution in the ongoing benefits of automation and technology across our operations. The strength in Q4 was driven by operating expenses as a percentage of revenue improving 180 basis points to 58.5%, marking our third consecutive quarter below 60%. And for the full year, our cost management is just as impressive.

we finished 2025 at 59.5%, which is the first time in company history that operating expenses have come in below 60% for a year with each quarter of 2025 improving sequentially. As I said on Investor Day, we are fundamentally changing our cost structure through the investments we're making in our people, technology and processes. 2025 was the year we proved the change is real and durable and we're well positioned to continue capturing these benefits for years to come. The improvement in operating cost was led by substantial improvement in repair and maintenance costs on both a dollar basis and as a percentage of revenue. driven by operational and fleet strategies that are yielding tangible benefits.

Accelerated investments in new trucks over the last 3 years has improved our average fleet age, significantly reducing unplanned repairs and they need third-party maintenance support. And at the same time, our disciplined focus on fleet optimization and a more streamlined maintenance model, increased technician productivity and reduce reliance on rental units and external services. These structural improvements were complemented by enhanced route automation and resource planning tools that lessen wear on the fleet and improve overall asset utilization.

Taken together, these initiatives reflect our strategic commitment to operational excellence and are driving sustained cost efficiencies that strengthen our performance. Our repair and maintenance costs were not the only cost category reflecting the strength of our operating model as we saw a similar story in labor.

In Q4, labor costs improved as we continue to see benefits from our people-first culture across our frontline teams. Driver turnover reached its lowest level of the year at 15.7%. The demonstrating our ability to sustain our meaningful improvements in frontline retention. We've implemented a people-centric approach to onboarding, training and accountability, which is improving retention, safety, and operating efficiency while also reducing overtime hours and training needs. We also benefited from our connected truck platform, which gives leaders real-time visibility into sequencing, downtime and efficiency to help reduce labor dependency while improving service reliability. And it's also worth noting that our connected truck benefits are not limited to cost advantages as the technology enables rightsizing service levels and other revenue opportunities. These people, process and technology-driven improvements extend beyond our legacy business.

And now that we have successfully integrated the health care solutions business into our existing field operations management structure, we expect to extend these improvements we've already seen in on-time service delivery, driver turnover, asset rationalization and network optimization. In both the legacy business and the Healthcare Solutions business, we are structurally lowering our labor cost base, strengthening day-to-day execution, enhancing service reliability, and delivering continued opportunities for long-term operating improvements.

Turning to the top line. We delivered another quarter of strong balanced growth. Pricing continues to be a strength for us with core price of 6.2% in the fourth quarter not just because of disciplined execution, but because of our strong customer focus and the consistent value we provide to our customers. Our asset positioning at scale service reliability and the investments we've made in technology and automation differentiate our service offering, which all support our pricing.

And on the volume front, we've seen notable growth in 2025 in special waste, renewable energy and recycling. In residential collection, intentional shedding moderated in the fourth quarter, and we continue to drive operating EBITDA and margin growth. We anticipate steady residential volume improvement as we move through 2026.

In closing, I'll close by thanking the entire WM team for their commitment and execution throughout 2025. We're entering 2026 with strong momentum, an optimized operating model and clear opportunities to continue delivering value to our customers and shareholders. And now I'll turn the call over to David to discuss our 2025 financial results and 2026 financial outlook in further detail

Thanks, John, and good morning. Our 2025 performance demonstrates the meaningful progress we're making toward our long-term strategic goals. Operating EBITDA margin expanded 40 basis points to 30.1% for the full year which is a result that overcame a 140 basis point margin headwind from the combined impact of the acquisition of the Healthcare Solutions business and the expiration of alternative fuel tax credits. This result significantly exceeded the margin outlook we provided at the beginning of 2025 as we outperformed our own high expectations for cost optimization in our legacy business and synergy capture in the Healthcare Solutions business during each quarter of the year.

Normalized for these known headwinds I just mentioned, our legacy business delivered 180 basis points of margin expansion for the year. This was driven by 120 basis points of growth in the collection and disposal business from the benefits of price, cost optimization in business mix, particularly growth in landfill volumes and the shedding of low-margin residential business. Margin growth was also bolstered by a combined 60 basis points from lower commodity pricing and the recycling brokerage business, recycling automation benefits the growth of our high-margin renewable natural gas business and the lower risk management cost.

Cost optimization remained a central theme in 2025. We SG&A expense for the legacy business was 9.2% of revenue for the full year, a 10 basis point improvement compared to 2024 as we continue to rationalize discretionary spending. Within Healthcare Solutions, we are making consistent progress in reducing SG&A expenses as we integrate and optimize the business.

Fourth quarter 2025 Healthcare Solutions SG&A of revenue is a notable improvement of 350 basis points from the prior year period and a significant step toward our long-term ambition to get the SG&A of this business in line with the rest of the company. At 10.4% for the full year, it is clear that we are on track to get total company SG&A as a percentage of revenue below 10% in short order. Our strong execution translated into robust cash flow generation in 2025.

Cash flow from operations grew more than 12% to $6.04 billion, and free cash flow reached $2.94 billion an increase of nearly 27%. These results showcase our success in driving margin expansion and disciplined approach to capital investment. For the year, we spent just under $2.6 billion on capital to support the business and $633 million on sustainability growth investments.

In 2025, we allocated $1.3 billion to dividends and paid down $1 billion in debt reaching a leverage ratio of 3.1x. We expect to reach a leverage ratio within our targeted range of between 2.5 and 3x during 2026. We also invested more than $400 million in tuck-in acquisitions to expand our traditional solid waste and recycling footprint.

Moving to the outlook. We expect operating EBITDA to be between $8.15 billion and $8.25 billion in 2026. This projection reflects an update to the classification of accretion expense, a change we are making to enhance the comparability with our industry peers and to better reflect operating performance. As a result, our 2026 operating EBITDA guidance excludes projected accretion expense of approximately $150 million. Our plan calls for a typical quarterly cadence of operating EBITDA contributions across the year.

Additionally, we expect an effective tax rate of approximately 24% and a share count at the end of the year of about 402 million shares. We anticipate capital expenditures for 2026 to be between $2.65 billion and $2.75 billion, which is inclusive of about $200 million directed towards high-return sustainability projects. Sustainability growth capital includes spending of about $85 million on 2 recently approved renewable natural gas facilities and 1 new recycling growth project, each expected to be completed and to begin contributing operating EBITDA by [indiscernible] These projects are attractive opportunities to extend our network while bolstering WM's industry-leading return on invested capital.

In 2026, we expect free cash flow growth of nearly 30% to $3.8 billion at the midpoint of the outlook, which drives our projected operating EBITDA to free cash flow conversion above 46%. Our guidance includes an anticipated benefit from investment tax credits of about $110 million which is about a $75 million headwind from the prior year.

In closing, 2025 underscored the strength of our business model, the resilience of our operations and the discipline with which our teams execute every day. We are proud of our progress toward our long-term strategic goals, driving margin expansion, strong cash flow generation and continued optimization across the enterprise.

I want to thank our dedicated team members whose commitment makes these results possible. As we look ahead to 2026, we are confident in our ability to sustain this momentum to continue delivering operational excellence and to generate long-term value for our shareholders. With that, Olivia, let's open up the lines for questions.

[Operator Instructions] Our first question coming from the line of Sabahat Khan with RBC Capital Markets.

Great. Just maybe starting with sort of the top line guidance. Can you maybe give us some perspective on the industrial activity has been weak for some time. There's some views just broadly out there that the economy picks up this. Maybe just what you've embedded in terms of the macro backdrop. Obviously, we see the sort of the directional volume and pricing commentary. But if you can just delve into what you're seeing in your local markets and as an industrial C&D type market picking up at all?

Yes. Regarding kind of the macro economy, I would say that we've said for the last few quarters that we're cautiously optimistic, and I think that we stay with that. I might even remove the word cautious I think we're optimistic about the macro economy. When we look at our own internal figures and you mentioned the industrial line of business, that's a line of business that has been pretty soft over the last couple of years. I think we've been down 3% or 4% volume each of the last probably 7 or 8 quarters. And that business actually has bounced back to almost flat. So that's an encouraging sign for us. I think similarly, as John mentioned in his remarks about the residential line of business, that's been negative for some time, that's been much more by design. But he also mentioned that, that is starting to come back to more of a normalized number. And we think by the time we get to kind of the back half, I think, John, of 2026, we'll -- we should see that down [indiscernible] so all of those are encouraging signs. If you look at the landfill line of business, that's been a source of strength for us. for a number of reasons, special waste, as John mentioned in his remarks as well, has been good. So all of that would tell me that the economy is on pretty firm footing.

Great. And then just a follow-up on the health care side a little bit. Can you talk about -- it sounds like the integration is largely there. But can you just talk about '26. What you're sort of thinking on the pricing front, maybe some of the larger initiatives on the cost refinement, getting that percentage more to where you want it to be on the SG&A side. So maybe you can delve into some of the commentary shared earlier on the initiatives for this year on the health care side? And what could those margins look like sort of over the next 12, 24 months?

Yes. So a lot with Healthcare Solutions, we've made a ton of progress just in the last quarter. There's a lot going on between Q3 and Q4, even if you look at Q3 to Q4, there was -- we talked about some lost accounts last quarter that would carry forward into this quarter and carry forward into 2026. And so that did, in fact, happen. But as I said in my remarks, we've made a ton of progress on our customer service -- the customer service side of our business. In fact, the metrics that we use to measure those have actually jumped above our legacy business, which is very, very encouraging. Similarly, from Q3 to Q4, we saw credit memos, we think they peaked in Q4. And so as you know, those credit members have been used to in part, take care of some of these past due accounts that we've had. I think what I would say is we've really kind of built a wall now between all that is continuing to go on on the back office side of that business and the customer themselves, and that's a real positive. And the result of that, as we think about 2026 is going to be I think, better price realization. We've been getting price all along, but we just haven't realized as much of it. And a lot of that has been these credit memos that we've been giving that has offset some of that price. I think when you get into 2026, we're expecting 4.2% price in 2026. Top line is going to be 3%. And that is a reflection of those lost accounts that will anniversary for the most part in the back half of '26. So that's the reason why it looks like all of our growth is coming from price. It is, in fact, coming from price and it's due to those lost accounts. And then when you think about the expense side of the business, John mentioned that we've rolled that in. And I think Rob, the last quarter talked about how we've rolled that business into our areas. And so we're seeing the real benefits of that. We're seeing that what we've owned on the legacy business over the last probably 10 years, some of it through technology, some of it through process. All of that gets brought to this routing logistics business, which is WM Healthcare Solutions. So we're really encouraged about what we're seeing as we roll the business into the areas. I guess the last thing I'll mention here is that cross-selling, which we put $50 million of cross-selling in the EBITDA synergy number back in June of last year. And I would tell you that if I were a betting man that I would take the over on that because talking to our area leaders last week, almost to a person, they were very encouraged by what they're seeing from their sales folks. In terms of cross-selling, I think it's important to keep in mind that some of that cross-selling benefit though, does show up in the collection and disposal line of business, not all of it shows up necessarily in the Healthcare Solutions business.

Our next question coming from the line of Bryan Burgmeier with Citi.

I appreciate all the detail in the press release [indiscernible] really helpful I thought that footnote seemed to say that maybe discussion on the 2027 financial targets would be put on hold for a little while. I'm not sure if I'm sort of interpreting that correctly? And if I am, maybe from a level, can you help us understand sort of what went into that decision? I guess there have been sort of some accounting changes. It's a pretty dynamic macro environment, but just kind of hearing in your own words would be really helpful.

We did debate, [indiscernible], whether we'd get a question on footnote age. So Heather's the winner on this one. But here's what I would say about the 2027 number, on Investor Day, we gave some high-level estimates. I would -- what I would say about those is that they weren't detailed guidance as we're giving today for 2026, and we will give detailed guidance on 2027 and a year from now. So I would tell you that those were estimates. They're kind of the best estimates we can make at the time. I mean our business typically about as far out as we can look as 12 months. It's hard to look at things like commodity prices 18 to 24 months out. So those estimates, I wouldn't rely on those as guidance. I would rely on them as what they were intended, which is estimates. But I will tell you this about '27 we don't see anything on the horizon that's concerning for us. And I would also say that if there's one thing you know about us over the last number of years, the consistency of our performance has been one of our strong suits, and I think that continues going forward.

Got it. Got it. That's really helpful. And then maybe just digging into the guidance for

'26 a little bit more. Maybe John, can you give us an idea of maybe the level of margin expansion that you're looking for in collection and disposal this year on sort of an apples-to-apples basis? I guess is kind of noise with the landfill accretion and the wildfire comps, but your thoughts on net price and maybe some key cost buckets could be quite helpful.

Yes.

Yes, Bryan, you saw the guidance we gave in terms of yield and core price. And what we've really been focused on was really showing up well in Q4 and this year, as I mentioned in my prepared remarks, is sort of -- is the spread between price and cost, and we're continuing to expand margins. So we're really pleased. Directly to your question, there is a little bit of noise [indiscernible]. We talked about the wildfires being one of those things that really showed up in Q2, but 50 basis points on a same-store sales basis is kind of what we're targeting from a margin improvement standpoint across the portfolio.

So grading down by calling the wrong name, I think equity [indiscernible]

And our next question coming from the line of Trevor Romeo with William Blair.

First one I had was maybe on the 2026 outlook for Healthcare Solutions, particularly on EBITDA because I know you did give kind of a revenue outlook. You talked about kind of continuing to optimize the business. So I was hoping maybe you could level set how much cost synergy capture you realized in 2025? And then how much is baked in for incremental in 2026. And then along with that, how much sort of underlying growth and margin expansion you expect from the business ex energy?

There's probably a couple of us could take this one, but I'll start and then maybe David or John can jump in. But first of all, as far as '25 goes, we did say at least on the SG&A synergies we gave a range initially of 80 to 100, and we finished above the top end of that. So we're encouraged by that, and that ends up being a benefit -- carryover benefits for us. Some of it is -- well, it all carries over, but some of it's happened [indiscernible] throughout 2025. So that ends up being a carryover benefit for us as we come into 2026. The original synergy goal of $300 million, and that, of course, mentioned the $50 million that's included in that for cross-selling, we feel very comfortable with that. I think there's a little bit of a scrambled egg happening here with these businesses because some of this, and I mentioned in cross-selling, some of that ends up showing up in collection and disposal. The same thing happens on the cost side. particularly operating cost but also SG&A. I will say this about SG&A, which is kind of kind of the long pole of the tent here. that David mentioned it in his remarks, but as you look at SG&A pre-acquisition, and that's been something that [indiscernible] and I spent a ton of time on all of us, but [indiscernible] in particular, were very focused on getting SG&A down. And that number pre-acquisition had gotten down to -- I think the third quarter of last year was -- or 2024 was 8.9%. And as for a year, I believe 2024 was 9.4% and then that jumped up after the acquisition to a high of 11% in Q1 of last year of 2025. We have -- through the synergy capture have really kind of chopped away at that. It ended the year at, I believe, 10.3%. But as David said, there's a near-term pathway to getting that continuing to get that thing down as a corporation. That includes Healthcare Solutions down to below 10%. And as we've said many times, that business was running at a much higher SG&A. I think it was as high as 25% when we bought it it has come down to 20%. I think the number that was in our synergy capture was 17%. And then [indiscernible] said a number of times, look, we think that there's no reason we couldn't expect that number to be down close to to our own number, which is kind of 9%. And as it gets down there, you can -- could expect to see that SG&A number continue to come down. And then maybe, John, on the operating side?

Yes, I would say from a synergy perspective, cross-selling and internalization, those avenues are going very well. And as Jim mentioned, Trevor, we're seeing a good bit of the benefit right now showing up sort of in the core solid waste business. I commented on our rollout volume last quarter being a portion of it, about 60 basis points being driven by simply taking that work and putting on WM trucks. That's not something that's going to show per se in the health care segment. And like I said, in terms of internalization and other synergies, we're getting out of the business. That's all going extremely well.

Yes, makes sense. And then I did want to follow up on the RNG business. I don't know, maybe [indiscernible] the call, but I appreciate the, I guess, the 60% of volumes contracted for 2026. That's encouraging. For the 40% of the uncontracted volumes, I think the comment in the press release was an expectation for $24.50 per MMBtu on the pricing side. I think if you use today's spot prices, that would imply something decent amount higher than that, let's say. So maybe you could just talk about that a bit. Is that kind of where you see the voluntary market right now? Or is there some conservatism built in there? Or just thoughts on [indiscernible]

Yes. So I'm hearing -- we're really pleased with the progress that we've made on selling a portion of our volume a pretty significant portion and it's a testament to how we've been managing the risk that's in this business. On the 40% that remains unsold, this is going to be the first year, if you look at it, our volume is doubling year-over-year from about 40 million MMBtus to now 21 to 22 plus. So we're going to have a portion that is not allocated to our fleet that will be sold in the voluntary market. and that's what you're seeing in there. From a pricing perspective, we're anticipating [indiscernible] pricing to hold steady in that $230 million to $240 million range. So that's what it's all based on.

Our next question coming from the line of Tyler Brown with Raymond James.

I'll reiterate, lots of good detail was in the release. But David or Tara, I just wanted to unpack the comments about the approaching $1 billion in sustainability EBITDA by $27 million. So I think in the release, you provided a baseline now. So I think that baseline is $300 million. I just want to make sure that I have it right, but are you basically expecting the investments to yield, call it, slightly less than $700 million of incremental EBITDA over the time frame. And can we comp that to the $760 million to $800 million that you laid out at the Analyst Day? And if so, can we just talk about what's driving that delta?

You absolutely have the parts right. And let me just take a step back on 2 key points. First, we're incredibly pleased with the progress on the recycling and the renewable energy investments. It bears repeating what was in Jim's script with 18% lower commodity prices and delivering 22% higher EBITDA on the recycling business. That's a testament to what we're delivering in labor savings, in premium savings and we've had strong volume growth, which has a halo effect with our customers. And then likewise, really having a lot of momentum on the RNG business. I mentioned before that we're going to be doubling our output. What you can bridge from the $700 million to the $760 million is really just in 2 buckets. The first is a difference in recycled commodity prices. What was in our Investor Day materials was $125 a ton and now what is in the number is 70 days, which we do view as a low point. So you can consider that there could be some upside if and when commodity prices come back. And that's over half of it. The other piece is, if you go back to 2023 when we had come out with this broader platform, we've learned a lot. And one of the things that we've learned is that there have been some different differences in operating costs, primarily related to electricity costs, which is a bit of a headwind, but also in the medium and long term a potential tailwind for us because we do have a robust landfill gas to electricity platform. And that is something that we can lean into as we look at whether or not we expand those types of facilities on our landfill.

Tyler, this is kind of case in point to my earlier comment about trying to predict things in our business way out. And then that Investor Day was the 2025 Investor Day, and you can go all the way back to the 2023 Investor Day about sustainability, just really difficult. So we're kind of dealing with what we have at the time. And so yes, commodity prices have dipped. And hence, the $700 million. But I think it kind of makes the point for us that, a, is tariffs, I mean, these businesses are incredibly good investments [indiscernible] on them, particularly the renewable natural gas plants. Well, I think we originally said they were 2.5% to 3%, now they maybe 3% to 4%, but still incredibly good paybacks. But this -- anything that's commodity related, as you can imagine, it's just really hard to predict that far out.

Yes. No, I just was trying to get the delta. That was extremely, extremely helpful. John Morris, a question for you. So if I look at the normal course CapEx, it looks like that CapEx number is running at less than 9.5% of sales. It just feels maybe a bit light. I realize that Stericycle is less capital intensive, so that's part of it. But is this kind of a good call it, forward capital plan. Is there something unique in '26 that keeps the budget down? I think you and Jim mentioned the lower fleet age, but I just want to just try to level set on where that CapEx will run longer term.

I think probably a little higher than that, Tyler, probably the 10-ish percent off the cuff. There's a few things [indiscernible] 1,500 trucks is what we said is probably a normal run rate for the traditional solid waste business. And as Jim mentioned, we've been obviously catching up and advancing some of those investments, which by the way, are clearly paying off, as I mentioned in my prepared remarks. We got -- we do have some work to do on the fleet with the health care -- on the health side is because they leased virtually every one of their vehicles. But we are systematically unwinding that where it makes sense and when it makes sense, right? So there's a timing aspect of when we peel back some of those leases. And then lastly, obviously, the sustainability investments, as you saw in the release and the remarks here is coming down by roughly $400 million to $200 million. So there's some puts and takes. But back to where we started, I think that 10-ish percent range is probably a good mile marker in terms of go-forward capital.

Next question coming from the line of Toni Kaplan with Morgan Stanley.

I also wanted to ask about the Healthcare business. You talked about the 3% growth next year, the 4.2% pricing. It sounds like you're still having some of the issues with the Stericycle customers. You mentioned the credit memos do you expect all this to be resolved this year? And how are you thinking about growth in this segment for future years? And just maybe if you could talk about market conditions within the medical waste space and if that's proceeding, how you sort of saw when the deal was launched or when you announced the transaction where you were talking about sort of a higher market growth for the health space.

Yes. So fair question here. And one thing I would maybe correct you on a little bit is the customer -- that's why I wanted to make sure I mentioned that we're getting to, and I would argue we're there where the customer is getting a good invoice, they're getting a payable invoice. There's a lot going on behind the scenes for that, especially for the larger customers. By the way, there is a lot going on behind the scenes for our larger customers in the legacy business in our national accounts. There's a lot of manual effort that is ongoing there. But our intention was to really kind of build a wall between the back office work that is ongoing, and we'll be ongoing through and what the customer sees. And that's why in my remarks, I talked about the improvement in our customer service stats to levels above our legacy business. That is all super encouraging and tells us, and I think I mentioned that one of our customers recognize us for really improving our invoicing. That was a big customer. I didn't name the customer or a big customer. So all of that tells me that we've done an effective job of putting that kind of all in place. So the customers -- they really don't care what goes on in the background as long as they're getting good service and good invoice and then we will take care of the system issues, we'll take care of the process issues, all of that. And that is all. We're making big progress on that. It's all ongoing. So all that's part of the ERP that we've talked about many times. It also gives us the ability to, as I mentioned, and you asked about kind of the growth of this business. Look, I would tell you this, I think we said 5% to 6%. And really, as you think about what we gave for 2026, 4.2% price, but only 3% top line and that negative volume piece, as I mentioned, is largely related to these accounts that we've lost. And we knew we had lost them, and we knew that it was going to have an impact on Q4 and we know it's going to have an impact on the first half of 2026. As we get to the back half of 2026, that actually turns into potentially a tailwind for us on a year-over-year basis. And then the last thing I'll mention about this, so I guess to finish that point, we do feel very good about the strategic business case for this. I know there's been some skepticism out there about well, is this business not going to grow at the 5% to 6%. You take those lost accounts and you're almost there right now. So when we get to the back half of next year and into 2027. When you look at that -- the pricing power that we have across the entire organization and when you look at the fact that this business demographically. I mean if I were to ask you what business should you be in over the next 20 years, I would think that health care is one of those with this aging population in the U.S. and in Canada and the U.K. So that has to be a beneficiary of it. So I think my long answer is, yes, we're very confident in the growth trajectory for the business. And we're also very pleased with the progress we've made, not done yet, but we've built this wall and the customer is now seeing a good invoice and a good service level.

Great. And just moving to -- you mentioned some technology and automation improvements that you've made. When you think about 2026, which areas are you most focused on for efficiency or technology? Just anything to highlight with level of automation that you're able to continue to do and which areas have the most runway for that?

Maybe I'll start with and Tara can chime on the recycling side, I think you've seen the benefits Tara commented in some of our answers about the progress we've made from the investments we've made in recycling, a lot of that has driven sort of the middle of the P&L, and that's where technology enablement and AI are paying off already, and we've made a lot of progress there. When you think about the 15,000 [indiscernible] vehicles, we run in now another called another 4,500 on the health care side, building out technology enablement as a logistics service is where you -- I think that's paying off, too. When you look at the margins and the OpEx in particular and momentum that we've built in '24 into '25 and into Q4, I think you're going to see that continue to carry forward into into 2026. And then lastly, on the post-collection side, we've talked a lot about the value of our network and having strategically placed assets in the post-collection side, whether it's transfer facilities, recycling facilities, landfill facilities we're taking a kind of an IoT approach at our landfills to by embedding technology in those facilities that's going to give us visibility to the operation in a much more efficient manner than we traditionally have done. And those are complex operations, as you know. So we still see a lot of opportunity on the post-collection side, particularly landfills to embed technology to to really drive down operating costs there as well.

Our next question coming from the line of Faiza Alwy with Deutsche Bank.

I wanted to ask about just volumes in the collection and disposal business in the fourth quarter. I thought they came in a little bit light relative to what we've seen. And I know we've had some obviously, special waste volumes. And I know earlier in the call, you talked about sort of the industrial business and the macro environment there and that you're optimistic. So I'm just curious, is there anything more to consider as it relates to collection and disposal volumes in the quarter relative to trend other than just special waste?

Yes. Look, we don't talk much about weather just because we choose to make it up. I would tell you the weather impacted us in December and likely is going to impact us this week when we get to first quarter results, but we make that up. I mean, we don't let our area folks say, well, weather impact [indiscernible] I'm going to be coming in under my budget. But it did impact volume a bit. As you see with the numbers, it didn't impact the overall numbers. So we made it up on the EBITDA line. But when you think about volume, it did have a bit of an impact on volume. MSW was a bit soft and much of that was a result of -- the 2 lines of business that are most impacted negatively by weather, our MSW and the industrial business. And so those were clearly impacted by the weather in early December. I suspect that they'll be impacted this week, too. So that would be my answer that may have caused a little bit of softness there, but it doesn't impact the EBITDA line.

The only thing I'd add on there, Jim, is residential is the one that sticks out. It's been negative for a number of quarters. And I would tell you, while we see that starting to turn into more of a growth engine in 2026, when you look at 2025 we finished the year at high teens on the EBITDA margin side and over 20% for the quarter on residential, which has always been a high watermark for us. So I kind of look at the volume attrition there a little bit different than it would be the other pieces of volume. But again, I think it's important we see that -- we see the teams pivoting from using that is shrinking to greatness to now growing to even better margins as we go forward in that particular line [indiscernible]

Well, I think it's been mentioned today, Faiza also, if it hasn't, we should reiterate the fact that on the volume line, when we look at 2026, we have 50 basis points headwind on volume from that fire volume that we got last year on the West Coast. The tough part about that is that we don't -- look, unfortunately, natural disasters seem to be happening fairly regularly, but we don't forecast them for obvious reasons. So right now, we don't have anything built in. We have asked our field operations to figure out how to make up that. That's a tough makeup because it was a pretty big headwind on volume, also a big headwind on EBITDA, $82 million was the number from last year on the EBITDA line. So when you look at -- whether you look at volume, whether you look at EBITDA, you may say, well, gosh, a lot of the reports are saying a bit soft on guidance. Keep in mind that that's why I pointed out the 7.4% EBITDA growth if you take out that that onetime impact from the fires. Unfortunately, these things do happen so something else may happen. It may not be as big. Hopefully, it's not. Hopefully, we don't have anything this year. But if we do we have the assets, the geographic coverage, the people we have all of that to take care of our customers.

Yes. Understood. Makes sense. And then I was going to ask about just the margin guide for next year. And was hoping there are a few moving pieces, in particular, with the wildfires. And also, I guess, this is the roll-off the sustainability projects. So maybe you can help us a little bit around the quarterly cadence of margins at a high level and how to think about that.

Sure. I'll give you some of the components. This is David. I'd be remiss if I didn't talk just about the records that was mentioned previously, both in the quarter of 31.3% and for the full year, 30.1%, which I do think is a testament to how our team members focus and dedicate on this throughout the year. But as we look to 2026, we're calling for our fourth consecutive year of EBITDA margin expansion of 30 basis points at the midpoint. But as Jim just alluded to, 50 basis points on an adjusted basis. The biggest contributor to that is going to be from our collection and disposal business. So as we execute our pricing programs, while continuing our strategies around operational excellence and leveraging our network, that's a big piece. We also have some business mix as we've alluded to continued shedding of some lower margin residential business relative to our volume growth in the landfill line of business. And then on sustainability, there's about 30 basis points collectively of benefit in '26 in terms of the bridge as we bring new plants online. We've got 4 recycling facilities and 6 RNG facilities coming online in 2026. There is a modest decline in recycling commodity prices year-over-year, that will have a minimal impact on margin. And then health care solutions, as we've been discussing, will contribute to margin expansion overall for the year as we capitalize on our value capture opportunities, execute our pricing plan continue our cross-sell efforts, even though that will show up most likely in the C&D business and then continue our progress on lowering our cost structure. And then in terms of cadence throughout the year, it's, call it, 47% in the first half, 53% on the back half in terms of mix, but that's in line with our historical averages.

Our next question coming from the line of Adam Bubes with Goldman Sachs.

Just had one more follow-up on margins. Really impressive in the quarter. And I think if you just compare your 4Q margin prior exit rates to where you typically ended the next year, it would sort of imply that this 4Q exit rate points to potential for better than 30 basis points of margin expansion in 2026. So I'm just wondering out of the 230 basis points of margin expansion in this fourth quarter, how much of that expansion would maybe more one-off? I know you called out the outsized RIN sales that were going to happen this quarter?

I think for the most part, these are sustained initiatives that we've been executing on, and it just highlights our focus on disciplined cost management. And so we're just seeing it come to fruition. And I think, as Jim alluded to, with the volume, some of it which we can't control, like just the ability of the the business to flex accordingly in the environment that we're operating in, it allows us to maintain and sustain that margin going forward. So for most of it, I think we can carry that forward versus a number of one-offs that we idiosyncratic to the quarter.

So I'm probably going to make his point form here, but one thing we haven't really talked too much about is the fact that if you look at our core price for next year, 5.6%. It's a 250 basis point delta, and we typically have gotten this question, so we haven't gotten here today, but a 250 basis point delta to our forecasted cost inflation. I don't know how that measures up historically, but it's going to be one of the bigger ones for us. So I'm kind of making your point for you, but still, we do think that 30 basis points is reasonable considering the 20 basis points of of headwind from the fire volume. So that's where we came out.

Terrific. And then on the landfill gas side, can you just update us on voluntary offtake discussions I think eventually 50% of your production will go into voluntary market. So what's your confidence level that, that 50% will be absorbed by those markets? And how are those discussions going?

We're confident that we'll be able to absorb that in the voluntary market. While the U.S. market right now is a bit softer than it had been. There are other markets that are strong. If you look at Canada, the U.K. and some other international markets, we're able to tap into those as well. And then still in dialogue with some larger utility companies across the U.S. as their public utility commissions pass their rulemaking that, that should free up more of the voluntary market in the future.

Our next question coming from the line of Noah Kaye with Oppenheimer.

I'm sorry to beat the margin math, hopefully, not the debt here. But just I'm a little confused. So the walk here is 50 bps on an adjusted basis ex wildfires. But I think you said that sustainability was maybe 30 bps benefit in the bridge. And then I think just with the synergies capture on health care and the pricing, that has to be another 10, 20 bps or so, at least. So what am I missing here? Because it seems like collection and disposal is going to be positive based off of what Jim and Dave just said. Just trying to understand what moving pieces there are that we're not accounting for?

Yes. There's some normalization of certain expenses in corporate and other, that we've baked into the guide. Those may or may not materialize, but just we felt prudent just based on on how we finish the year to adjust for that. There's also some technology costs that show up in there that are for the benefit of other parts of the organization. And so that's offsetting some of the points that you're highlighting.

Okay. That's helpful. And then just a quick one on the recycling outlook. The basket was $62 a ton in 4Q and I think we're kind of maybe at or slightly below that, maybe you can update us. But just the thought around the $70 per ton outlook for '26, can you help us understand that?

So 2026 -- the way to look at it is the first half, second half story. And so exiting 2025 at $62 a ton, what we're anticipating for the first half is in that $60 to $65 range and then ramping in the back half of the year. Why is that? Well, what we're starting to see is a little bit of green shoots on the fiber side. The headlines previously were that a lot of capacity has been taken out of the U.S. market, which is true. That was more inefficient [indiscernible] but the larger mills that remain are going to be looking for material, some of the cloud around tariffs has been lifted. So we're anticipating that OCC prices should bounce back in the back half of the year. We're not expecting any material movement on plastic pricing moving forward.

Our next question coming from on James Schumm with TD Cowen.

For WM Healthcare, can you give us revenue split between document destruction and medical waste? And then maybe give some color on document destruction profitability and whether you see this as a core business for you going forward?

So James, I think the answer to your question is about 2/3, 1/3 between health care and document destruction business. And then, sorry, could you repeat the second part of the question?

Yes, sure. Just in terms of like the profitability and document destruction, any color there? I think you talked about in the past that maybe you had an advantage here with your recycling business. Maybe you got better paper pricing. But do you see this as a core business going forward?

Yes. I mean, first to start on the recycling side, it's interesting. Both of those businesses are collection disposal and our processing businesses, right? And I think you heard some of that commentary from us earlier. So from that perspective, it lays nicely over whether it's on the [indiscernible] side or on the health care side to what we see as some of our core competencies. The commodity side of Tara spoke to what we're going to see from a commodity side and probably some more green shoots on the fiber side in the '26, which certainly benefit that business. And then when you look at the health care side, it is a collection and disposal and processing business and Jim gave a good bit of commentary on where we're at. I would tell you that the integration into the areas, which has just occurred over the last, call it, 120 days, I think it's going to be a great platform for us to continue to drive some real expansion in margins now that our field leadership teams have sort of a full purview of the business at the local level, which not dissimilar to the WM core business, there's a lot of elements to this from an operating perspective that are [indiscernible] international teams. And Jim mentioned, we just had our quarterly business reviews last week and got a lot of good commentary and a lot of positive commentary on where that business is going.

Okay. Great. And then Jim kind of touched on this. But collection and disposal core price in 2026 is expected to be like 5.6% at the midpoint, which seems very conservative off of 2025, 6.3% level. So just curious like what was the customer churn number in Q4? And what do you see as the right number for churn?

We see that, obviously, bounce around a little bit quarter-to-quarter for a litany of different reasons, but we've talked about churn being in and around that 10% range, and we're still bouncing around in that range, although it varies from quarter-to-quarter, and you've heard us comment at times it's been as low as 8 and change. It's been a little bit as high as 11. But when you stretch the tape-out, that 10-ish percent churn number is kind of what we anchor on. In terms of the price side, when we think about core price and yield and the conversion, obviously, the numbers bounced around, it's been the high 50s, high 60s I think what I would point to is when we break it down by line of business and the margin profile of those businesses, what you're seeing is our operating expense under 59% in Q4, under 60% for the full year. So that's showing that we're making progress on the middle of the P&L. And then we look at that relative to customer lifetime value and what's the long-term perspective on pricing that we should take with each of those individual customer segments. And I think you're seeing it translate to all-time high margins. I mean the collection and disposal business was 39%, which I think that's an all-time high as well.

Maybe one last point here on pricing, James, because you mentioned that you can but maybe 5%, 6% conservative. Can you remind that as CPI or some of these indexes come down, we've talked about this many times that there is a lag in those index-based price increases that we can take largely on the resi side of the business, but sometimes on other lines of business as well. And so that lag can be up to 6 months. And so we do expect that as CPA has come down throughout 2025, that we will see a bit of a lag there that will negatively impact 2026 pricing. So hence, the 5.6% as opposed to something in the 6s for 2025. But as John just said, look, we're certainly making up for that on the margin line.

Our next question coming from the line Jerry Revich with Wells Fargo Securities.

John, I wonder if you could just go back to your prepared remarks, you mentioned some benefits from connected trucks and other. Can you just give us an update? Are you focusing an acceleration in terms of the savings that you're seeing from logistics management. And obviously, you had the session with Caterpillar at the Consumer Electronics Show. Is -- are the returns from your tech investments accelerating as we head into this year?

Yes. I think, Jerry, starting with connected truck, we've had that technology on all our commercial fleet for some time now. We've actually expanded that to the automated components of our residential business. So we still see that there's there's runway there. So we'll continue to build on that. And I think to your point about the -- I mentioned connected land only in particular, the heavy equipment side, we see plenty of opportunity that we're starting to unpack with this connected landfill. There was a good bit of detail laid out at Investor Day about what that pathway looked like going forward. So if you think sort of late middle innings on some of the connected truck elements that you mentioned, I'd say we're in the early innings on the post-collection side and see a lot of opportunity to drive cost out of that part of the business as well.

Okay. Super. And then from a margin standpoint, just really impressive performance over the course of even as recycling commodity prices got worse over the course of the year. David, I just want to make sure I'm not missing anything heading into the first quarter because normal seasonality and the accounting change implies that you're going to be at roughly, I don't know, [ 30.5% ] margins in the first quarter, which is typically your seasonally weakest margin quarter. So I just want to make sure there are no moving pieces off of the really strong run rate that you folks have achieved as the year unfolded last year.

Yes. I'm kind of thinking accretion aside, Jerry, to keep this kind of same-store sales, but you're right. Q1 is usually one of our softer quarters, and I don't know off the top of my head whether that's the right number, not it feels a little bit high to me. I think it's a little lower than that, but we could circle back with you to confirm.

Our next question coming from the line of Konark Gupta with Scotiabank.

Just maybe one question on the top line. For the full year, you guys are expecting about 5% at the midpoint just looking at the puts and takes on the quarterly side. You have probably Stericycle more like a second half story, Jim, I think you said. And then second quarter you're expecting or seeing maybe tough comps from the wildfire last year. How should we think about the growth guidance for the year by quarter? I mean, especially in terms of how the volumes kind of shake out on the C&D side.

Yes. I mean it's pretty balanced over the year, but you do see more of a pickup in the second half of the year to, call it, kind of below 5% or below in the first half and then above that in the second half in terms of the revenue bridge across the year. And the Q2, to your point, is the toughest comp with the wildfire volumes.

And then volumes, do you expect that to be more evenly spread out throughout the year? Or it's going to be more skewed to the second half?

I think the one area that we'll stick out is we mentioned our residential volume has been negative 4-plus percent print. and we see that ratably declining. And by the end of the year, we should be right around 2%, maybe a little bit south of that in Q4. So that will be a clear tailwind to volume in the second half of the year.

Our next question coming from the line of Seth Weber with BNP Paribas.

Just wanted to go back to the health care cross-selling opportunity. I think on the third quarter call, you guys mentioned that it's largely been focused on small- and medium-sized customers. I wanted to see if that's still the case or if you're getting any better traction with the large hospital networks at this point?

I think this ultimately it's going end up being more of a large customer opportunity for us. We -- what we've heard from our folks on the sales side is when they're going out and talking to the decision-makers at these customers, typically, these large customers, it ends up being the same decision maker on solid waste as it is on health care waste. So that's a positive for us and the fact that we feel very good about the services that we have now on both sides that ends up being good for us. I do think it's going to be more of our -- we've stratified our customers, [indiscernible] by size. And so you can imagine the [indiscernible] are the bigger ones. I think this is going to be more of an ABC thing than it is [indiscernible].

Got it. Okay. And then kind of a related question, just can you update us on your national accounts business just across the whole company. It's been sort of low double-digit CAGR for the last few years. Is that still kind of running at that -- improving at the same level in 2025?

I mean, look, I would tell you, National accounts has been one of our real success stories. And both on the volume side but also on the price side. I think we've done well with getting price increases based on really differentiated service and differentiated data and analytics that we provide our customers. So we're real pleased with the results of national accounts. I mean, gosh, I would tell you a decade ago, the national accounts was kind of a mess for us. And today, it is one of our success stories.

Our next question coming from the line of Shlomo Rosenbaum with Stifel.

I want to jump back to what you started kind of the questioning with -- on the call, just in terms of the healthy economy and you said that it's things are looking, you say, not cautiously optimistic, just optimistic. Can you give us just delve in a little bit more into some of the -- like the metrics on that. Is the service interval trends. What are you seeing on scale report on some of the mature routes. And then on residential also scale reports and the trucks that are coming through how is the temp roll-off activity doing in prices and poles. If you can just go through some of that, then I have one follow-up.

Yes. So as we look at what might be considered leading indicators because we are kind of at the back end of the cycle, so the business cycle. But we do have some business that that tends to be leading indicators. I would argue that the special waste waste stream is kind of a leading indicator for us because while those jobs have to be done companies have some discretion as to when they have to be done. And the pipeline, as we talk to our sales team, is good on the special waste streams. So that's a bit of a leading indicator for us that and what we're hearing from them is that they're those jobs, and we heard it from our area folks last week that those jobs are starting to manifest themselves. So that is one of the indicators that we do look at. The roll-off line of business as well, although a portion of roll off, the permanent roll-off is is kind of more analogous to our commercial business. So I'm not sure that's so much a leading as a lagging indicator. But you mentioned roll-off and roll-off has been has been pretty good for us. The C&E business. If I look at C&D, and that's been one that has been -- has really bounced around over the years. And C&D for the year was $0.34. And if I looked at last year, for the year, last year, it was a negative number last year. It was bounced around in '23 and '22 as well for some reasons related to pandemic. But I think [indiscernible] is somewhat of a leading indicator as well, if you think about the -- about homebuilding. So it's a tough one because I'm trying to read some of the tea leaves that are kind of macro. And as I look at GDP, it looks like it could be strengthening. I don't know. I guess what I would tell you is the business performs well, whether in good times or in bad. And I'm feeling, I guess, a bit more optimistic than maybe I have in the past.

Okay. Great. And then just I wanted to follow up a little bit more just on a question that was -- excuse me, the comment that was made last quarter. in terms of suspending kind of the pricing initiatives in the Healthcare Solutions area, that would be expected to be done by the end of the first quarter of this year. Are you still on track for that? I mean, obviously, from your commentary, it looks like pricing is going to pick up this year based on your discussion of 4.2%. But is it a matter of like really hitting that end of the first quarter were done with those issues that we're having that was preventing the pricing? Or is that going to extend a little bit further? Or have you already started?

Yes. So here's what I would say about about last quarter's comment. I mean that was not a universal comment. I mean, some customers, yes, we had some customers we had suspended price increases. But the large majority of our customers are getting price increases. But as I said earlier, it was really being diluted by these credit memos. And so we believe that those credit memos, which are really just a tool to try and clean up some of these past due receivables, those credit memos, we believe, peaked this quarter or last quarter, I should say, Q4. And those start on a nice downward trend, which ends up being a tailwind for us as we think about the whole year of 2026 versus 2025. So pricing, look, we have, I think, a fantastic price team, and they are definitely looking at the opportunities that are in front of us. But a lot of those opportunities are not so much a price execution as it is just less dilution to the overall gross number.

Our next question comes from the line of Tobey Sommer with Truist.

From a capital deployment perspective, are you shifting broadly to share repurchase? Or as you look into '27, '28 sort of a longer period of time, you're supposed to take in about -- produce about $12 billion in free cash over that 3-year period. How do you see it shaking out between acquisitions and the core acquisitions and investments outside the core and repurchase?

Sure, sure. Yes. I mean as we alluded to in the last quarter and also with our December announcement on some of our shareholder returns. We do view 2026 as a year of harvest and a balanced capital allocation program. But to your point, the beauty of our business is that it does generate a lot of excess cash flow. And you could expect a pretty balanced approach going forward. We do want to continue to return capital to shareholders. So you should expect that our share repurchase program is not a onetime event in 2026, we'll continue it going forward, but it's going to be governed by kind of what opportunities we have in terms of investment opportunities, both organically and also inorganically. But the keyword here, I think, is balanced from a shareholder perspective, and that's what we should expect.

I'm curious what you're hearing from health care customers about there for tolerance for price increase, particularly this year, given the various declines in federal funding ranging from the exchange subsidies, the Medicaid cuts that may come in a year that could pressure hospital margins?

I guess I would just say, I haven't heard anybody say there's an intolerance for price increases. So if that's a good sign, then that's what I've heard.

I think with the handful of customers I've visited with, I would tell you that I think what's encouraging is the fact when you combine what we kind of core services with the ability to integrate those with the additional health care services. I think the value proposition is something that's really resonating with the customers, especially the ones that Jim was referring to earlier. These big hospital networks, we sit here in Houston, obviously, one of the centers of the universe, if you will, on that front. And when you walk in the door with a comprehensive set of capabilities that these combined organizations have now. I think there's a value proposition that is not going to be matched out there.

Yes, I think these -- [indiscernible] we've talked about [indiscernible]. This is going to end up looking like they're similar in so many respects to our big national accounts on the legacy side. So it's going to be a -- it's a negotiation. They have a contract that's going to be a negotiation on price. What's the price increase going to be? And a lot of that ends up on how much they appreciate the differentiated service offering. So I think that's -- going forward, I don't think it will look much different than what we see with other big national accounts.

Appreciate that. What are you seeing in the hazardous waste business? Is that industrial optimism that you kind of mentioned already palpable?

I think probably our special waste line that we've all commented on is probably a good spot to look. And we've said our pipeline is strong. Our results would demonstrate that through 2025. And I think going into 2026, we haven't seen any indications that that's going to solve. And that's probably the one barometer that I would point to that's probably most closely aligned with your question.

Our next question coming from the line of William Grippin with Barclays.

I just wanted to come back to some of the incremental disclosure you gave on the sustainability business. So you gave us the parts to kind of get to sort of your $700 million implied sustainability growth EBITDA in '27, obviously, a little below the target you gave at prior Analyst Days. But if I adjust for this sort of lower recycled commodity price environment based on your sensitivity. It implies that was maybe $150 million EBITDA headwind. And so sort of x out the commodity headwind, it feels like maybe this business is actually performing well ahead of your initial expectations. Is that a fair characterization?

We're really pleased with how the recycling business is performing absolutely. I think the number that you rattled off was really more for the aggregate of our recycling business versus the $700 million number relates to the growth projects of recycling and renewable energy, but the comments still stand. We've been very pleased with the investments that we've made in automation and everything that we expected and then some is being delivered coming out of those automation investments, whether it's higher throughput at those facilities, whether it's higher price points on the commodities that we sell, whether it's labor, which was huge for us and has been over a 30% improvement. So really pleased with those investments.

I appreciate that. And just the follow-up here. You gave the sustainability growth, EBITDA breakout or contribution for the 2026 guide, I think, $235 million to $255 million. Have you broken that out between recycling and RNG?

We have not. But the way to think about it, including the royalty, it's about 60% renewable energy, 40% recycling.

Our next question will come from line of [indiscernible] with JPMorgan.

So the sustainability EBITDA growth of $2.35 to $2.55. Can you help us with the cadence of this as we think about 1Q versus the rest of the year?

You're going to -- a similar story, the way to think about it first half, second half, so you're going to have more of a ramp in the second half than the first half when you have the carryover effect of what we brought online in the back half of 2025 and then we're bringing new projects online 3 in the first half of 2026. So you'll see a bigger half -- bigger impact in the second half than the first half.

So for modeling purposes, is 40, 60 first half versus back half is a good proxy?

I think Ed can get back to you on that on some of the modeling questions.

Our next question will come from the line of Kevin Chiang with CIBC.

It's Alexander on for Kevin here. I believe the EPA is set to finalize the renewal fuel blending rules in I was wondering if you could share any thoughts or insights into potential changes they could make to the volume obligations from their original proposal.

Sure, yes, we had -- we're hoping that they issued in Q1. We were hoping it would come out in late Q4, but the government shutdown delayed that a bit. What we've seen is pretty much the market has priced in the current RVO. And if anything, we're cautiously optimistic, maybe there might be some changes around the edges that could be constructive for pricing. We're not anticipating anything dramatic coming out of the RVO. I think that's the most important point. And we've really seen stability in RIN pricing, which is the most important thing for our business and our team has done a great job in navigating selling our RINs ratably over time.

Our last question in queue coming from the line of Stephanie Moore with Jefferies.

I wanted to follow up on a prior question that was just asked on capital allocation priorities. I mean I appreciate the commentary regarding keeping a balanced approach. But I also think as we think about 2027 and 2028, just the share cash flow that's going to be kind of runoff from this business, especially with the R&D investments coming through, you should be back to your targeted leverage this year. So as you think about that balance and maybe looking specifically at the M&A component, you're going to have, again, a lot of optionality. So as you think about that optionality any areas that are particularly interesting as you think about the next couple of years?

I mean I think as far as M&A goes, David can comment more on the capitalization piece or the share purchase dividend. But those are kind of dividends kind of stuff. But M&A, look, I guess what I would say, and John can reiterate here that there's still plenty of good strategic acquisition opportunities out there. I wouldn't expect to see us kind of stray outside of that. We have used typically $100 million to $200 million as our estimate for acquisition acquisitions throughout the year, and that's a number we have baked in for this year that range. So it could be at the high end of that range. But I think for the next few years, that's the number I would -- if I were modeling, that's the number I would use is kind of $100 million to $200 million in acquisitions. And then David, dividend [indiscernible] the increase is going to be but dividends and capital allocation to make up the rest. Because really, the balance sheet, I think, would say is in good shape.

Yes. The balance sheet is in great shape. I think the one thing just to your point about now that we have the share repurchase program is going to start back up this quarter. Obviously, we look at acquiring our own shares versus -- if we're looking at larger opportunities, we have a very biased view on kind of what the value of our company is. And so that's -- I think you're going to see us to continue our share repurchase program just from that point alone. But we're very disciplined in terms of our pricing approach to acquisitions.

And I'm showing no further questions in the queue. I will now turn the call back over to Mr. Jim Fish, WM CEO, for any closing remarks.

All right. We had a 15-minute closing remark plan, but in light of the time, I'll just say thank you all for your great questions today, and we will talk to you next quarter.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Good day, and thank you for standing by. Welcome to the WM Third Quarter Earnings Conference Call.

[Operator Instructions]

Please note that today's conference may be recorded. I will now hand the conference over to your speaker host. Ed Egl, Vice President of Investor Relations. Please go ahead.

Thank you, Olivia. Good morning, everyone, and thank you for joining us for our third quarter 2025 earnings conference call. With me this morning are Jim Fish, Chief Executive Officer; John Morris, President and Chief Operating Officer; and Devina Rankin, Executive Vice President and Chief Financial Officer. You will hear prepared comments from each of them today. Jim will cover high-level financials and provide a strategic update, John will cover an operating overview, and Devina will cover the details of the financials.

Before we get started, please note that we have filed a Form 8-K 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 of 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.

All forward-looking 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 filings with the SEC, including our most recent Form 10-K and Form 10-Qs. John will discuss our results in the areas of yield and volume, which unless stated otherwise, are more specifically references to internal revenue growth, or IRG, from yield or volume.

During the call, Jim, John and Devina will discuss operating EBITDA, which is income from operations before depreciation and amortization. References to WM legacy business are total WM results, excluding the WM Healthcare Solutions segment. Any comparisons, unless otherwise stated, will be with the prior year period. Net income, EPS, income from operations and margin, operating EBITDA and margin, operating expansion margin and SG&A expense and margin have been 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.

This call is being recorded and will be available 24 hours a day beginning approximately 01:00 p.m. Eastern time today. To hear a replay of the call, access the WM website at www.investors.wm.com. Time sensitive information provided during today's call, which is occurring on October 28, 2025, may no longer be accurate at the time of a replay. Any redistribution, retransmission or rebroadcast of this call in any form without the the expressed written consent of WMS prohibited.

Now I'll turn the call over to WM CEO, Jim Fish.

Okay. Thanks, Ed, and thank you all for joining us. Our team delivered another strong quarter of operational and financial performance. This led to third quarter operating EBITDA growth of more than 15% and free cash flow -- free cash flow growth of nearly 33%. These strong results reflect the hard work of our teams, the resilience of our business model and the value of the intentional investments we've made across our business. Our collection and disposal business continues to be the engine behind our growth, contributing more than half of the year-over-year increase in operating EBITDA. The business drove strong organic revenue growth and we're particularly pleased with our ability to attract robust disposal volumes to our network.

MSW grew 5% in the quarter and special waste volumes grew 5.5%, driven by new event work. We also remain focused on maximizing customer lifetime value through our pricing strategies and leveraging technology to optimize our cost structure, and we continue to pursue tuck-in acquisition opportunities to extend our network and drive further internalization.

Turning to WM Healthcare Solutions. The strategic value of the medical waste platform within WM's portfolio is more evident than ever. We've successfully integrated the people and operations of health care solutions into the existing management and operating structure of our 16 areas. This not only streamlines our operating model, but also allows us to apply our playbook, the WM way across the acquired business, fostering a culture of customer focus, continuous improvement and accountability. This aligned structure accelerates collaboration and unlocks new opportunities for growth. As an example, one of our top hospital customers has increased their annual spend with us by over $5 million after choosing us as their single provider solution across their multistate network. This is precisely the type of cross-selling opportunity that gives us confidence in the long-term value of our combined offering.

In our sustainability businesses, our solid performance is the direct result of success in managing contract structures and leveraging innovative technologies. Even as recycled commodity prices declined nearly 35% compared to last year, our Recycling segment operating EBITDA grew by 18%, which is a phenomenal result. Our new renewable natural gas facilities drove higher year-over-year contributions from the Renewable Energy segment. The growth was lower sequentially due to the timing of RIN sales. Our full year growth expectations remain consistent with our initial outlook.

I'm proud of the momentum we're building in this final stretch of and even more excited about the opportunities ahead. These last several years, including this one, have been years of deliberate and disciplined investment in technology and automation in our fleet in new recycling and renewable energy, renewable natural gas facilities and in a premier medical waste platform. Each of these investments was made with intention. And with a long-term view, positioning us to serve our customers better while structurally lowering our cost to serve. We're pleased to share that 2026 is setting up to be a year of harvesting the benefits of our investments, which will be partially evident in our free cash flow as our early view for next year suggests free cash flow approaching $3.8 billion. We remain thoughtful and disciplined in our capital allocation, and we fully expect to translate this performance into commensurate returns for our shareholders.

In closing, WM is exceptionally well positioned for future success. Our long-term strategy is delivering, and the investments we've made are paying off. As always, our results are a testament to the hard work and dedication of our people I sincerely appreciate the contributions of each and every team member. I'll now turn the call over to John to discuss our operational results.

Thanks, Jim, and good morning, everyone. In the third quarter, our team expanded margins by maintaining discipline on price to cost spread, leveraging advanced fleet and maintenance technology to reduce operating costs and realizing returns from our sustainability investments and strategic acquisitions. Our results affirm that our strategy is working and our disciplined organic and inorganic investments deliver long-term value. In the third quarter, we saw continued growth in our core collection and disposal business, increased contributions from our sustainability businesses and sequential margin growth and synergy capture from our Healthcare Solutions segment. In our collection and disposal business, we delivered strong performance in the third quarter with operating EBITDA margins expanding 100 basis points to a record 38.4% and operating EBITDA growing more than 7%, with every line of business contributing to that growth.

Both results are consistent with our operating EBITDA growth and margin expansion objectives and reflect the strength of our post-collection assets, increased landfill volumes and our disciplined focus on optimizing price to cost spread through customer lifetime value. We're also realizing the returns on strategic investments we've made to enhance efficiency and structurally drive costs lower. Looking at our top line, we delivered solid organic revenue growth in Q3 driven by disciplined pricing and improving volume trends in several lines of business. Core price was 6%, exceeding our plan with residential and disposal pricing leading the way.

Collection and disposal yield came in at 3.8% which was in line with expectations. Volume increased in the quarter with industrial up 1.2%, our first positive quarter since 2022. We remain focused on differentiating our services and maximizing customer lifetime value and our customers see the value of our service as churn remain right in the 9% range and service increases outpace service decreases. Additionally, landfill volumes rose 5.2% with broad strength across MSW, special waste and construction and demolition, mostly all unrelated to wildfire cleanup. As we mentioned at Investor Day, our strategic post-collection network continues to drive value both now and over the long term as we have seen both strong price and volume contributions, and our results keep us on track to meet our organic growth expectations for the full year.

Turning to operating expenses. Q3 marked our second consecutive quarter with operating expenses below 60% of revenue. This improvement was driven primarily by our collection and disposal business, which contributed 90 basis points of margin expansion through lower maintenance and risk management costs. On the fleet side, investments in trucks and technology improved our maintenance processes, reduced repair and maintenance costs by 60 basis points. Additionally, our focus on retention and training and development contributed to a 7% year-to-date improvement in the total recordable incident rate, lowering our risk management cost as a percentage of revenue. The strategic investments we've made in our team, our fleet, cutting-edge technology and comprehensive training are showing meaningful results. Turnover improved by an impressive 300 basis points bringing the combined rate for drivers and technicians down to a record low of 16.8%. These results underscore that when we invest in our people, we invest in the future of our business.

These same investments in people, process and technology are showing up in the WM Healthcare Solutions business as well. Since the beginning of 2025, the team has improved turnover by 21% while also improving on-time service delivery to the highest level in over 4 years. As we close the third quarter, our results reflect not only strong execution, but also the innovative mindset that continues to set WM apart. From advancing operational efficiency to strengthen our customer relationships, our progress is driven by the ingenuity and commitment of our team. Thank you to all of our employees for the work you do every day to move us forward.

And with that, I'll turn the call over to Devina to walk through our financial results in more detail.

Thanks, John, and good morning. Total company operating EBITDA margin was 30.6% in the third quarter, which is the best quarterly results in our history and that is despite the expected margin headwind from the acquisition of the Healthcare Solutions business. WM's legacy business achieved operating EBITDA margin of 32% in the quarter, meaningfully surpassing our long-standing ambition of sustained operating EBITDA margins above 30%. We achieved these results while overcoming a known 30 basis point headwind from the expiration of the alternative fuel tax credit. Our legacy business achieved 120 basis points of margin expansion in the quarter from 4 primary things: one, continued optimization of business mix with strong municipal solid waste volumes, taking the place of low-margin residential volumes; two, our focus on operational efficiencies in our collection and disposal business; three, the scaling of our sustainability businesses; and four, our dedicated focus on reducing costs. The remaining 60 basis points of margin expansion was driven by lower recycled commodity prices in our brokerage business and a reduction in incentive compensation costs.

As I mentioned, the Healthcare Solutions business created an expected headwind for our consolidated margins. Our focus on optimizing this business will lessen this pressure over time and we can already see the benefits of the team's integration and optimization efforts on the margins of this segment, which have improved each quarter since we acquired the business and are now at 17.5%. The key takeaway from all of this is that WM's disciplined focus on driving efficiency and investing in high-return opportunities is benefiting our financial results.

Our strong performance continues to translate into robust operating and free cash flow growth. Through the first 9 months of 2025, we generated $4.35 billion in cash from operations, an increase of 12% compared to the same period in 2024. This increase reflects our significant earnings growth, partially offset by higher cash interest due to the debt issued last year to fund the acquisition of Stericycle.

Capital spending to support the business and our sustainability growth investments are both tracking according to plan, totaling $2.34 billion for the year-to-date period. Putting these pieces together, free cash flow has grown 13.5% to $2.11 billion. Notably, our operating EBITDA to free cash flow conversion approached 42% in the third quarter, reflecting that we have moved from peak investment levels in sustainability growth projects, landfill infrastructure and our fleet into a period where we will harvest strong returns on these investments.

Through the first 3 quarters of 2025, we've returned $1 billion to our shareholders and dividends. and allocated more than $400 million to solid waste acquisitions. Our leverage ratio at the end of the quarter was 3.3x and we continue to track toward our target ratio of between 2.5 and 3x, which we expect to achieve by the middle of 2026.

Turning to WM Healthcare Solutions. As Jim mentioned, we're as confident as ever in the strategic value of the acquisition, and we are committed to fully capturing its long-term potential. Revenue trends for this business reflect a more measured pace than our initial projections. This is because we are using a disciplined approach to customer engagement, which means we have offered credits and deferred planned price increases for some of our customers. All of this reflects our focus on maximizing customer lifetime value and building a strong foundation for sustainable long-term growth.

Despite the moderation and the anticipated pace of revenue growth in the second half of 2025, we're on track to achieve the targeted operating EBITDA contributions from the acquisition across our total company results because synergy capture has exceeded our initial expectations, internalization of waste into our landfill network has been effective, and cross-selling opportunities are proving to be strong.

Turning to our total company outlook for the remainder of the year. We remain confident in our ability to deliver the operating EBITDA and free cash flow guidance we provided last quarter. Full year revenue is projected to be at the low end of our prior guidance range, reflecting incremental weakness in recycled commodity prices and our revised expectations for Healthcare Solutions.

With our outstanding year-to-date operating EBITDA margin results and confidence in our continued execution as we close out the year, margin expectations have increased to between 29.6% and 30.2%. In short, we are well positioned to achieve another year of strong earnings, margin and cash flow growth in 2025 and to build on our success as we go into 2026.

Finally, as many of you know, this is my final earnings call as CFO before my upcoming retirement from WM. Over the past 23 years, I've had the privilege of being part of this extraordinary team. Together, we work hard each day to care for each other and our communities and to deliver value to all of our stakeholders. In closing, I must say that my favorite thing about our business has always been the people. I want to thank the entire team for leading the way in service to our customers, the environment and to our shareholders. To our shareholders, thank you for your trust and support. I have complete confidence in the Wm team and in David Reid, our incoming CFO, who knows this business deeply and has been instrumental in shaping our financial strategy. I know the future is bright, and I look forward to watching WM's continued success.

With that, Lydia, let's open the line for questions.

[Operator Instructions]

Our first question coming from the line of Tyler Brown with Raymond James.

Devina, I've got a couple of housekeeping items. But just year-to-date, how much have you guys benefited from the onetime cleanup work at the landfill. Just want to make sure I have that right for next year? And then secondly, can you go through a couple of the charges this quarter? Has that plastic still plant just been idled based on commodities? Or was that a technology issue? And then what was the genesis of the landfill closure and the charge in renewables? I'm sorry. I know that's a lot, but I appreciate it.

Yes. Let me take them in pieces. So first, with respect to the wildfire volumes, I think it's important to first highlight what John mentioned in his prepared remarks, that there was virtually no impact of that in the third quarter. That really was mostly a Q2 item. There was some in Q1. Total revenues for that were around $115 million for the year. And as we've talked about, the flow-through on that revenue is higher than our portfolio flow-through on incremental volume, which tends to be in the 45-ish percent range. As you can imagine, landfill volumes and special event volume tends to be at the higher end. So you have to extrapolate that in order to think about total EBITDA impact, but I want to reiterate that the strength of Q3 solid waste results really indicates that we accomplished about $145 million in EBITDA growth in that segment. without any meaningful impacts from the wildfires.

With regard to the charges, I'm going to let Tara address the Natura activities because you'll do that better than I could. But with regard to the landfill impairment that we took in the quarter, that was a really long-term pursuit of expansion at hazardous waste landfill in the Northeast, and we had some news this quarter that indicated that our pursuit would no longer be worth moving forward with. And both recorded an impairment of the existing net book value of that and then also reported the impact of an acceleration from former estimates in the expected closure and post closure cost for the site.

So on Natura, it is absolutely market conditions. We built this plan and demonstrated that we can produce a high-quality pellet that customers would buy. But with virgin prices being at all-time lows and some of the minimum content legislation being a bit delayed the buyers were just not there for the product that we were producing. So we made the decision to temporarily close the operations. We could start it back up, but we're going to monitor what happens with those market conditions going forward.

Okay. Okay. Very, very helpful. Appreciate that. And then, Jim, I very much appreciate the early look on the '26 free cash. But can you give us any help on some of the pieces to get there? I mean, what mid- to call it mid, high single-digit improvement in EBITDA, which I think is pretty consistent with the Analyst Day makes sense. And then will part of the improvement in free cash be a sizable drop in green CapEx? Just any broad steps there?

Yes. So it's coming from a number of different places, Tyler. I mean if you think about the wind down of the sustainability investments and then a ramp-up in the related EBITDA, that's a big piece of it. You'll see the normal strong performance of our legacy business, which tends to perform year in and year out. And so you'll see that as well, and we'll give you kind of the exact number when we get to next quarter. In addition, we bought -- I think, John, correct me if I'm wrong here, about 6,000 trucks over the last 3 years, and that's above our normal spend on fleet. So we'll ratchet back to more of a normal looking year with about 1,500 trucks. So you'll see maintenance capital be a piece of that. You'll also see, and I can talk about this to Healthcare Solutions. There's a number of reasons why healthcare Solutions is going to be a nice contributor to free cash flow next year, not the least of which is reducing the cost of integration, which has been substantial this year. You'll see some carry -- a fair amount of carryover from synergies that we were collecting throughout the year this year that we'll get the full year of next year. You'll see some additional synergies in that business next year. So there's a number of reasons why Healthcare Solutions will be a nice contributor to free cash flow. So there's quite a bit going into that. I don't know that, that helped you kind of fill out the model. But I think you'll be able to -- when you hear us in January, be able to recognize that this is not just one thing that's causing us to be bullish on free cash flow.

Yes. No, I totally get there's a lot of pieces. And just if I can squeeze one last one. So I think at the beginning of the year, you guys said that sustainability EBITDA would be up, call it, [ 280 ] at the midpoint this year. It does appear year-to-date on my math. Again, this is my math, but it is tracking pretty well below that. I assume there's going to be a step-up in Q4. And then I thought, Jim, I heard you say that you are expecting to hit that target for '25. Is that right? And then two, and Tara, this is my bigger picture question, but with where commodity prices are where RINs are. Do you still have that full confidence in achieving that near $800 million of total incremental by '27? Or should we start thinking about maybe haircutting that a little bit or pushing it out a little bit further? Appreciate it.

So let me take this in pieces. And first, I'll start with the renewable energy business. So we're making great progress on our projects. As Jim mentioned, you might have noticed that our earnings might have looked a little muted in the quarter. But that really is because we made the decision to defer really selling some of our RINs in Q4 because we saw pricing uptick -- upticking a bit. And on the volume side in 2025, just to give you a little bit of color, we're on track through the first 9 months of the year where we doubled the amount of RNG production. So we're seeing the benefits flow through from those plans.

As far as what we guided in 2025, we're expecting our renewable energy business to be on track. What's lagging is the recycling business, which is primarily commodity price driven. We've made a lot of great strides on our automation investments. And if you look at what Jim mentioned that commodity prices were down nearly 35% and EBITDA was up 18%. That is a testament to the benefit that we're driving out of these investments in labor costs and operating expenses and our EBITDA margins are more than doubling at those automation plans.

So what you might see going forward into '26 and '27, on the recycling side, you'll recall we gave you a range of between $75 a ton and $150 a ton for what we might expect out of the recycling business. And so for the automation investments, we expect roughly a $10 change to equate to about $8 million. And then you would have to add to that for our base business, a $10 change is about $20 million. So all in, somewhere between $25 million and $30 million would be our new $10 change. But we're -- we remain very confident on where we're headed. We're looking at renewable energy pricing and what's happening in the RINs market, and we're seeing prices for 2026 in that [ 220 to 230 ] range. so still within our investment thesis.

our next question coming from the line of Noah Kaye with Oppenheimer.

I'll add the congratulations to Devina for a long career at WM. Thanks for all the dialogue over the years, and we wish you well on the retirement.

Thanks, Noah.

So now that we know that landfill volumes didn't benefit from wildfire in 3Q, can we double-click on the strength in MSW as well as what drove the positive inflection in industrial volumes?

Yes. So volume was a good picture for us this quarter. When you think about industrial, it's been negative for several years now. And so the fact that it ticked up was encouraging. It was pretty evenly spread geographically. Part of that industrial pickup was the conversion of of WM Healthcare Solutions hospital customers that moved from other companies to us. So that was a piece of it. I guess you could call that cross-selling, I don't know. But it certainly is a benefit of acquiring the business. Temp roll-off was slightly stronger across a couple of geographies as well. So that contributed. And then you didn't ask about resi, but resi is has been negative for a number of years. And I think, John, we've talked about it kind of starting to flatten out at the back half of next year, but the volume -- the margins have certainly been strong there.

Yes. I mean if you look at quarter-to-date, year-to-date, the revenue despite the volume headwinds is up in the quarter and the date. And I think for the quarter, we were still up $10 million in revenue and about 155 basis points. So that math is still working, but to your point, Jim, about the outsized volume impact. If you remember last quarter, we talked about 1 big franchise. It's affecting about 250 basis points of that negative landfill -- excuse me, residential print and it's about 50 to 60 basis points on the commercial side because that will be another question. It's that franchise business. So we should lap that at the end of Q4. To your point, we've said we think we'll see continued improvement in trends in residential and probably get sub-3 by the first quarter of next year and continue to improve there.

And then, Noah, on landfill volumes, not only was MSW positive, really all waste streams showed nice positive movements. And MSW in particular, I think, is reflecting the strength of our network really more than anything else. It wasn't kind of similar to the industrial line of business. It wasn't something you could point to specifically in 1 place. It was pretty universal. And so we're pleased with it, but it certainly wasn't a case of us trading price for volume because if you look at the price numbers, they were very strong as well, particularly MSW, I think, was a 6.7% yield. So we're pleased with it. I wish I could give you a better answer on other than just the network is very strong and why it's coming to us. The pipeline on special waste, we just heard from our area leaders last week is it continues to look good. So overall, we're pleased with volume numbers.

Okay. Nice to see the margin guide raised for the year. There's still, I think, a fairly sizable range there for 1 quarter implied. So just broad upon what would take you to the low end versus the high end of that margin guide.

Yes, it's a good question. And what I can tell you is we're optimistic about the margin outcomes. I think that what you're left with is recognizing that with softness on the revenue line, there had to be outperformance in our execution, particularly in the collection and disposal business on margin, and that's what lifts our confidence in the top end of that range. I don't anticipate much that would drive us to underperform on that range. So I do think you're looking at midpoint to the upper and being the most likely outcome for the fourth quarter.

With respect to what gives us that confidence, I really think it's important to reiterate that when you look at the 32% collection and disposal margin in the quarter. It's the result of the retention benefits that we've talked about driving efficiency and safety. It's the fleet investment, it's improved price/cost spread and its improved mix, which Jim just gave you color on, particularly with those landfill volumes being so strong. So that's what gives us confidence, combined with the fact that, as Tara mentioned, Q4 will be a strong quarter of RIN sales, and those are effectively 100% accretive to margins. So really expect the fourth quarter to be another strong quarter of margin performance.

Our next question coming from the line of Trevor Romeo with William Blair.

First one I had was just on the Healthcare Solutions business. If you could maybe just touch a little more on the deferral of the pricing increases. Just maybe like what kind of customers are pushing back and why? And then just in terms of maybe the long-term pricing power of that business, what's your confidence in the ability to eventually get those price increases and achieve the kind of mid-single-digit revenue growth you expect for that business?

Yes. Trevor, apologies for kind of a long answer kind of here, but I'll touch on the price increase piece. But let me give a little bit of perspective for everybody here on Stericycle after 12 months of owning the business. First of all -- and we talked about this in our prepared remarks, but strategically, we view this as being even better than the original business case. It's hard to -- the secular trends absolutely support this. It's hard to read an article these days about the next 10 years of kind of 10-plus years of economic growth in the U.S. without reading something about lower birth rates or an age population here. And all of that supports this business. We know that what happens is we get orders that there's demand for higher demand for health care services. And the market position of this business, too, is incredible. There -- I'm not sure we realize that coming in, how strong their market position is geographically. I think regarding pricing, and then it's really related to the ERP implementation itself, Devina can comment on this as well. But overall, as a comment about the ERP, I mean, it's moving along well.

I think it's worth mentioning, every single company that's ever implemented in ERP, including ourselves, by the way, has measured this in years, not in months. And there are always some challenges with it. And this one, in particular, our ERP rolled out a few years ago off of a well-run system. This was not a well-run system. And so we had some challenges, I think, coming in. What we saw with the top line really was that it was affected by a couple of things. You mentioned one of them, which is deferred price increases. The other was credits given to customers as we're trying to clear up this AR. By the way, we've cleared up 1/3 of the past due accounts receivable just over the last 3 months, about -- some of that is coming in the form of cash collection. Some of it is coming in the form of credits.

The good news there is that those credits are, for the most part, are going to be one-timers. It's not as if we'll never give another credit, but a lot of those are onetime credits that we're giving to customers. And then we're seeing a bit of churn as well. It's not excessive churn, but we are seeing some churn. So it's really those 3 things. It's deferred price increases. It's some credits. We're giving to customers to clear up old AR and it's some churn with the business and a bit of volume as well there. But overall, look, we're -- we think that -- we talked about the synergies outperforming, Devina mentioned that in her script. Those are outperforming for us. And by the way, this ERP, I mean, we absolutely have the right team on it right now.

We have a super strong team on it. They are focusing on a whole bunch of different work streams. We're doing things like rolling out a new invoice to customers shortly. The systems are now finally talking to each other. So SAP and Salesforce are talking to each other. I'm not sure that was the case before. And so this becomes not an IF anymore. This is a when. And I think the when dwin is still well into '26. And -- but what we can say is that this quickly become transparent to our customers. It's all internal work that's being done, things like the new invoice, those aren't transparent to the customer. They'll see that and they like it. But again, long answer to your short question there, but we do feel really good about this. I know a lot of you wrote about it in your early remarks, but strategically, it's a great business, and we're making a ton of progress on all fronts.

And Trevor, I'd just like to underscore one thing, I think, to address your question very directly. And that's that this was not a step that we took as reaction to pushback from customers, quite the opposite. It was a step that we took because WM does the right thing for our customers. And so whether it's the credit or the customer-centric evaluation of service and contract that was necessary for us to ensure that we're taking the right steps with price increase. Those were things that we did because we do think is the right way. And you'll just see effectively a restabilization of revenue as we get into 2026 outlook. But I think this housekeeping that you're seeing in the third quarter was necessary for us to focus on customer lifetime value and a long-term growth portfolio that we know exists because this is the best platform in the business for regulated waste service, particularly in North America.

And maybe, Trevor, one -- again, to add to Jim's long answer, I'll extend it just a minute. I mean, listen, at the end of the day, the strategic value of the health care business, Jim and Devina spoke to, in their comments. The other thing I would tell you is when you look at it, it's about 10% of our business when a dust settles, and if you look at the legacy business or the core solid waste business with margins over 38%, SG&A and kind of a soft revenue quarter at 9%. There's a lot of strength in the legacy and core business, and we think that that's going to continue to perform well through the balance of the year next year. And again, we're going to get the tailwind, if you will, of all the improvements that the team is working on with regard to the health care business. So that's another reason why we feel so good about in particular, what our free cash flow is going to look like for next year.

All right, thanks so much to all 3 of you for that. That was really helpful. And then, John, I guess that's a good segue into a follow-up question I had, which is maybe the -- looking at your price cost spread into next year, it sounds like things are kind of tracking well. Now if you look at your pricing, maybe the yield is tracking maybe toward the low end of what you expected this year, but still pretty solid on costs, it sounds like your turnover and incident rates are improving. So you see potential maybe for wage inflation to go down further next year? Just kind of how are you thinking about both pieces of that spread into -- beyond this year?

It's a good point there. Trevor, I spent a good bit of time looking -- I looked at a few different ways. If you look at sort of the yield for the traditional solid waste business for the quarter, it's 4.1%. If you look at core price at 6% and you compare that to sort of CPI, CPI for, at least our math, is right around 2.93%. So I think we continue to see a good spread between core price yield and operating expense pressure. And I think as I mentioned in my prepared remarks, another quarter under 60% with a little momentum on a year-to-date perspective. So we feel good about the cost price spread. And I think the other thing we've talked about for the last number of quarters is that our commercial and industrial pricing has always been solid and consistent, but you're seeing continued improvement and consistent levels of pricing across our landfills across our entire post collection network and still in our residential business. So I think the fact that we've syndicated sort of our our pricing strategy in a more effective way, gives us a lot of confidence going into next year on that spread you mentioned.

You might mention, John, driver turnover because that's incredibly good story.

Yes, that's worth noting. I mean if you look at our risk cost, our safety metrics, there's a number of metrics. Our labor ratios are all benefiting from the fact that we, as a team, have worked really hard over the last couple of years really post-pandemic to get that number, a under control; and B, to make it -- to improve it quarter in and quarter out. As I mentioned, the driver and technician turnover is at an all-time company low and that shows up in a bunch of different metrics, as I mentioned in my prepared remarks.

All right. Really appreciate it. And Devina, and my congratulations to you as well.

Our next question coming from the line of Toni Kaplan with Morgan Stanley.

I was hoping you could talk a little bit more on what's going on with yield and also just in the quarter, but also looking into 2026, how your conversations with customers have been going at the end of the year here.

Well, I would say yield is -- we talked about with yield, and I mentioned a couple of them earlier. MSW was very strong at 6.7%, commercial at 4.7%, resi 6.5%. So we're we're happy with yield and core price. We tend to focus on both. And I think the primary focus with respect to pricing is to cover our costs and then tack on some margin over and above that. And I think that what we're showing, whether you look at -- when you look at our margin results, even with some of the headwinds that we faced, I believe that's really kind of showing up there. So I don't know that, that answers your question. But right now, we're -- we don't just focus on kind of the absolute number as our cost comes down. We've said all along that our yield will tick down slightly. So -- but we just want to make sure we maintain that delta between cost and price.

Got it. Yes. I was sort of curious on the industrial yield. I think it was like the lowest since COVID, and I think you've talked about mix and temporary roll-off being a little bit weak in past quarters. I know you said it was a little bit better this quarter, but were those still similar drivers? Or is like, I guess, on the industrial one, was there a reason why 2.3 was -- we saw a lower.

I think you picked it off, Toni. I think a few things are affecting that. One, in terms of -- we mentioned that some of the volume increases coming from the health care side as we internalize some of that, but to your point, the temporary business has actually rebounded a little bit is less negative. And historically, that's lower priced than permanent work, but that doesn't mean it's not as profitable. So that's one I would certainly point to. And I think the other thing we saw is a little uptick in our permanent [indiscernible] from some of our permanent customers, not meaningfully, but it was an uptick. But that is what's affecting the yield. But I think as Jim mentioned, when you look at our core price at 5.7% for Industrial and the overall margin in our collection and disposal business at 38.4%, I think that the math flips out pretty well.

May also be a bit a mix issue with respect to national accounts when you look at yields. So -- and that's why core price is an important metric for us to look at also, yes.

Okay. Great. And then just as a follow-up, when you think about the M&A pipeline, how is that looking? How are valuations looking? And should we expect '26 to be sort of a bigger year or still digesting the health care business? Just where are we on sort of M&A strategy?

Well, I think you heard a good bit of color from Jim and Devina on what we're doing in health care and where we are sort of any integration there. We made a big step. The business is now fully integrated into our 16 areas. So we feel good about the momentum there. Separately, on the traditional solid waste side, I think we've closed about $450 million year-to-date, and we said that number could be as big as $500 million by the end of the year. And it could still be we've got a handful of transactions that are out there that could close in Q4 or could roll into next year. I think with regard to '26, sitting here today, I think probably somewhere in the normal $100 million to $200 million is what we're looking at now. But as we've demonstrated over the last couple of years, when the right strategic solid waste asset pops up, we've certainly got the capacity to do that. We're going to take the same approach into next year.

And I think, John, maybe one last add there. When you think about M&A for next year, it really kind of brings into the conversation capital allocation and what does capital allocation look like next year. We'll give you some specifics on it when we get to January. But free cash flow as we really harvest the cash from the sustainability businesses in the health care solutions and then continue to drive good strong cash from our legacy business.

It probably indicates that you're going to see, obviously, the dividend will be -- come out of that first, but there could be some M&A and very likely will be a substantial share repurchase next year. We'll figure out exactly what that number is going to be when we get to July -- to [indiscernible] months.

And our next question coming from the line of Jim Schumm with TD Cowen.

I was wondering on the WM Health care, would you be able to give us a sense of how the medical waste is performing and how the document destruction businesses are performing?

Well, two things there. First of all, addressing a little bit of the remarks that Devina made earlier regarding some of the credits we've issued to the customers. those credits have been primarily on the regulated medical waste side of the business. A lot of that is acknowledging frustration over the years with the ERP implementation. It has been sort of maintaining our customer-first focus there and making sure that we establish a firm foundation from which to grow. We have experienced a little bit of churn there on the hospital side of the business. However, additional customers continues to be pretty strong. I will say, I think it's worth noting that we've renewed nearly $200 million worth of business on our large customers there and that average PI has been in the low double digits. So I think we have a good runway there. And as we stabilize that side of the business, and we have a firm foundation to grow, you'll see those PIs begin to realize towards the back half of 2026.

On the auto shred side, the purge business gave us a little bit of challenge at the beginning of the year. That was mostly having to do with disconnects between commercial and operations. We fixed those we've seen us bringing that high-margin business back in line. And the auto shred, actually, this is the place where we've implemented our sales coverage optimization the soonest, the fastest. And we're seeing a lot of productivity in terms of pipeline, rate of closure and we like what we're seeing there. Quite frankly, the whole melting ice cube concern is no -- not that much of a concern for us anymore.

Okay. And on the positive side, you noticed -- you noted like basically legacy Stericycle volumes going into your landfills. Are there any -- is there any way you could quantify that benefit for us?

So basically, when we think about how we outlined synergy value, we talked about $80 million to $100 million in 2025 of synergy value. You can think of it being about 1/5 of the synergy realization to the year.

Okay. Okay. And then just last one for me. on the hazardous waste landfill, like I just want to make sure I understand correctly, you were pursuing an incremental hazardous waste landfill. Is that right that didn't come to fruition? Or are you closing an existing hazardous waste landfill. And then can you just -- can you just -- I forget how many -- you guys have 4 or 5 hazardous landfills, where do you stand there?

The answer to the question is that the site that we're referencing that was shuttered has actually not been operational. We've kept it on life support, if you will, as Devina mentioned, we were pursuing permit expansion. So it's not a loss from our existing portfolio. It hasn't been operating in a meaningful way in a number of years.

But it is in the count. We've always disclosed that we have 5 hazardous waste landfills. We will now disclose that we have 4.

Okay. Great. And good luck to you, Devina. Thanks for everything.

Our next question coming from the line of Rob Wertheimer with Melius Research.

I just had a quick clarification on an earlier comment with respect to Healthcare Solutions doing more traditional waste. I think you said, I guess you could call it cross-selling. Sound a whole lot like cross-selling. So I was wondering if I missed a subtlety there. And then just more generally, how does your cross-selling kind of sales effort ramp up over time?

Yes. You're probably referring to the comment I made about our industrial volumes and how we were taking volumes from what would have been under the old company going to a competitor and then internalizing them into us. So that's really what that is. our solid waste volumes coming to us in the industrial line of business through internalization of that volume.

Okay. Perfect. And then just in general, your progress on cross-selling on health care?

It's been very strong. There are some great examples where we've had exactly what we've talked about, where the national accounts business platform for WM has been a long success story for us. But the health care sector was one of those where we were underrepresented relative to our share in other important segments of our customer base. And we've seen great success in leveraging, I would say, the WMHS customer base in order to extend traditional solid waste performance across that national accounts platform.

And then we've also seen success the other way, where we've taken legacy WM customers and saw about shred opportunities or even using the health care solutions platform in order to deepen the customer relationship. I think what's really important there is that when you become that single source provider for a customer that customer relationship will be longer and provide incremental value. So that's another leg of that focus on customer lifetime value that we've been talking about.

Maybe, Rob, one more finer point there. Jim referenced in his script, 1 particular customer that has increased their annual spend by about $5 million across their multistate network. But that's certainly an evidence of cross-sell there. By the way, there are several customers that have increased our spend in the 7-figure annual revenue range with us. But maybe what's even more exciting is that we're also seeing cross-sell in our independent RMW shred it, small and medium-sized customers.

We've actually completed cross-sales for over 7,000 customers. Now those are small customers, but those end up becoming the backbone. And what we've seen is that customer split is basically 50-50 between WM and Stericycle original books of business.

And our next question coming from the line of Faiza Alwy with Deutsche Bank.

I wanted to follow up on the same topic. It seems like you're talking about success around cross-selling. But at the same time, you're also talking about higher churn on the health care side. So I'm just curious if you could give us a bit more color on what type of -- is there a specific type of customer, maybe a region or like where are you seeing other strength with cross-selling versus where you're seeing higher churn?

Well, the success -- Faiza, if I understood your question correctly, the success that we're seeing on cross-sell is across all of the channels. I just mentioned 7,000 customers that we've cross-sell. Those are small and medium-sized customers. We've also had some success with some of the larger, more complex hospital networks the churn that we've seen in the hospital side really relates to those customers that have experienced the most frustration over the last couple of years. They were the ones that maybe weren't getting their bills correctly earlier in the Monarch, which is what they used to call their project implementation back in late 2023 and early '24. And so we've seen some uptick there. But we've also seen our addition of customers on the hospital side remain pretty healthy.

I think too, Rafa, it's worth mentioning that -- okay. So yes, we've seen some churn here. But I mentioned kind of in my long answer there that this network that Stericycle has is unsurpassed. Nobody is close to this network. So while we may have seen a bit of churn, it's not extraordinary churn by any stretch. And so once we get this ERP kind of ironed out once we really kind of bring this entire business under us, which we've done now, John mentioned bringing it into our operational structure in our 16 areas. I think you can expect to see all those numbers that you've been focused on that we've been focusing on as well, which is 5% to 6% revenue growth, and the synergy is really showing up as opposed to being a little bit obscured by the top line all of that will begin to show. And then I guess, John's point is an important one, too, which is again, this is 10% of our business. The 90% is killing it. So we're overall pleased with the way things have progressed.

I think the only thing I'd add to that, Jim, and I mentioned earlier is worth highlighting here is the service is good. I mean, when we look at the health care portfolio of services. Rafa and the entire team have done a nice job, as I mentioned, improving 1 KPI, which is on-time delivery. So service, if it were at challenges, the harder one is hard to fix. In this case, we have the benefit of providing solid service.

I think their numbers end up being better than our own numbers on the legacy side.

And by the way, that churn number is also better on that segment than on the legacy side anyway. Yes.

Understood. Very helpful. And then just maybe pivoting to the core business. You mentioned lower maintenance, lower risk management costs. So how much more runway do you think you have in this as we look ahead to 026 and beyond?

So I would tell you, there wasn't that many handful of years ago, we were at the 63-plus percent range and gradually and systematically we've worked our way down under 62, 61 and now under 60 and we think that's obviously a pretty big accomplishment for us. To answer your question, is there room to run there? Absolutely. I think you've seen the momentum from above 60 to below 60. We have some numbers aspirationally over the next handful of years that we'd like to achieve that are better than the 59.4% that we printed this quarter.

I think it's going to require. So John, to your point, it's going to require a different way of doing business. And that -- and so John has a team that's working on this. So it's not just run fast or jump higher. It's doing things differently than we've done them. So if all we're doing is just doing this kind of trying to squeeze dollars out of the existing business the same way, then I would argue, yes, we probably squeezed a lot of those SG&A dollars out and the OpEx dollars out. But in order to get to those aspirational figures that John's referred to, I think you'll see us doing things a bit differently. That means using technology to supplement our operations and using AI, which every company is talking about these days, to replace labor that leaves us.

Our next question coming from the line of Tami Zakaria with JPMorgan.

One follow-up question on the topic of churn. I found your comments quite interesting. Could you comment on where these customers that are churning are going to? The reason I asked that question and like you mentioned earlier, Stericycle had very strong market share. Hence, I'm curious, are they turning for price, network, something else. And related to that, would you expect to win some of these customers back once the ERP is in a good spot? Or are these customers not profitable enough to go after?

Well, there's a lot in that question. I'm going to try to give you some nuggets that you can take away here. But first and foremost, we're having -- we're having exit interviews with those customers. And by the way, a lot of times, what we're losing is not the entire customer but a piece of the customer and the reason for that is that there is no other competitor out there that can actually handle the entire network of hospitals that is associated with the customer. And so -- when you ask the question, do we have the ability to go back and gain that customer? The answer is absolutely yes because they're going to want to gravitate back to a single provider.

Our next question coming from the line of Konark Gupta with Scotia Capital.

Just want to kind of address the same 10% business, Jim, you talked about it's kind of like important in the grand scheme of things. But your SG&A intensity at health care, if I look at the GAAP versus the legacy business, I think it stood at 10 points. In Q3, you were 12% or 12 points in Q2, 14 points in Q1. I mean it's been coming down sequentially the gap versus legacy. And I think at this clip, I mean, you might hit your target -- underlying target for synergy in the next few quarters, perhaps. So I just wanted to get the sense of are we thinking it correctly that the SG&A intensity is coming down quite nicely here and it's kind of going to hit your targets soon enough? Or is there something else in the mix that has held to SG&A intensity much faster in the first 3 quarters?

Yes. Well, I would say to that, I mean, just to frame it maybe in more pointed fashion, I think what you've seen is since Q3 of last year, you've seen that SG&A go down by essentially 700 basis points, which is a pretty dramatic shift down. Now there were some parts of that business that were clearly low-hanging fruit. We are now taking a much more surgical approach to how we do that. So particularly so we can do 2 things: one, maintain the improvement and the fixes that we are doing on the ERP 1, change a little bit of the customer care level approach that we're using with that larger complex customer base and then facilitate more collaboration across the sales and operations side of the business. So we saw a really good improvement in 2025. We're going to see that improve in 2026 and then taper down. But I think what we've said is over the -- we see, over the 3-year horizon, we are intended to take that down to 17%. And we think we're going to end up there, and there's opportunities for more.

By the way, I want to add there is that, that SG&A performance is even more impressive then Rafa gives a credit there because the softness on the top line. So -- and we're measuring it as a percent of revenue there. So Rofa and his team have made huge progress on the cost side of this. And as we have discussed with the top line, there's been some things that some of them are one-timers, some of them are recoverable. But as we see top line really start to tick back up, that improves SG&A as a percent of revenue as well.

I appreciate the color on that. And if I can follow up on the recycled commodities. I think you guys see a 35% decline in Q3. What are you seeing now based on the book that you are left with? What kind of basket of commodity prices you're looking at heading into Q4.

Well, as you all saw, commodity prices have dipped and a couple of reasons for that. If you're looking at OCC prices, we've seen some mills closed down domestically, about 10% of capacity has been taken out, and we're seeing weaker box demand. So certainly, if the economy picks back up and we see more consumer spending we would see an uptick in OCC prices. And you heard my previous comments related to plastics. Plastics are at all-time lows. But when you look at commodity price trends, typically from peak to trough, roughly 12 to 24 months. So we would expect a bit of a bounce back sometime in 2026. We're not expecting that in Q4 2025. We're expecting commodity prices to remain around that $65 to $68 a ton basket, and that's what has been included in our recent update. But overall, still feel very optimistic about the investments we've made. We've been taking out labor out of our facilities, which is good in any commodity price environment. and certainly creating cleaner material, which we can sell at a higher price point.

Okay. That's great for thanks for the color and time and all the best to you, Devina and David.

Our next question is coming from the line of Kevin Chiang with CIBC.

Echoing the congratulations, Devina, best of luck in your future endeavors. Maybe just on RNG, I think at the Investor Day, you had mentioned, I guess, in 2026, you had secured about 30% of the volume at a fixed price, WM prices have moved up a little bit here in Q4. Just wondering if that ratio has changed as we think about the fixed versus variable into next year.

So for 2026, we've presold about 45% of our offtake, so it's up from our last update. And just to give you a balance, what we're anticipating is a little less than half of that will be sold in the transportation market and a little more than 50% will be sold in the voluntary market. 2026 will be a year where we will fully allocate the -- our fleet to WM's RNG production. We're seeing RIN prices for 2026 in the again, $220 million to $230 million range and still seeing some buyers on the voluntary market, and we're making some headway there.

Okay. That's super helpful in the update. And just -- I know you've had a lot of questions on health care here. Maybe if I just ask a bigger picture question. When you look at the price elasticity of this business, as you try to put through price increases and pursue your revenue strategy. Is it -- is it in line with what we would have thought a year ago? And maybe how does it compare to solid waste as you've kind of had this under your belt, just interested from a higher level perspective, just how you view kind of the pricing and demand dynamics just having on this almost a year now?

Well, lots has happened in that year. I think what I would say is we start maybe with our long-term vision and then move backwards. We've talked about that maybe aspiration of 5% to 6% growth overall being realizable, long term. What we found is that, as Devina mentioned, we're taking a slower, more deliberate approach with that, particularly in the price increase because the last thing you want to do is put a PI through to a customer, particularly a large complex customer that has been going through a tremendous amount of frustration with their billing with our reporting over the last couple of years. That said, once we have offered that credit and baseline that customer better, we don't see any reason to doubt that we're going to be able to put in the particular PIs increase that we are entitled to. And I would just point you once again to the example I gave earlier about some of the renewals we've had about $200 million worth of that business that we've been able to renew with an average low double-digit PI.

I would just double down on that and say there are some really important fundamentals there. One is the secular trend that we've discussed. So from a supply and demand perspective, the demand for our business is just going to continue to grow. Two is the quality of the customer service, the quality of the customer service, our on-time delivery, all of that is strong. And that's really supported by a best-in-class Net Promoter Score for that part of the business.

And then three, I just think of it in terms of the strong execution, data-driven approach that WM has established and that we show quarter in and quarter out for the collection and disposal business, we're going to be able to leverage that know-how for this business segment. We're just going through this period of housekeeping, I would call it, that is appropriate and doing the right thing for our customers. So I think those things bolster our confidence in that long-term price outlook for the business. And I think we're more confident in that today than we were a year ago.

Our next question coming from the line of Shlomo Rosenbaum with Stifel.

I wanted to talk a little bit about the industrial volumes turning up. And if you kind of exclude the internalization of the health care solutions, are we starting to see an uptick just in general? Do you feel like we're just kind of bouncing around a little bit off the bottom. It's certainly notable that it's the first positive number in 3 years. I want to see what you think that is indicative of just in general in your customer base?

So I think if you look at that in industrial, I think you hit on the key point, which is the first quarter in many that we've seen a positive uptick. And if you if you discount out the health care service volume, it's about 50 basis points of the increase. So net of that, we've still seen an increase in our volume. And I mentioned a little bit of less of a drag from the temporary business. And Jim mentioned, we're seeing some of that flow through to our landfills in the construction and we've also seen an uptick in some of the business our permanent customers are doing. So think about the same customer falling a little bit more per week per month than they were before. Those are the 2 contributing factors, net of the health care and like I said, that's about half of the improvement.

So it feels like the underlying business -- just to make clear, the underlying business is getting better. It's not just a kind of bouncing around awful finally hitting the bottom. I'm just trying to put a little finer point on that.

I think you got it. Like I said, half of it's health care and half of it is unrelated to that. And as I mentioned, part of the yield push was the fact that the temp business is profitable, but it doesn't bring the same top line revenue. So it does put a little pressure on yield. But as you think about our margins in the collection business or our collection and disposal business, I think they'll speak for themselves.

It could be interesting to see how the housing market does. I mean every home builder you talk to would tell you that we're short houses, unlike years ago during the Great Recession where we had too many and so hence, the big crash. Now we've kind of gone 180 degrees. And so it will be interesting to see how what the homebuilders do, how that affects our business because it is a piece of our business for sure, and it will affect our roll-off volumes.

Okay. Great. I just wanted to follow up just a little bit more on the ERP impacts on the health care business. Where do you feel you are in terms of stabilizing that whole system so that we're kind of clean the customers are seeing what they would expect to see and we can kind of baseline off of there. I mean is it another few quarters that we need to go. I'm just trying to understand kind of timing wise, how long we should think about this kind of interim period before you get back to being able to implement the normal kind of pricing you would expect? And then just a housekeeping convert to [indiscernible]. Is there a difference between issuing credits for past dues and write-offs? Or is it just semantics there?

Yes, it's a great question. So I'm going to take that easy one first. So customer credit has to be recognized as a reduction to the revenue rather than a write-off, which is recognized as incremental SG&A cost and so our write-off actually were pretty well in hand in the quarter for the health care business. It was more direct steps that we took to credit for the top line with our customers in the quarter where we saw an outsized impact. With respect to where we are in the ERP journey, I think Jim's comments about the fact that these these implementations and journeys are measured in years, not months is the right way to think about it. But I think to put a finer point on that, what's really exciting about where we are and kudos to the team that's working diligently on this each and every day in order for us to get there. But we're calling the current environment, and you actually use the word in asking the question, our stabilization period, and we expect to be through our stabilization period by the end of the first quarter.

We're then going to move into a scalable and growth period, and we think that scalable and growth period starts with Q2. So we're really optimistic that we've got the right people working on this, we've got the right plan, and we are seeing really good traction on the work streams that are in place. And while there may be a quarter bump or bump in the road with regard to the revenue that we provided, we know that the bump in the road is temporary, and we're going to be on a stronger foundation going forward for the growth of the business long term.

Great. If you don't mind me sneaking in one more. Just if you renewed $200 million at low double-digit PIs, how do I think about that in terms of kind of the flow through for the business? Is that kind of you take that divided by revenue and assume that the rest of it is flat, and then you're in kind of the 3% to 4% range or so you're already kind of narrowing in on your 5% to 6%? Or how should I take that in the context of what's going on?

Yes, I think it's early to kind of think about that in the context of the 4% to 6%. I think those numbers are the aggregation of annualized revenue renewal and terms of contract that might extend well into 2 and 3 years. So it's just -- take it for what it is an indication that there is price to go get out there in this large complex network of customers.

And our next question coming from the line Brian Burgmeier with Citi.

I just had 1 question maybe for Tara. I appreciate the details on Natera PCR earlier in the call. Maybe just kind of zooming out, it seems like nobody has really cracked the code on flexible plastic recycling yet. What do you think maybe it takes to make flexible plastic recycling work at scale? Do you think we need EPR legislation? Is it kind of about the consumer packaged goods companies? And maybe what is the best way for WM to try to take advantage of that as Natura PCR is kind of on the sidelines right now.

So I just want to clarify, we did crack the code on making a quality product. What we were not able to crack the code on is getting customers to divorce their expectations for the price of that product from Virgin. And that is absolutely what has to happen in order for this to be a broader, sustainable business model. So there's a couple of ways that, that could happen. It could happen through minimum content legislation. That is one, and that exists in certain markets, but not across the whole country, and there needs to be broader enforcement and and penalties and teeth to that. And then two, the companies that would buy PCR, if their customers are expecting products that are put on shelves to be made from PCR, they're going to have to buy it at a higher price. If you think about our recycling business, our traditional recycling business is a fee-for-service model. And we're manufacturing a product in the Natura PCR plant, and we have to get an appropriate margin on that product, and that's independent of virgin pricing. That's just the reality of where we are in that space.

Our next question coming from the line of Stephanie Moore with Jefferies.

Great. Maybe just circling back on the M&A piece. I appreciate the commentary in terms of just all the work and integration behind the health care deal and also your commentary about the traditional solid waste deals completed or planned to be completed this year. I wanted to get a gauge of your appetite as you think about 2026 and even 2027 about looking at deals or opportunities outside of the traditional solid waste space.

I think we've always stayed pretty close to home on M&A, probably the farthest we've ventured out would have been Stericycle, and we did, I think, make a pretty good case that that's very similar to our existing core business. So we don't expect us to buy a semiconductor company in a couple of years. I think we'll continue to do what we do best, which is operated within our core. Our core it includes -- it includes solid waste, it includes hazardous waste. And for now, I think medical waste, I think we have enough on our plate to try and not do anything else in the near term.

And there are no further questions in the queue at this time. I will now turn the call back over to Mr. Jim Fish, CEO, for any closing remarks.

All right. Well, thank you very much. Before I sign off, I just -- I want to express my gratitude to my friend, Devina Rankin here. Devina is 23 years with a company that's amazing. She's got me by a couple 9 years, and I have worked together more than 9 years. She and I worked together since 2012 directly. And she's been an incredible, not only friend Diana and Devina to Tracy and me, but also confidante for these, I guess, it'd be 13 years since 2012. Everybody at this company thinks so highly ever and we're all going to miss her, but we know she'll do incredibly well in whatever you choose to do following her retirement. But thank you, Devina, for all you've done for this company.

Thank you, Jim. Thank you so much.

With that, I will -- I'll just say we'll see you next quarter. Thank you very much.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the WM Second Quarter Earnings Conference Call.

[Operator Instructions]

Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Ed Egl, Vice President of Investor Relations. Please go ahead.

Thank you, Olivia. Good morning, everyone, and thank you for joining us for our second quarter 2025 earnings conference call. With me this morning are Jim Fish, Chief Executive Officer; John Morris, President and Chief Operating Officer; and Devina Rankin, Executive Vice President and Chief Financial Officer.

You will hear prepared comments from each of them today. Jim will cover high-level financials and provide a strategic update. John will cover an operating overview, and Devina will cover the details of the financials.

Before we get started, please note that we filed a Form 8-K 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 of 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.

All forward-looking 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 filings with the SEC, including our most recent Form 10-K and Form 10-Qs. John will discuss our results in the areas of yield and volume, which unless stated otherwise, are more specifically references to internal revenue growth or IRG from yield or volume.

During the call, Jim, John and Devina will discuss operating EBITDA, which is income from operations before depreciation and amortization. References to the WM legacy business are total WM results, excluding the WM Healthcare Solutions segment. Any comparisons, unless otherwise stated, will be with the prior year period. Net income, EPS, income from operations and margin operating EBITDA margin, operating expense and margin and SG&A expense and margin have been 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. This call is being recorded and will be available 24 hours a day beginning approximately 01:00 p.m. Eastern Time today. You will hear a replay of the call, access the WM website at www.investors.wm.com. Time-sensitive information provided during today's call, which is occurring on July 29, 2025, may no longer be accurate at the time of a replay. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of WM is prohibited.

Now I'll turn the call over to WM CEO, Jim Fish.

Thanks, Ed, and thank you all for joining us.

Coming out of last month's Investor Day, we're energized by WM's strategy, which combines our unreplicable core business with new platforms for growth, generating consistent long-term value for years to come. It's our sustained strong results across all market cycles that we believe makes us a forever stock, the type of stock you buy and hold indefinitely. We continue to deliver strong results quarter in and quarter out, year in and year out, driven by a disciplined strategy aligned with secular trends, a proven ability to further execute and implementation of technology to both significantly lower our cost structure and differentiate us from our competition.

There's no better evidence of our power of our growth engine than our 19% operating EBITDA growth in the second quarter. Yet again, our collection and disposal business drove the growth, contributing more than half of the year-over-year increase in operating EBITDA. Within our collection and disposal business, our focus remains on growing customer lifetime value, utilizing technology to optimize our cost structure and leveraging our unreplicable asset network. Landfill volumes were particularly strong in the quarter, demonstrating the value of our advantaged disposal network. This is best reflected in our MSW volume growth as we continue to capture solid waste volume in key markets across our network.

We also saw growth in special waste volumes, which is largely related to wildfire cleanup in California, as we're uniquely positioned to be a dependable community partner during times of recovery and rebuilding. Additionally, we continue to identify opportunities to scale the core business through acquisitions. In the quarter, we completed the acquisition of a regional solid waste player in the Washington, D.C. area, adding complementary operations in a key geography and adding a great team to our existing WM operations.

We have a very robust pipeline of tuck-in opportunities to continue to expect acquisition spending to total more than $500 million for the year. The strength of our sustainability platform continues to distinguish the WM brand in the industry in ways that are difficult for others to replicate. For decades, we've been investing in recycling in renewable energy growth, and we accelerated that investment 4 years ago, aligning ourselves with key secular drivers of circularity and energy demand. The results we're generating clearly support our investment thesis as both our recycling and renewable energy segments delivered margin enhanced growth in the quarter.

Even as recycled commodity prices declined by nearly 15% compared to last year, our recycling segment operating EBITDA grew by 17%. We believe in these high-return investments, and we continue to execute on the remaining projects in our portfolio, having commenced operations on 3 new projects during the quarter, a renewable natural gas facility in Illinois, a recycling automation project in Pennsylvania, and a new market recycling facility in Oregon.

Additionally, we're making significant progress in integrating WM Healthcare solutions into WM. We've positioned ourselves to capitalize on the ongoing growth trends in health care and are utilizing our advanced reporting and analytics platform, along with our extensive asset network to deliver enhanced value for our customers. We've known this is going to be a needle mover for us, and you're starting to see it in our results. We're successfully identifying and capturing synergies and on track to achieve the upper end of the targeted synergies of $80 million to $100 million in 2025.

There's no doubt that our results to date support the strategic rationale of this acquisition, and we see significant opportunities ahead. In closing, WM is exceptionally well positioned for future success. We've deployed a long-term strategy that's delivering, and we're executing with discipline to extend our advantages. We're also investing in growth platforms that provide incremental growth, complement our scale and widen our moat. That's what makes WM a forever stock, and that's what you see in our second quarter results.

Now I'll turn the call over to John to discuss our operational results.

Thanks, Jim, and good morning, everyone.

The second quarter 2025 marked another period of strong consistent performance for our business, continuing a multiyear trend of steady execution and standout results. The performance we're delivering is the direct result of long-term investments we've made in technology, in infrastructure, and most importantly, in our people. As we discussed at Investor Day last month, we are using the WM way, which is our framework to drive operational excellence to build a more modern, more connected WM, and the results we've delivered in Q2 continue to reflect that strategy. We saw solid margin expansion and revenue growth across nearly all lines of business, with particular strength in landfill, commercial collection and transfer operations. Our second quarter collection and disposal operating EBITDA improved 60 basis points to 37.9%.

These results were driven by our strong landfill volumes, the team's focus on customer lifetime value and the investments we've made in new trucks that help reduce downtime and maintenance costs. We continue to see strong pricing discipline across the board. Core price remained healthy in the second quarter at 6.4% with collection and disposal yield improving sequentially to 4.1%. Regarding volume, second quarter collection and disposal volume increased by 1.6%, influenced by 2 notable events. Landfill volume benefited from peak contribution of wildfire cleanup, while the loss of a relatively large franchise contract had a negative effect on residential and commercial volumes. But overall, our full year volume expectations remain between 0.25% and 0.75%.

Turning to operating expenses. One of the clearest indicators of the progress we're making is our ability to consistently reduce operating costs as a percentage of revenue. As we shared at Investor Day, structurally lowering our cost base isn't about temporary cuts, it's about using technology and process discipline to build a more efficient, scalable model for the long term, and our team delivered that in Q2. The second quarter marks a record period in which we achieved operating expenses below 60% of revenue. This reflects the significant progress we've made in connecting the full value chain of WM from routing and fleet management to customer communication and maintenance. Our connected fleet continues to serve as a key differentiator. We achieved a 70 basis point improvement in repair and maintenance costs as a percentage of revenue in the second quarter as real-time telematics are helping us anticipate and resolve vehicle issues faster, reduce downtime and streamline maintenance scheduling.

This allows us to provide great service to our customers by helping to make sure each route is run it safely, efficiently and predictably as possible. Looking ahead, we believe we're still in the early innings of what this integrated technology can do for our operations, and we're excited about what's to come. As always, none of this happens without our people. Turnover improved 370 basis points this quarter to 18.8% for drivers and technicians combined, and it's no coincidence that we're seeing parallel improvements in safety, service and operational consistency. We focused on modernizing the work environment, whether it's upgrading maintenance shops to be digitally enabled, refining coaching programs for our drivers or building pathways for new talent to grow in their careers with us and it's making a difference. We're attracting the next generation of skilled workers by showing them that WM is a place where innovation and impact meet.

To wrap up, our Q2 results reinforce the effectiveness of our long-term strategy. WM is not just operating from a position of strength. We're actively expanding our lead through focused execution and long-term thinking. I want to thank our team members for their dedication, their innovation and their commitment to doing the job right every day. Their efforts are creating lasting value for customers, communities and shareholders.

And with that, I'll turn the call over to Devina to walk through our financial results in more detail.

Thanks, John, and good morning.

In the second quarter, we drove profitable growth in each segment of our business and delivered total company operating EBITDA margin of almost 30% quickly approaching historical best levels despite the known headwinds from the acquisition of the Healthcare Solutions business. This result was achieved because our legacy business continued to deliver margin expansion and because we are quickly improving the cost structure of health care solutions. WM's legacy business delivered 130 basis points of margin expansion in the quarter, resulting in operating EBITDA margin of 31.3% and The improvement was driven by strong landfill volumes, the growth of our sustainability business and our continued focus on improving the -- price to cost spread in the collection and disposal business. These positives were slightly offset by the expiration of alternative fuel tax credits, which had a negative 30 basis point impact for the quarter. The key takeaway from the margin bridge is that strong contributions from our core solid waste business and the results of our sustainability growth investments provided meaningful margin uplift.

Turning to WM Healthcare Solutions. Our focus on optimizing this business, including through synergy capture has led to a 190 basis point improvement in operating EBITDA margin since the acquisition. This progress has been particularly swift in reducing SG&A costs as we work to optimize the sales and back office functions of the combined organization. We're pleased with our progress.

And as Jim noted, we're on track to achieve the high end of our full year synergy expectations of between $80 million and $100 million in 2025.

Moving to our cash flow results. Operating cash flow was $2.75 billion in the first half of 2025, an increase of 9% compared to the same period in 2024. The increase was driven by our strong earnings growth partially offset by higher cash interest, primarily due to the additional debt issued last year to fund the acquisition of Stericycle. Through the first 6 months of the year, capital expenditures totaled $1.56 billion. Capital spending to support the business and our sustainability growth investments are both tracking in line with our expectations. Our capital expenditures are typically more heavily weighted toward the back half of the year.

But in 2025, we successfully pulled forward some of our truck delivery, which has provided benefits to the business and our operating expense margin. Putting this together, free cash flow in the first half of the year was $1.29 billion, and we're on track to achieve our upwardly revised free cash flow guidance for the year. Through the first 2 quarters of 2025, we returned $669 million to shareholders and dividends and allocated $378 million to solid waste acquisitions. Our leverage ratio at the end of the quarter was 3.5x. We remain focused on quickly getting back to targeted leverage levels through a combination of earnings growth and debt reduction, and we currently project we will achieve our target in the first half of 2026.

With half of 2025 complete and confidence in our continued ability to deliver on strategic priorities, we're confirming and updating our 2025 guidance. We've always said that operating EBITDA and free cash flow are the 2 best measures of performance, and we're positioned to deliver results that need meet or exceed our initial guidance for each of these measures in 2025. We're affirming the midpoint of operating EBITDA guidance of $7.55 billion and increasing our expectations for 2025 free cash flow to between $2.8 billion and $2.9 billion.

Revenue for the year will be about 1% below our initial expectations due to a couple of factors outside of our control, recycled commodity prices and the harsh winter weather of the first quarter. Our team's focus on optimizing what we control, delivering on our top strategic priorities and reducing our cost to serve, position us to overcome this small revenue headwind and deliver more than 15% EBITDA growth in the year. Our strong collection and disposal operating expense margin, SG&A synergy capture in the Healthcare Solutions business at the high end of our initial outlook and lower recycled commodity prices are expected us to position -- are expected to position us to generate even stronger operating EBITDA margins in 2025 than we initially expected. And so we are also increasing our full year expectations for operating EBITDA margin by 40 basis points at the midpoint. We're pleased with our performance in the first half of the year, which positions us to achieve another year of strong earnings, margin and cash flow growth.

In closing, I want to extend my appreciation to the entire WM team. The strength of our results is a direct reflection of their commitment to our customers and our communities, and it's their continued focus that positions us for success throughout the rest of the year.

With that, Olivia, let's open the line for questions.

[Operator Instructions]

And our first question coming from the line of Bryan Burgmeier with Citi.

One for you, Devina, just kind of thinking about the cadence in the back half of the year. Last year, we talked about WM maybe striving for like a 31% peak margin in 3Q. Is that sort of back on the table for this year? Or should we think about margins being maybe closer to flattish year-on-year, similar to 2Q? I know the Stericycle synergies are going to continue to ramp. So just trying to think about that cadence in 3Q and 4Q.

Yes, it's a great question. What I would say is that when you normalize for the alternative fuel tax credit, margin expansion was 120 basis points in the first half in the legacy business. And that exceeds what we were expecting. We've always talked about 50 to 100 basis points of margin expansion in collection and disposal being the target and to have exceeded that in the first half of the year really makes us bullish about margins for the back half of the year in the collection and disposal business. We're projecting that, that will be about 110 basis points for the full year, and some of that has to do with the landfill volume impact in 2Q that doesn't repeat in the second half.

In terms of the specific margins, it's really important to focus in on the fact that the Healthcare Solutions business had 140 basis points headwind to consolidated margins in the quarter. We think that, that normalizes and starts to reduce as we ramp the synergy contributions to the business as well as just the base business performance, which we are still optimistic about. So all in all, I would say we're going to have less of -- less pressure from the Healthcare Solutions business in the second half of the year than in the first half of the year by probably 10 to 20 basis points. And then the collection and disposal business will be about 10 basis points less in the back half of the year than it was in the first half of the year.

Got it. Appreciate that detail. And then maybe just a follow-up on your volume expectations for the year. Are we still kind of maybe looking in the range of 50 basis points of growth year-on-year? I know 1Q was kind of weak, but then 2Q had kind of a benefit from the wildfire cleanup, but you also shed a contract and underlying construction activity probably isn't great. So just curious what your updated expectations are there.

Yes. Bryan, I think you're right. I mentioned that in my prepared remarks, there was a little bit of a headwind in Q1 and then obviously, the -- some of the landfill volumes in Q2 and then the 1 franchise agreement I mentioned in my prepared remarks. So netting that all out that we said between 0.25% and 0.75%, so your number of 0.5% is right in the middle of where we expect to be.

Our next question coming from the line of Toni Kaplan with Morgan Stanley.

I wanted to ask about volume as well, really strong performance in the quarter. I know you called out wildfires, but outside of that, maybe could you just give some incremental color on the strength in volume that you're seeing? And I know you mentioned the -- on the flip side, the large resi loss maybe sounded perhaps like a planned strategic exit. Just any more color on that loss as well.

I'll let John touch on the resi piece. But I will tell you that volume was encouraging for us. And when you look at June, being the last month of the quarter, June was the strongest month of the quarter from a volume standpoint, really kind of across the board June was the strongest month for the quarter. Volume for the quarter was particularly strong in the MSW way stream and C&D. And so when we talk about fire volume, that really was limited to our special waste stream, not MSW or C&D. And so when we look at MSW and C&D being strong, that's encouraging.

And then when you look at the collection lines of business, we did have a bit of an impact in commercial from that contract that John will talk about. But our roll-off industrial line of business has been weak on the volume front for quite some time for probably a couple of years now, and it's improved pretty significantly. It still was negative for the quarter, but quite a bit less negative for the quarter than previous quarters. So we're encouraged by that. All of that would start to tell us that 2025, I mean, first of all, we don't see a downturn in 2025. We see that the economy seems to be reasonable at this point. I wouldn't say it's a space shuttle, but it seems to be pretty reasonable. And those waste streams that are predictive of that are performing pretty well.

I think, Toni, specific on the franchise loss in Florida, which was fairly significant, to put in context, it's about 185 basis points of the volume loss in residential and about 35 basis points, so you net those 2 out and then you think about our commentary about us still being confident in our volume projection for the full year.

And was that planned? Or I guess, what was the situation there?

What I would tell you is this particular franchise was not performing at a level we thought acceptable. So we positioned ourselves if we were going to retain it to do it at the right margins and returns and that did not work out. So it's -- I would sort of addition by subtraction, if you will.

Yes. Understood. Just lastly, just hoping to get a little more color on the delta between core price and yield. It seems like widened again. Anything to call out on the yield side and how we should think about that going forward?

Well, when you look at core price, I mean, core price is right on track for us pretty much across the board, whether you look at collection or landfill. Core price was right on track. Yield was a little bit under the middle of that range, and we expect it to finish under the middle of the range. The range, I think we gave is 4% to 4.2%, and we'll probably end up in that 4% range. But what that does tell you is that this is really a mix issue between core price and yield. And John has gone through a few of those kind of components. So we're pleased with how price performs, particularly as you look at the core price.

Our next question coming from the line Sabahat Khan with RBC Capital Markets.

Great. Maybe if I could just follow up on the conversation about the residential, kind of the volume that was lost there. I think you've been on this journey to optimize our resi business for a few years now, others throughout optimization, trucks, getting the business at the right margin. Can you just maybe update us on where you are on the resi improvement journey and maybe how much might be left there.

Yes, sure. Good question. So I think Jim commented a few quarters ago, we look at this business in a few different buckets, sort of what's performing at an acceptable level and then all the tranches done. And we've made really good progress. About 70% of that business now is up at a margin that we see that's certainly one that we're pleased with. So we've got a little bit of work to do, but the ratio of revenue that's really below that threshold now has improved a good bit. What I would tell you is we've talked about moderation in the residential losses, and I took a look at it in advance of the call. And you look at about 3.7% this quarter. We think by the end of the year in '25, that number will be somewhere south of 3%, it's somewhere around the 2.7% range. So we are starting to hit the peak of that, and we're going to see some moderation in the back half of the year, which aligns with my earlier commentary about the margin and return improvement we're seeing in that line of business.

Great. And then just maybe one on the EBITDA margin side with the revenue guide update and the EBITDA margin maintained, can you just give us some of the puts and takes to get the EBITDA margin still back into that midpoint of the initial range? I'm assuming mix might have helped a little bit, and maybe if you could just get all the puts and takes on the EBITDA margin.

Sure. And just to clarify there, we actually had an update to reduce revenue and increase margin by 40 basis points at the midpoint, and that increase of 40 basis points is about 30 basis points from collection and disposal and 10 basis points from recycling. That 10 basis points from recycling really is the commodity price impacts that we've talked about because of lower recycling commodity prices helped the margin, particularly on the brokerage side. In terms of thinking about collection and disposal, as you mentioned, mix is a big contributor there with the landfill volume contribution exceeding our expectations slightly. But our sustainability businesses are also performing well, and that's helped. And then price/cost spread contributed about 25 basis points in the second quarter, which is a little above our initial expectations.

Great. If I could just maybe squeeze in a quick one. Obviously, the industrial kind of the backdrop hasn't been good. And I think you mentioned earlier, it's been a drag for a few years. Maybe you can just look a little bit closely. Q2 is obviously a bit of a step down there just from a macro perspective. What are you seeing into Q3 and maybe your expectations for the back half of the year understanding you're reiterating the guide. But just curious to what's doing on the ground level.

So talking about roll-off here, the industrial line of business. Yes, I mentioned June was the strongest volume month of the quarter roll-off was still negative for the month of June, but 310 basis points improved versus the second quarter and 300 basis points improved year-to-date. So we are seeing a rebound in roll off kind of similar to what you just heard from John about resi, I think you do get to a point where your year-over-year comparisons become easier. And I think we're starting to see that, but at the same time, I think you actually are seeing a little bit of strength in the economy that we haven't had. We've talked about kind of an industrial recession over the last probably 5 or 6 quarters.

And I think that's largely kind of dissipated and we're seeing it in roll-off and in C&D, by the way, our C&D was a positive 9.4%. And as I mentioned, that has nothing to do with any of that fire volume. It was just 9.4% and that's been building incrementally 4.9% last quarter, 2.6% the quarter before. So we've seen C&D start to build incrementally and that's a positive for us and positive for the economy.

And our next question coming from the line of Noah Kaye with Oppenheimer.

So WMHS confident in the upper end of the $80 million to $100 million synergies captured for the year. Maybe talk a little bit about what you got in the first half of the year, kind of the exit rate as we look at 4Q in terms of the run rate on synergies there. And then kind of how you square that up with the $250 million targeted over a longer period of time?

Yes. No, this is Rafa. I'll take a crack at that. So you correctly addressed it, right? We're still targeting that upper range of $100 million. That seems to be coming in kind of pro rata evenly, maybe a little bit weighed heavily to the SG&A portion in the first half of the year. That will continue to be the bigger contributor. If you remember, when we first kind of laid out our expectations for synergies, we were going to have equal parts contributions from SG&A from OpEx and from internalization. Internalization is just going to start hitting in the back half of the year. SG&A has been hitting throughout the first half of the year and then OpEx could sort of scattered throughout.

Just a follow-up. So you said this kind of coming in pro rata meaning sort of we're getting kind of growth in the run rate synergies each quarter of the year, right? And so the implication is that you're entering '26 with a higher level of run rate synergies versus $100 million.

That is correct.

Should we just plus that up by 50%?

That's a good estimate, Noah. We'll spend some more time giving you specific exit rate when we get to Q3 earnings. But what I would tell you is, as Rafa mentioned, in terms of the internalization benefits really becoming more of a second half of 2025 impact. That's one of the things that will really amplify synergy capture going into 2026 from day one.

Great. I want to ask a question on the sustainability side. It's great to see the -- really the strong increase in margins in the renewable energy line of business. Maybe you can talk a little bit about expectations for margins there moving throughout the year. And in particular, kind of where you sit with contracting for perhaps even next year on the RNG offtake?

No. It's Tara Hemmer. We are really pleased with the performance of our sustainability related businesses, and you can see that ramp very clearly in our Q2 results. So I want to unpack your R&D question first. For 2025, we have 90% of our off-take locked up and our team has done a fantastic job of selling forward. You can see our RIN price for this quarter was about [ $2.55 ], which is above market, and that's a direct result of us selling forward some of our RINs. So our team really does know how to contract in the marketplace. We expect margins to be similar throughout the balance of 2025 in the renewable energy business, primarily because we have 90% of our offtake locked up for this year.

And then as we look forward to 2026, we still are at about 30%, which is what we had outlined in Investor Day at roughly $26 for that contracted offtake. But you have to remember, we have most of our RINs yet to sell, and we're able to tap into our fleet that we have, which is an incredible advantage for WM compared to anybody else in the marketplace.

On the recycling side, despite the fact that commodity prices were down substantially year-over-year, you saw us drive EBITDA growth of 17% and a lot of that has to do with our automation investments coming online. We're seeing volume growth related to those automation investments, and that clearly is us differentiating in the marketplace, where we're able to add more customers in those key geographies.

Next question coming from the line of Jim Schumm with TD Cowen.

I was wondering if you would be willing to provide the revenue split between medical waste and secure information destruction. And how should we think about the longer-term EBITDA growth for WM Healthcare?

Yes. Jim, this is Rafa. So that revenue split continues to hover right around 2/3 on the Healthcare Solutions side and 1/3 on the information destruction side. In terms of kind of revenue growth, we continue to look at that 5% to 6% as sort of the long-term aspirational growth on top line for both businesses. We think that right now, though, we're focused on the customer relationships. We're improving the quality of the revenue as we are -- as we renew agreements and we're ensuring that we prioritize the customer lifetime value right now.

As I mentioned during the Investor Day, it's going to take a little bit of time to acclimate the customers to a more rigorous cadence of pricing, and they've not been seen or have seen implemented even though their contracts actually permitted it. So I think the takeaway here is that we're very conscious about our customer relationships right now. The initial phase, we're really focused on kind of building out our reporting suite also to adopt sort of the new WM revenue KPIs that we can then use to plan and execute long term.

And then in terms of the EBITDA growth over the years, I think it's really important to note that we're still in a period where we're focused on a combination of optimizing the business and running the business and then realizing the tremendous value of synergies between the 2 organizations. And so splitting those 2 becomes art versus science in some ways because they really do blend into one another. So specifically giving you a growth rate of the business right now becomes murky. And so what I would say is give us some time in terms of owning this business and optimizing this business to specifically give you what we think that long-term growth rate of the business is beyond 2027. I think looking to the information that we provided at Investor Day, for '25, '26 and '27 is a good benchmark for what we'll realize in the near term.

Jim, I think it's also -- I'd mention one thing here. When we bought this business, there were some real problems with the interconnectivity of the systems and not surprised anybody on this call, but whether it's Salesforce and SAP or whatever. But that resulted in some issues with customer onboarding with reporting and billing and routing for instance. And so what we've done is put the right people on this and dedicated the amount of -- the right amount of resources to -- and we're making significant progress here on this front. And that's why we're comfortable with this top line growth that Rafa mentioned for the long term, but we do have to get that ERP fixed, and we're -- we feel like we're in a good place as we make progress on that with the right people. And once we do that, then I think you'll start to see us focus more on that top line and then talk more about that top line on this call. Right now, we're talking about more the bottom line for Stericycle because of the synergy capture.

Right. Okay. Great. And then just as a follow-up. With the top line growth of 5% to 6%, like how do I -- how do we think about the price volume mix within that?

Yes. Jim, long term, as I said, I mean, the aspiration is to get to a really balanced top line growth of 50% price, 50% volume. Is that what you were asking?

Okay. Yes, yes, that's what I was asking.

Our next question coming from the line of Tyler Brown with Raymond James.

Jim, John, so you guys mentioned lifetime customer value a couple of times in the script. And I just want to understand what you're messaging there. So are you messaging that you're being a little more aggressive on price to hold churn? Are you saying that you're being a little more aggressive on price to improve lifetime economics. Am I just completely crazy and there's just really no change. I just want to be clear on the messaging.

Well, I can't speak to the crazy thing. But here's what I would tell you, Tyler, about lifetime value. I mean our focus is not related to price, specifically price as kind of the end result of that. I mean our focus is on how do we differentiate ourselves versus our competition. I mentioned it kind of in the first paragraph of my prepared remarks that using technology, for example, to differentiate ourselves really helps set these customers up to be longer lifetime customers. And then price ends up being kind of a byproduct of that. I mean, you're able to -- if you have a differentiated service offering, then you're able to charge more for it on the price line.

Okay. Crazy seems like the right outcome. Okay. So -- and then this one, again, for Jim or Rafa, and I kind of want to go back to Noah's question, and maybe I misread it, but didn't you raise the '27 Stericycle synergies to $300 million. And it sounds like some of that might be revenue cross-sell, which I surmise will be a gift that kind of keeps giving. But it also seems that there's maybe more cost opportunity. Is that correct?

And then two, has there been any change in the CapEx profile of that business now that it's under your control? Are there proving to be some synergies there?

Yes, Tyler, maybe -- this is Rafa. I'll take the first part and then maybe hand it to Devina for the second part of the question. So yes, you're correct. The $50 million on the cross-sell side that's additive to $250 million in cost synergies primarily, and that is across -- through the 3-year horizon that we have for the synergies. I did say during our Investor Day that those $50 million are heavily weighted towards year 2 and 3 of the horizon.

On the capital side, I do think, Tyler, it's a good thought in terms of there being optimization opportunities between the 2 businesses for us to optimize our capital. But I think it's important to point out that pre-acquisition, the business funded its capital largely through the P&L and that at least its fleet. And in WM, we've got the best cost of capital in the industry, and we are going to ensure that we acquire the fleet and that we have a really strong lifetime utilization approach to optimizing the fleet over the long term. But those are less complex assets and therefore, less expensive, and they also have a different disposal cost to the business, which we all know the landfill capital intensity that is collection and disposal. So what I would say is that long term, we expect their capital probably to be in the 8.5% range versus our 10-ish plus range. And so that will be a return on invested capital benefit to the business that we anticipate over the long term.

Yes. And Tyler, maybe one last thing because I think it speaks to the symbiosis between the capital deployment of the business and the synergies is when we own that fleet, we're going to be able to maintain and repair the fleet much more efficiently and effectively. And we do anticipate synergies there on maintenance and repair.

Okay. Okay. So 8.5% longer term, maybe it's actually hotter first and then cools off, we'll see about that. Okay. That's helpful. And then my last one here. So Devina, I don't want to rehash the whole Analyst Day, but I do want to talk about the long-term free cash guidance because I want to just kind of make sure that I have it. So I know that, that free cash guide did not include bonus depreciation. But did that guidance also assume that the statutory tax rate would go back up. I'm just really trying to understand how tax policy has changed that number basically.

Yes, it's a great question, Tyler. What I would tell you is that we were retaining the statutory rate in our guide, but we were not assuming the upside of bonus depreciation and the ballpark of the upside of bonus depreciation in 2027 is $200 million. So we have about $120 million in 2025 and that ramps to $200 million by 2027.

So the delta is the $200 million.

And our next question coming from the line of Trevor Romeo with William Blair.

I just wanted to go back to -- I guess, the landfill volume strength even outside of the wildfire cleanup. Specifically, I wanted to ask about, I guess, internalization, just because it was up, I think, another 120 basis points sequentially. Just trying to dig in a bit more. I don't know if you had temporary volume benefits that boosted that, but it doesn't sound like you've done much on the medical waste side yet. So I guess what would you say about the drivers of that continuing to increase now nicely above 70%? And then how much can you continue to increase it moving forward?

I think it's a great observation, Trevor. I think as Rafa mentioned, the internalization benefits are just starting to hit now. So you're not really seeing any meaningful amount in our landfill volumes. I think Jim made the comment in his prepared remarks, I mean, the MSW volume at 4.5% for the quarter and 4.1% year-to-date does not include any of the event work, right? And I think that's worth highlighting. And the internalization rate of 71% and change, which historically we were talking about that before the call was like 65%, 66%. I think that really speaks to the value of the network that we've all been talking about for the last handful of years, quarter in and quarter out because there is a level of complexity of movement this material that continues to increase.

And I think the investments I mentioned in infrastructure in my prepared remarks, part of that is related to exactly what you picked up on. So that's -- I think it's great momentum. I think we're going to continue to build on it. And as Jim used the word differentiated, we see our post-collection network, including our T stations and our recycling assets, et cetera, is all being something that's going to differentiate us over the long term.

That's really helpful. And then maybe a follow-up for Rafa, trying to keep you busy here. Just one from a human capital perspective on the Healthcare Solutions business, how much voluntary workforce turnover. Have you seen a Healthcare Solutions since the acquisition? And is that kind of more or less in line with what you would have expected at this point?

Well, if you're talking about sort of the hourly workforce, actually, we've seen an improvement in turnover since the acquisition. I think that has a lot to do with sort of the human-centered approach to leadership that we're driving down throughout the organization. Obviously, sort of in the managerial corporate support ranks and all that, that's somewhat impacted by the attainment of some of our SG&A targets, et cetera. But overall, it's a good story. I think during Investor Day, I talked about the continued receptivity to the qualitative approach and the accountability we're driving in the business. A lot of them are really eager for that integration into the areas that I spoke about as well where we're going to then have a culture of ownership of the business much more at the site level.

Our next question is coming from the line of Konark Gupta with Scotiabank.

I just wanted to follow up on the volume side of things. The residential contract loss, you talked about. I mean, I'm just wondering if there is a domino effect you would expect from these things in that market considering, obviously, the customer could be price sensitive perhaps. So do you expect any more follow-ons with this?

Actually, I mentioned earlier what I've looked at, we're going to lap a handful of contracts in July and then later of the year in October, which is 1 of the reasons why I think we feel confident about the volume loss to moderate by the end of the year Q4, the exit rate will be sub 3%. And the other comment I mentioned is worth repeating is when you look at the quality of the business we have, we've got about 70% of that revenue addressed at an EBITDA margin that's acceptable today. So we've certainly shrunk the opportunity here while we're improving the overall business. And I think over the next handful quarters, as I mentioned, you're going to see moderation in the volume losses.

So that's a domino effect necessarily. No, I don't see that as -- I think these are by stand-alone contracts that's -- and this one, as John said earlier, this is 1 that we bid it at a certain price. It was not a positive for us. And so when it came out for RFP, we bid it at a certain price. And to the extent that it doesn't hit that price and we lose the contract, okay, as you said, John, it's kind of addition by subtraction.

We really don't mention these individually, except for this 1 was fairly significant, and it really was what drove the difference between the historic revenue -- excuse me, volume loss in residential and where we were. But again, we'll see that return to normal and improve through the balance of the year.

I appreciate the color on that. And then just a follow-up on the tariff cycle. The SG&A seems like it's tracked down further to about like 20% and change. How do you see the bridge to the full $250 million synergy you expect over the next 3 years or 2 years, maybe now from 20% to the guidance you had.

Yes. So again, Rafa here, Konark. So you're right. We hit, I think 20.9% is the number that on an adjusted basis for the quarter. We're driving that number to continue to lower rate and finish hopefully below 20% at the end of this year. The aspiration is to be at 17% at the end of the 3-year horizon. And if you think about that, just to kind of give you some perspective, the average in '23 and '24 for the legacy business was approaching 25%. So what we're talking about here is a nearly 800 basis points reduction over that 3-year horizon. But we continue to think and be positive about the aspiration long term beyond that 3 years to lower it closer to the legacy business, that 10% or lower. And that's because by then once we get past the ERP issues, we're going to be able to leverage some of the platforms and self-service capabilities that we've leveraged for the WM business as a whole. And so a lot more runway there.

Our next question coming from the line of Tobey Sommer with Truist.

I wanted to ask sort of a follow-up on your Investor Day themes. One of them was related to the landfill advantage because of the useful life. When do you think that starts to manifest? And how do you see the initial years impacting the company in terms of pricing and other financial impacts?

Well, I think it's kind of manifesting itself already, which was part of my point earlier. And I think that only continues. The chart we showed does show that as you get into '25 and beyond, that landfill capacity for the industry really does start to get constrained we're in a better position, both geographically and also length of life than the rest of the industry. So that's why we feel that, that is a separator for us. But I do think you're starting to see that already.

And is there a year in which you think that, that sort of impact becomes most acute or most visible externally?

I think the -- well, sorry, John, 1 -- I forgot what the 1 year was on the slide that showed the biggest reduction in capacity, it might have been 2030 or 2032, something like that. So that may be -- if I were to point to a year, and I'm not sure that it's easy to point to a year, but certainly, the biggest year on the chart was kind of early 2030s.

I think what I would point to is I mentioned the internalization rate kind of ticking up the last couple of years. There's a handful of markets on the West Coast in Florida, in the Mid-Atlantic and Northeast where we're actually moving volumes differently than we did a couple of years ago, and it's because of the value of our network in our -- in a lot of cases, our intermodal capabilities. And to Jim's point, while the peak might be 2033, we're investing in it now because it doesn't happen overnight. It's an incremental shift, and that's why I think you're seeing us benefit on the volume and on the price side.

Understood. And then last question for me. On the WHS side, what's your current thinking about internalizing the fleet and other incremental things you can do for the business that aren't part of your synergy target presently?

Well, Devina kind of referenced kind of the internalization of the fleet, right? I mean there's really no benefit in accelerating the payment of those leases. We would have had to basically pay full price anyway. So what we've done is kind of create a similar fleet strategy to what we have at WM legacy business, which is to smooth out the capital kind of intensity of that year-over-year. And then in the meantime, we're laying down the groundwork to be able to actually support the maintenance and repair at the local level of that fleet. That's going to start showing itself in the OpEx synergies sometimes towards the beginning of 2026.

Maybe the other place, Rafa, and I don't know how much we have built in on this front. But if you think about real estate, I mean all of these trucks sit on property. And so as I look at Houston, for example, we're opening a new hauling company, a large facility that's replacing an old 1 here in town. And so that's got -- that has a fair amount of open space to it. It's possible, I don't know that we've baked this in necessarily, but it's possible that you can relocate fleet from and save on real estate cost. That's not something I think we've spent a lot of time and effort on quantifying, but I do think there's a second or third benefit that we could see.

Yes, that's fair, Jim. And I think maybe just overarchingly, you can think about us beginning to put the WM way across every facility that we do consolidate. And as we bring fleet forward, we're going to have that WMA approach also in maintenance and repairs.

Our next question coming from the line of Stephanie Moore with Jefferies.

Maybe just a follow-up to a question that was asked earlier, but as you think about the -- maybe the puts and takes to normal seasonality in terms of the margin cadence in the second half of the year, I think there's couple of things that we need to work through in terms of just ramping of synergies, the volume environment and the like. So this is the best that you can, maybe, Devina, just talk through how you kind of expect the second half cadence to look in light of normal seasonality and the events this year?

Sure. So the way that I think you can think about is usually, we have a 70 to 100 basis point benefit going from first half into second half. And I expect that to be slightly muted in the collection and disposal business because of landfill volumes that we've discussed. But then it should increase, as I mentioned earlier, on the WM Healthcare Solutions side, the drag associated with the acquisition of the business on the consolidated results should lessen in the first half of the year, it's been about 145 basis points, and we think that, that could improve to, call it, 125, 135 basis points in the second half of the year. And then the recycling business, which I mentioned, you should have a 10 basis point help in the second half of the year from lower commodity prices. So I think that will help you understand first half versus second half.

Well, and then Devina, also the 8 plants, the renewable energy plants, and those are definitely margin accretive and those -- I mean, we knew going in that these plants that we're building are pretty much back-end loaded. So we still have 8 plants. I think one of those might bleed in the first half, but it doesn't affect the EBITDA really. But 8 plants that Tara is opening at the end of the year between third quarter and fourth quarter. And those will have more so in '26, but have a margin-accretive impact.

Got it. No, that's helpful. And then just lastly, again, clarification. If you could talk a little bit about the M&A environment in particular anything that you can speak to in terms of pipeline? And then just give us an update of what's embedded in the updated full year guidance based on M&A year-to-date.

Yes, Stephanie, I'll address the pipeline. Jim, we talked in his prepared remarks, we've got about $500 million in for this year. We did a fairly significant sized regional acquisition in D.C. last quarter, we've done some other normal tuck-in acquisitions. And we have 1 fairly sizable 1 that we're hopeful we're going to get closed probably between Q3 and Q4. But as usual, we remain disciplined. But to your question on pipeline, the pipeline remains strong. We've talked about last year being probably 1 of our strongest years, and a lot of that is carried over into this year. So we feel good about where we're at this point in the year. And then in terms of what's embedded, Devina, I'll let you maybe on the revenue.

I don't have that number specifically. So -- and Heather will get back to you.

Our next question coming from the line of Faiza Alwy with Deutsche Bank.

I wanted to follow up on the collection and disposal margins. I think you mentioned 110 basis points improvement year-over-year in those margins. So I want to make sure I'm getting that right. Does that sort of suggest stronger margin growth in the back half than I would have thought considering you're saying that landfill -- this was sort of the peak quarter for landfill volumes. So could you talk about some of the -- maybe if there's other drivers around better margin performance in the collection and disposal business.

Sure. So the collection and disposal business margin improvement was 110 basis points in the quarter and about 40 basis points of that is efficiency and price cost spread and the remaining portion really is mix and landfill volumes in particular. When -- and that's before the impact of the alternative fuel tax credit. So the alternative fuel tax credit was a headwind to that of 30 basis points. So you put all of that together and you're at 80 basis points margin expansion for collection and disposal. I actually expect that to moderate in the second half because of the mix and landfill volume impact that I just mentioned, being about 70 basis points in Q2. So you'll have some moderation of that into the second half. However, going from first half to second half, you normally have a 70 to 100 basis point improvement in collection and disposal volume just because of seasonality. So hopefully, that helps clarify what the bits and pieces are, but we're really happy because all of this pulled together to say that the traditional solid waste business is going to have 30 basis points better margin in 2025 than we expected coming into the year.

Understood. And then when you initially gave the guide for '25, you've given us a lot of color around your expectations for EBITDA for the various pieces of the business? So I'm curious with the update today and just given the change in commodity prices, if you could perhaps update us on what you're expecting for EBITDA -- EBITDA contribution from Stericycle specifically this year and maybe the sustainability projects? I think you said $270 million to $290 million previously. So just any update on the other pieces would be really helpful.

Sure. So what I would tell you is that with us confirming $7.55 billion in EBITDA for the total company for the year. Really, the only take that we've had in the entire mix has been from the recycling part of our business. And there's about a $15 million decrease expected in the EBITDA associated with commodity prices and another $10 million associated with some cost increases that we've had in that part of our business. And that's really the only part of the business where there was any sort of decrease in the expectations and the increase is coming from the strength of collection and disposal and a little bit of benefit from higher-than-expected synergy realization.

So going from the midpoint of $90 million to the high end of that of $100 million indicates incremental value that we're retaining. Some of that shows up in the health care solutions business, but some of it also shows up in collection and disposal. So I would say all of the pieces that come to the total are really in hand with the exception of the recycling business, which I mentioned at $25 million.

And I'm showing no further questions at this time. I will now turn the call back over to Mr. Jim Fish, CEO, for any closing remarks.

Okay. Well, thank you so much for your questions this morning. Very good questions, and we certainly look forward to next quarter and talking to you again after Q3.

This concludes today's conference. Thank you for your participation, and you may now disconnect.

Well, welcome to WM's 2025 Investor Day. Thank you for making the long train ride down to lower Manhattan here. To those of you watching online, I appreciate your attendance. And to those of you who are fast forwarding through this section on a replay, no, your video player is not stuck at 2x speed. I just talked this fast. Appreciate everyone's attention and interest in WM.

So as customary, I'd like to start with a quick safety briefing. As you can tell in the room here, we're pretty crowded, lots of tripping hazards. So please be careful when you get up and move about. In the unlikely event of an emergency that we have to evacuate, you go out both these doors here on either side, there's a staircase [indiscernible] down on both sides. We'll meet downstairs and wait further instructions. If there's a medical emergency, Eric Dickson and Dave Brandon are both certified CPR and Kim Moore's volunteered to dial-911.

As someone who grew up in the Bronx, of course, I had to go to the Yankees game on Saturday. Sorry, Noah. And being in this room, I'm reminded of a great Yankee quote from Yogi Barak, feels like deja vu all over again. Okay. So looking at this agenda though, we have a really great day ahead of us. And I think Yogi was actually misquoted. I think his quote is, it feels like deja vu all over again, but only better. And looking at this Investor Day is exactly that..

It was only 6 years ago, we were in this exact same room with many of the same presenters, many of the same people listening in the audience here, talking about our strategy. And what you're going to hear today is excitement about the future of WM for the next several years. We're going to start the day off with an overview, talk about our operations, talk about our customers, talk about our people, how the mill will come up on stage and give a moderate a Q&A session followed by a brief break. Now the bathroom will probably be busy during that break time. So I encourage everyone to go to our demonstration area over to the right to see some of the cool things that we're doing at WM.

So as you listen to the presentations, I hope you reflect back on our 2019 Investor Day. We accomplished great things during that time period. We set high expectations and we exceeded all those expectations. You'll see many people in the room today wearing WM badges have green on it. It's thanks to those people's hard effort that we were able to accomplish such great things. In about 1.5 months time, I'll be celebrating my 30th anniversary with WM. And I can honestly say there's been no better time to be with the company than there is today. And as you go through these presentations, you'll hear the excitement about the opportunities that lie in front of us. So I know you guys want me up the stage quickly so we can start the presentations, but I have to go through your favorite slide and my favorite slide, the cautionary statement. And we have many people from our legal team in the audience today. So if I don't read this correctly, this will be the last time you've seen me presenting. So indulge me while I actually read a portion of the forward-looking statement or the cautionary statement side.

Please refer to the slide, Slide 4 in the deck for additional details. Today, you'll hear us discuss certain non-GAAP measures, including our adjusted operating EBITDA and free cash flow. Please see the end of the presentation for reconciliations to the most comparable GAAP measures. Also, you will hear forward-looking statements, which are based on current expectations, projections or opinions about future periods. Those statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the cautionary statement slide, Slide 4 of today's deck and our filings with the SEC, including our most recent Form 10-K and 10-Q for a further discussion of these risks and uncertainties. We assume no obligation to provide updates to any forward-looking statements.

Now let's get the show started with the short video titled Only WM, followed by our CEO, Jim Fish. Thanks for your attention, and enjoy the presentations.

[Presentation]

Okay. I gave our video people a hard time. I said, could we not have put an Astro in there. We have to put a Philly in there, but he is a good guy, Kalish Warber, he played our tournament last year. So a very good guy. Well, welcome to our 2025 Investor Day. Hard to believe it's been 6 years since we were in this room. It is an amazing room, by the way. But a lot has happened with our company. A lot has happened with the world in the last 6 years. You're going to hear a lot of messages today. And my hope is that you take a couple of things away as you leave.

First of all, I want you to take away that this company has some traits that are unmatchable by any other company in our space. I hope you take away from this that they have a sharp leadership team, a team that's focused on doing the right thing for all of its constituents. I hope you take away that we have a long-term strategy that makes a lot of sense that makes sense for you and it produces the way it's produced in the past. And lastly, I hope what you take away is that this is a company that is a forever stock. I call it a forever stock. You buy it and you hold it indefinitely because you know that it's going to perform year in and year out. I hope you take those messages away from today.

So here are my key messages for today. And I'm going to start off with one that's near and dear to my heart. When I took this job in 2016, I said I want to be a people-first leader. It doesn't mean I want to be Santa Claus. People first leader means I want people to feel like they're valued, their opinions matter. They're included. That's what people first mean. So at the top of this list, fostering a people-first leadership approach. And building an experienced and dynamic leadership team, fueled by a powerful long-term growth engine for sustained value creation, a unique unreplicable asset network and materials management expertise. Building distinctive platforms for incremental growth supported by some secular trends that I'm going to walk through, and then executing a clear and disciplined capital allocation strategy focused on long term. shareholder value creation.

This is a slide that I'm sure you're all familiar with. It has changed a lot since 2019. But this gives you an idea of who we are and where we are. You can see 62,000 now employees once we've rolled in our Stericycle folks. 2024 revenue of $22.1 billion and $6.6 billion in EBITDA. And the map on the right there shows the density of our network, and you can see pretty much a spot everywhere. I did notice there's a spot in Jackson, Wyoming, John. So I need to make sure I'd visit that in the next few weeks. But obviously, we are where the population is.

Okay. So this slide really demonstrates how we've performed. And it's -- I think it's important to understand how we've performed over the past few years. And you remember when we were here in 2019, we talked about 4% to 6% organic revenue growth. And we talked about 5% to 7% operating EBITDA and free cash flow. And so through the pandemic, 3% revenue growth was pretty impressive right through the middle of the pandemic, and then 7% adjusted operating EBITDA growth and 14% free cash flow growth, incredibly impressive performance right through the middle of the pandemic. And then from '22 to '24, similarly impressive, 6% top line, 9% EBITDA, 13% free cash flow.

So here's what that resulted in, and you're all aware of this, but you can see the performance of this company over the last 10 years. And obviously, the numbers on the left are impressive when compared to the Dow Jones and the [ XLI ]. But I think equally impressive is the fact that the volatility is not nearly what those 2 indexes are at [ 0.6 ] versus [ 0.98 ] and [ 0.93 ]. And all of this -- you know all of this, but all of this through administration changes, regulatory changes COVID-19, obviously, labor shortages, and we'll talk a lot more about labor shortages today. And inflation, you remember in 2022, the highest CPI in 40 years and even with all that, you still see the performance there.

Here's the team. This is the team that I have really proudly assembled over my 9 years. This is the team that has continue to perform year in and year out. And you'll hear from a number of these folks today, and they're all here, so you'll have a chance to meet each of them. Okay. So let's talk a little bit about what is this engine? And this kind of puts it in kind of pictorial form, but if you think about this unreplicable core business, I mentioned people first. And so on the outside, you have people first and customer centricity. And we'll talk a lot about the customer today and then operational excellence. And John Morris will spend a lot of time talking about operational excellence and what we've done to improve margins with operational excellence.

And then the gears inside of that, the strategic asset network, technology and automation, which we've talked a lot about on earnings calls, and logistics and materials management expertise. And then you have these new growth platforms. And each of those will be addressed. Sustainability will be addressed by Terra Hemmer today, and Rafa Carasco will talk about WM Healthcare Solutions. And all of that equaling what we've done over the last 10 years, I guess, all of it equaling what we expect to do going forward, which is revenue growth, margin improvement, free cash flow generation.

Let's talk about these the unreplicable core business. So disciplined price growth, and I'm going to give a little bit of credit to my predecessor, Dave Stein. Our new Postmaster General. And when he started talking about pricing back in 2004, some of you may remember that a lot of you weren't even old enough to remember that, but some of you were, and you might remember that Dave, started talking about pricing when pricing was 1%. And I remember when I came to the company in 2001, it was kind of accepted that the best you could do on pricing was 1% maybe -- and there were quarters where we reported 0.7%. And so David, credit to him really started to focus us as a company on disciplined pricing, and we've continued to focus on that. And you can see the number here just in '23 and '24, 300 basis points over inflation. And at the same time, we've really focused on the customer to make sure that when we price them that way, that we're providing a true customer service product that is worthy of that 300 basis points.

And then targeted volume expansion, and I think of that as a net number because there's a positive and a negative here as we grow volume. The negative, which you've heard John Morris talked a lot about is we've called out some of the some of the bad business in the residential line of business. And as a result, residential margins have almost doubled over a fairly short period of time, I think, about 4 or 5 years. I kind of use myself as an example. We are not -- my house is not serviced by WM, but I pay $60 a quarter for residential service, twice a week trash, once a week recycling and they can pick it up in my backyard. I mean it's back door service. I can't imagine they're making much money at that. We used to have those, probably still have some of them, but we have called those out of the system.

So volume is not just all growth. Some of it is actually taking volume away. But we are focused very much on volume growth as well. And you can see 4.4% MSW volume. I'll show you a chart here in a second that gives more detail. And then all of that, while we are effectively managing our costs. I'll never forget when I became CFO in 2012, meeting with a big investor, and I was very excited to tell this investor, we're going to go from 13% to 11% SG&A as a percent of revenue. And I won't tell you exactly what this person said because it's probably not appropriate, but they will say, I don't believe you. And so credit to them, they did call me a couple of years later and said, congratulations. I didn't believe you and you got to 11%. Well, now we're approaching 9%. And I think we had a quarter last year where we were below 9%, 8.9%.

And then on the operating cost side, and I just mentioned that, we've gone from something in the neighborhood of 65% OpEx as a percent of revenue, down to 60%, really impressive performance on the OpEx side, a lot of that via technology, and we'll talk more about that today. Okay. So continuing on with this core business, this unreplicable core business Here's a couple of boxes that I think probably demonstrate what we're really focused on. I mentioned customer focused, relentless customer focus. I get messages every day, I respond to it, and you might say that's not a good use of your time, Jim. I mean, I don't get 1,000. But I probably do get 2 or 3, and we have few customers. So 2 or 3 a day isn't too bad. And I respond to those. And the reason I do is because I want to demonstrate that we are relentlessly customer-focused. Best-in-class asset network, and that is not debatable. And environmental solutions and regulatory expertise that benefits us each and every day.

And then these last 2 are kind of tied together, asset management and logistics expertise with technology. And that provides this competitive moat. Businesses love -- would love to be in the same position we're in, having a deep, wide moat around your business, makes it really tough for somebody to kind of make their way in and disrupt you. And people talk about disrupting this industry and this company, but boy, we have a deep, wide competitive moat. So this is a slide you may not have seen before. And I think it's an interesting slide and what's intended to tell you is that we look -- there are threats in the industry, whether it's labor and a shrinking labor pool or in this case, landfill is coming off-line. But we look at those threats and say, how can we turn it into an opportunity.

And with respect to this slide, we are better positioned than anybody else in the industry. You can see what MSW has done since 2000. If I were to ask you back in 2000, what's going to happen with MSW in the industry? I think everybody in the room would say, it's going to drop off. It might even drop off a cliff. I mean, we're all recycling more and -- but in fact, it's actually continued to climb, which has been a positive for us. But the chart on the bottom left shows you what happens with capacity over the next 20 years. You can see that landfills, and this is just -- this is tons here, but you can see that landfills have closed a few landfills have closed, a couple of ours have closed over that kind of 15-year period since 2010. But look what happens in the next 20 years. And so you might say, well, why are you showing this slide, Jim. That didn't make me feel any better.

Here's why we're showing this slide. because on the right, we have an advantaged disposal network. Our life of our landfills is longer than the average by a pretty wide margin. At the same time -- and so we've talked about the second bullet, which is we have the best-positioned landfills in 9 out of the 10 biggest MSAs in the United States. At the same time, we're working on expanding our transfer capacity, and we're making capital decisions to help expand this shortage that's coming. Some of them aren't cheap to buy adjacent property next to landfills that helps us maintain that landfill in 1 of those 9 out of 10 MSAs. South Florida is a great example of that. I wish I was the guy that bought that swap plan that we just bought back in 1950. I'd be [indiscernible] happy.

But -- and then adding to that is this recycling infrastructure. And you've heard us talk a lot about that. You've heard us talk about the fact that we've spent almost $1.5 billion on that to enhance it over the last few years. And so all of those things help us win in this situation -- in this scenario where landfill capacity is, in fact, shrinking. After we announced the Stericycle deal, there was kind of a misnomer out there that, well, the reason they announced that is because they're out of tuck-in acquisitions. They don't have anymore. And there might have even been a reporter to that said that. And then we've kind of dispelled that because we've done a couple of tuck-in acquisitions since then.

But this, I think, shows it to you in graphic form. I mean you can see this TAM part of the donut, those are tuck-in acquisition opportunities for us and for others in the industry. You can see the big guys in the industry there. And then you can see the other competitors make up about half of that. So there is a big chunk of consolidation potential within the space, and we participate in that. We look at where we have gray areas where we're not -- where we don't have strong operations or we don't have any operations and those are where we end up focusing. But there certainly is opportunity for us to consolidate. And we will continue to use inorganic growth as one of the levers that we can pull to grow the business over the future.

Okay. So let's talk about these new platforms. And you've heard us talk about these a lot. There's been a lot of questions about both sustainability and W Healthcare Solutions. But first on sustainability. $3 Billion is what we've said we're going to spend on this, a little bit less than half of it with the recycling -- new recycling plants and the automated facilities, 29 of the 39 have been completed. And then a little bit more than half of that, $1.6 billion on these RNG plants enabled by this natural gas fleet that we have. Nobody else can do this because they don't have the natural gas fleet, so they can't generate the RIN credits. And 20 of those have been announced, we currently have 8 completed. We will have all but 2 in some form of construction by the end of this year.

Here's the number that I think is the craziest number on the page. And it's that $600 million to $630 million of incremental free cash flow. In 2012, a -- our free cash flow for the entire corporation, including Wheelabrator, remember we used on Wheelabrator, was $829 million for the entire corporation. It's going to be 3/4 of that just from these incremental investments, has nothing to do with the rest of the corporation, just from those incremental investments, $600 million to $630 million of free cash flow. So Healthcare Solutions, let me talk a little bit about the middle section here because those. And I'll talk a bit more about the secular trend on the next slide as well.

But you may or may not know that from 1980 until today, the average age of an American has gone from 29 years old to 39 years old. So what does that mean? Well, that means it means we're going to have increased chronic conditions. We're going to have rising hospital occupancy -- we're all spending more on health care. I guarantee I spend more on health care at 62 years old than I did at 22 years old. And that's just a fact. And so if you would ask me in 2000 what -- give me a couple of businesses that really are going to grow that are going to outpace the normal economy. I would have said something that's health care related and something that's technology related. Those 2 are going to outpace the growth of the economy. So we've been interested in this business since way back in 2010, 2012, Morry Myer sent me a note last week said I was interested in Stericycle in 2004, but it would have been about the company acquisition back in 2004. It was a large tuck-in when we bought it. And then when we apply what we do well, here's what we do well, a couple of things we do well on the 2 sides of the trends.

First of all, we're really good, as I said earlier, about taking cost out. And you can see that we've already gone from $125 million to $250 million that we announced several months ago. Rafa will give more information on that, but a lot of that is cost. If I talk about SG&A specifically, they were 24%. SG&A is 24% of revenue. I mean, you know where we are. I just said we're at 9%. And built into that $250 million is not 9%. It's about 17.5%, 17% I said 15% here, but I think it's -- actually, we took it out. Earlier today, it said 15%.

But anyway, 17%. So think about the fact that there's a lot of opportunity beyond that. Let's just get this down to where we are at 9% or maybe, as you've heard Devina say, we get this down to where our areas operate because they're not burdened with corporate cost and they operate at 4% to 5%. So wherever you go with this, whether you go from [ 24% to 17%, 24% to 10% or 9%, 24% to 5% ]. There is tremendous opportunity with this acquisition. One of the reasons it was so attractive to us. And then if I go over to the right side of the page and think about the -- our national accounts business has been a big driver of our success over the last few years. It was kind of a disaster when we bought it in -- we bought a company called Oakleaf way back in, I think 2014. And it was a bit of a disaster with all kinds of systems issues and it's turned into a hugely successful business. Kind sounds a little bit like maybe Stericycle had some systems issues. We buy it and it ends up being a huge success for us.

And one of the things about national accounts has been so valuable is that when you see so many industries consolidating, I mean we were kids used to there was a hardware star in the corner, right? There aren't any hardware stores on the corner. They're all owned by Lowe's and Home Depot now. And that's the same thing that's happening in this health care space. That corner ER, it's now owned by HCA or UnitedHealthcare. There's a big consolidation going on. and it leads perfectly into our national accounts footprint. And then when you combine that with the fact that we are bringing technology, data and analytics to the national account space. And we have coverage that nobody else in this industry has.

There is not another company that has the same national footprint or anywhere close in the health care space. So we are feeling really optimistic about WM Healthcare Solutions. Here's those secular trends I talked about, and I won't go back through those. The one at the bottom, though, I haven't touched on, which is rising energy demand. And you know we're producing a lot of energy out of these renewable natural gas plants. We were already in this business producing high Btu methane or electricity, and now we're producing renewable natural gas out of these 20 plants. But here's an interesting stat for you. I said on the Caterpillar Board, we went and met with a big data center operator in Dallas, Texas, and they're building 4 big monster data centers altogether in Dallas. And his question for us was how much Energy does the city of Dallas use. The answer was -- I had no idea -- the answer was 3 gigawatts is what the city of Dallas uses.

And then his follow-on question was how much energy do you think these 4 big data centers are going to use? And the answer was 4 gigawatts I mean that tells you why we're going to go 3x on energy demand. So it's another place where we've anticipated this and now we're perfectly positioned. So let's think about one of these trends, which I've talked a lot about. We've talked about the fact that the labor market, especially in these trade type positions is shrinking. I've given the example of my daughter in high school and athlete from college. But in high school, she came up one day and said, dad, nobody is talking about driving a truck, nobody is talking about operating heavy equipment. And so it was a little bit scary for me when she said that.

So what are we doing to address that? It doesn't mean we're doing a big riff. What it means is we're applying technology. You've heard us talk a lot about several of these, but converting those traditional rear loaders to sideloaders, and by the way, a big part of that, the impetus for that was not labor. The impetus for that was safety. We had somebody that was unfortunately very unfortunately killed behind one of our trucks. And after that -- and it wasn't the first time that's ever happened, but it was the last time I said that this -- if we cannot have this ever happen again, it won't be too soon. So we said we've got to move this area, and it was our Texoma area. We've got to move it to ASL. And now we're moving the entire company to ASLs.

And so how does that help us from a labor standpoint? There's a person on the back that's bloating. That person comes off. By the way, hard-to-fill position, 50% turnover in that job. That person comes off. And then by the way, 30% productivity improvement by moving to an ASL from a rear loader. Automated facilities. You've heard Terry talk about this a lot, but we're taking 30% to 40% labor out when we automate those facilities. Another hard-to-replace job. Not many people want to stand on a -- stand 8 hours a day on a conveyor belt and pick stuff off of it. And it lends itself perfectly to automation.

Dynamic routing optimization. We've talked about that a bit. And then testing autonomous vehicles, I've challenged our team. We'll see whether I'm even close, but I've challenged our team to have an autonomous residential contract in 2 years. Not a huge city, but maybe an HOA. And there may be a driver upfront that's giving comfort to that HOA, but look, if you've been to Phoenix, you've been to Austin, you've been to California, you've seen these Waymo cars running around. I mean the technology works. I've been in them. It's a little weird when you get in but it works. There's nobody upfront like the Jetsons or something. So that's something that I think is an opportunity for us, especially in that residential line of business. So here's the investment thesis one more time. People first leadership with a dynamic leadership team, fueling a powerful long-term growth engine.

This unique unreplicable asset network and materials management expertise building distinctive platforms for incremental growth supported by these secular trends that we've identified and are taking advantage of and then executing clear and disciplined capital allocation strategy focused on long-term value creation. So thank you for listening to me today. We've got a lot of great presentations today. And the next one is from John Morris, our newly announced President and Chief Operating Officer. Thank you. Thanks, Joe.

Good morning, folks. As Jim mentioned, John Morris, I've been with the company since 1994, and I guess I started in the industry and a high school by accident around 1987 or '88 and been really fortunate to work with such wonderful people along the way. And as Ed said in the beginning, I think we're all excited to be here today. And after 30-plus years with WM as much as I'm excited to be here today, I'm not much more excited about what we're going to talk about, which is really why the future of WM as equally as bright as the last decade has been.

So on the slide, you see driving operational excellence through the WM way. Think of the WM way, I think it's something that separates us from the industry. It's really -- it's a framework for us to drive operational excellence all the way from our frontline folks all the way through the post-collection operations. And so with that, I'll get rolling here. So a couple of key messages. One, the core competencies of the business will always be a key for us, and we're going to continue to build upon those. Partnering with our customers, my colleague, Mike Watson is going to come up here and talk about everything that we're doing on the customer front, but that's always front of mind even when we talk about operational excellence.

And then the third bullet point, I would argue is probably one of the most important ones as you think about the presentation for the next handful of minutes. We talk about modernizing our business operations to structurally lower our costs. let that sit for a second. Jim talked about it. It wasn't that long ago, we were at 65% operating expense as a percentage of revenue. And now we've been consistently under 61%. And it's not about asking folks to go faster and jump higher, but we are trying to take a lot of the process discipline we've instituted in the organization. And couple that with technology advancements that are going to enable us to structurally lower the cost of this business. I think you've seen some proof of that over the last handful of years. And you'll hear from myself and the rest of the colleagues some optimism of why we think we have more room to run there. and then obviously, continue to drive operational excellence across the entire value chain, and I'll give you a view of that here in a moment.

So to step back just a bit, we referenced when we were here last time in 2019 and how the company was performing then. Two things we talked about then, process discipline and technology enablement. You can see that on the left side of the screen here. And I won't read it to you, but you can see in the middle com there, there's a list of technologies, some of which Jim has mentioned in his comments that have helped us get to where we are. And if you look over the right section there, we have improved safety. We have improved efficiency. We have reduced our cost to serve, and we've done it with the customer in mind. And if you look at a lot of the customer metrics that would suggest that our customers are pleased with that. And then lastly, as much progress as we've made to date and why I'm so optimistic is I think we're still in the early innings of what we can do in this space as we go forward.

Talk about differentiated core competencies. I think this is where all things start with people first. We have 62,000 associates now across the portfolio and about 1,400 operating locations. And those are -- that is where this Symphony, as I call it, of WM happens every day. 52 weeks a year, those folks go out, service our customers and do it safely and efficiently with you folks in mind as well. From a logistics expertise standpoint, with the addition of the health care services business, we now put roughly 18,000 vehicles on the street every day. We are a logistics company on the front end. It is part of our DNA. It is something we are good at today, and we're striving that to be better tomorrow. We've got a wonderful team of operational research folks, data scientists who are working to improve the way we go out and go about our business on the road every day.

From a technology and automation standpoint, listen, this isn't just about automating. This is really about integrating systems across the business to connect our full value chain that is the WM ecosystem. So these are the 4 imperatives that always remain stable in how we approach the business. So the value chain. If you think about this, we tried to give everybody a somewhat simplistic view 1 page and call it the place mat. That really shows everything that WM is. If you look across sort of the top half, you can see a representation of sort of the logistical capabilities and the customer piece that we do. We go out and service millions of customers every day across a lot of geographies and a lot of customer segments. And Mike is going to go a little bit deeper into that.

And then when you look at the bottom of the page, you'll see a representation there for recycling. I'm not going to touch on that because Tara's going to come up and talk about that in our renewable energy business. But if you think about the bottom of the page there, it's really about the post-collection asset network that we have. And I see post-collection asset network landfills are certainly part of it, but you'll also see our transportation capabilities over there. We are moving material, including waste by road, by rail and by water. And that is a unique set of capabilities to WM. And I think we do it better than anybody else. And I think as we go forward, it's going to be a big differentiator for us as a business.

Talking about the collections operation value chain for a second. I mentioned we have 18,000 trucks that leave about 500 locations every day. And what we have done is worked on building differentiated capabilities that enable us to drive safety, service and efficiency. It is really our digital backbone in integrating the connection points of our value chain. So why does this matter? I think it provides us a unique set of capabilities compared to the others and lets us serve the widest range of your customers and do it in an optimized fashion. So we talk about leading and safety and advancing our business. Jim touched on a few of these points, but I'll start.

First and foremost, we think about safety as being paramount in everything we do every day. We train folks, we give them all the tools, in the space to operate their truck or their piece of equipment as safely as possible. But the reality is we also have the ability to leverage technology and some automation to provide a safer work environment. You'll see a demonstration video here in a moment. We have technology in the cabs to help simply with how our folks are performing every day and using that information to coach them to be successful. We've automated elements of our fleet across our whole portfolio that Jim spoke to. We've also got advanced fleet safety technology, and I'll talk about that in a slide or 2.

And then going down to the bottom half of the page here, you can see we've also done things around efficiency service, customer satisfaction and profitability with route optimization and data science team. We have real-time tracking systems. We're automating more and more of our vehicles and the componentry in those vehicles. And obviously, we want to do this again at the bottom state to improve -- increase safety, improve service and enhance customer experience. And before I leave this slide, I do want to stop and pause on the right side there. This has been an industry that historically has turnover in the high 20%, low 30%. And we really saw that peak after COVID. we went to work hard as a team to really unpack what was it going to take for us to be a best place to work, to improve retention across all those trade like jobs that Jim spoke about.

And I will tell you, I am proud of a lot of things in this organization. But the fact that we are at our lowest all-time turnover, we've improved almost 30% since 2022 is something that's really benefited the business. And maybe it's one of those softer metrics, but any of you work in the business and have lived through some of the labor strike that we've seen over the last handful of years. This has been a big benefit to the organization. Optimizing our fleet. One of the other areas that we've made tremendous progress in is not only on the process side, but really from a technology side. When we think about our trucks are connected to our technicians and our repair facilities. Why is that important? We have real-time information through telematics a moving both -- from a big portion of our fleet to our technicians in our repair shops, on real-time basis. That is a capability we didn't have that many years ago. Now we don't have it across the whole fleet, but we're working as fast as we can to do that.

So you've got advanced driver systems in the trucks, other safety technologies we put on the trucks. We are focused on using this technology to more effectively plan and schedule the work. Why is that important? Because if we do have to bring a truck in, we want to make sure we do it as efficiently as possible and get it back on the road as quickly as we can and be in a position to service our customers. And then when you look over at the right side on technicians, another area we've made tremendous progress in terms of retention and attraction. And a digital environment, a technology-enabled shop has proven to attract some of the younger talent that want to come work in this space.

And before I leave the page here, you could see as an investor, when you think about capital efficiency, a lot of it's driven right here on the right side of the slide in terms of decreased downtime and spare ratio improvement. So this is the last slide before the video, this is the connected truck, and I'm going to walk around this fairly quickly. You're going to see a representation of it here in a minute. In the top left corner, we have technology, we've had onboard computers in our trucks for over a decade. That's not new, okay? But now we've been building on that technology. And now what we can do is our drivers have asked us, how are we doing every day? How we do it from a safety perspective, a service perspective and an efficiency perspective.

We now have a daily report that the drivers through a daily performance index, where our drivers get a scorecard every day on how they did on that. And believe it or not, it's something they're curious about they want to know about and if they're in the middle of pack, they want to be at the top of the pack. On the second one, you'll see the safety behavior support. That's the inward-facing technology we've had on our trucks for a lot of years to not only see how our drivers are performing real time, but the capability that's getting built out there is really using artificial intelligence not only to help that driver from a coaching perspective, but to use that information as a predictive tool for what could happen to some of the drivers counterparts, and that's what we're using to train our folks. In cab navigation, obviously, we have -- I call it waste for garbage trucks. There really wasn't a product that we could take off the shelf.

So we partner with a technology company and now have the ability. We engineer the routes on a regular basis with our data science group -- we also now have the ability to give our drivers real-time traffic information. So we engineer the route, but anybody who's driven around New York City getting a car in the morning you hit was, and it says I got to go blocks and so take me 4 hours. We have that same technology to help our operators of our vehicles get in the truck and navigate that as safely and as efficiently as they can with real-time information. fleet health alerting, I touched on telematics that we have in our vehicles. Again, this has given us transparency between how a vehicle is operating on the road every day. and what we can expect in terms of a maintenance profile for that business. So we don't see customer interruptions and friction in our maintenance shop.

This point about integrated systems is pretty simple. All this technology, it's ubiquitous, it's everywhere. One of the missions that we have, our entire team, is that we want the technology to be as passive as possible. We want our folks to get in, whether it's a truck, a piece of equipment in a recycling facility, any function that we're automating, using technology wanted to use to be passive. The best example I could give you my phones on the table over there, but you see people all day going down the road touching their phone, right? We don't want our folks interacting with the technology while they're doing their job. We want the technology to be passive and they can use the benefits of the technology to do their job safely and efficiently. And lastly, I think this all ends up being a much better transparent more transparent to our customers in terms of vacant now see a lot more of the information about their service, and it's much more transparent and they can interact with us when and how they want.

So I would tell you, most companies don't think of the waste industry is where you go for new technology, but I'm going to roll this video here in a second. And think about 3 things. We're going to talk about safety in the first section, and I'll give you a few words about that. Automation in the middle section, okay? And then lastly, we're going to talk about how this ends up by the smart truck technology is helping us from a customer perspective. So we talk about our vehicles being rolling data centers. And what you see here is sort of our crew out process in the morning. We launch our vehicles the same way, the same day, everywhere, every time.

And what you're going to see here in just a second, you're seeing a few different lines of business here and how these trucks operate. What you're going to see here in a second is you're going to see a driver operating a vehicle. This driver has done nothing wrong. In fact, he's doing everything right. And it's hard to see because it's a little bit grainy up here, but you'll see the drivers driving this truck, just you know he's doing the speed limit, he's approaching the turn the right way. He's making a left. And if he is not absolutely paying attention, that guy is dead. Why is that important? Because we train our folks to be alert all the time. They have to look for blind spots. He's doing nothing wrong. He's doing everything right. And if he doesn't -- if he's not paying attention, this could have been a much more tragic outcome. This is a new technology we're pioneering with the same folks. This is actually here in New Yorkers. It's not one of our trucks, but this is technology that's evolving around pedestrian notification.

So if you're driven here in New York City or if you're in a refuse vehicle in New York City, having those capabilities would certainly help in terms of navigating around town safely. Jim talked -- talked about reducing labor dependency. Well, one of the ways that we're doing that in addition to improving safety is automating routes. We have about 5,000 residential routes. A lot of those were automated. But we -- as Jim mentioned, we've had a concerted effort for the last handful of years to go out and automate as many of these routes as we can. And what you see here is a representation of one of those trucks running on the street. Nobody outside the cab. -- nobody behind the cab. The material is containerized, it's safer. There's not anybody interacting with traffic. From a weather perspective, obviously, you're not exposed the same way you would be on a traditional rear load truck, which is, frankly, where I started.

And lastly, is smart truck. This is the outward-facing technology that we have across all our commercial fleet, which you see here. So think about the fact we probably pick up about 700 million yards, that's rough math of commercial material every year. And if 4 yards a clip on average, you could see how many containers we do a year. We're put -- this gives us the opportunity. Here you go. You can measure what's in the can, what's around the can? Is the can in good shape? Are there safety hazards, are there bulk material that we could otherwise go pick up for the customer. And then in a second here, this is going to go to another video capability, which I think is really interesting when you think about segregating material and sustainability.

This right here is parsing out what's actually going in the can while it's happening. And it's hard to see up there, but it's actually identifying what that is. Think about the power of that technology when you go to a customer and say, hey, we have the ability to tell you what's in your waste stream and you have sustainability objectives, you have recycling objectives. We cannot tell you what that looks like and what you have to do from a behavioral standpoint to be able to improve your business. So in any event, that's a couple of minutes here on the connected fleet and how it ties into some of our other objectives. So we did the top side of the page. Now we're going to the bottom side of the page. This is our network I'd say post-collection, I just don't say landfills because as you heard from Jim, the network capabilities we have today and the network capabilities we're building are going to be vital from a competitive standpoint as we go forward here. We do this. We have 350 transfer stations and over 260 landfills in North America, and we aggregate about 140 million tons of material a year and about 120 million of those tons end up in one of our landfills.

And one of the keys for us today, we internalize about 70% of our entire waste stream now. We view our ability to continue to do that and frankly, internalize more waste over the long term is going to be driven by the value of our post-collection network. How do we connect all the nodes on the post-collection network. Those 350 testations with the transportation network, which is truck, rail and water and get that and be able to access our sites for decades to come. And that's one of the things we're working on very diligently as we speak now. So just a minute here on maximizing landfill asset value. This is a cross-section of the connected landfill. I won't read the words, Steve. But you see on the left side of the page is a number of different technologies we've implemented inside our landfills that you can see in the picture in the center there.

What the benefits are, are clear. LifeSight capacity increase in renewable energy production, total return on invested capital is certainly one of them. And then lastly, in terms of enabling landfill expansions, these are hard to get. They're not getting any easier. And part of the reason I put that Darin pause on is because being a good community partner where you operate these facilities is as important as anything else you do because if you're not, your license to operate is going to get challenged the next time you look to do an expansion. Optimizing our network. We talked about the post-collection network, limited land availability, the regulatory climate, population migration, this stuff's moving around. We are doing things that you see in the middle of the page I've already mentioned. But ideally, optimizing landfill flows and moving buy more cost effectively is going to maximize asset value. And we've got a whole team of people.

Our enterprise network team has been stood up, and this is what they work on every day of the week. I'm going to give you 2 quick profiles here. One, you see some stats up there. About 45% of the waste is generated in what I'll call the Eastern Seaboard at Eastern third, 25% of the country. About half of that disposal is going to need a new home in the next 10 years. Think about that. When you look over at the right side there, is a great example. We started -- we partnered with New York City in 1997 as they started to close fresh kills for any of the local here. Why is that important? -- because we built out a network to handle that waste in a way that was different than had ever been handled here in New York City, maybe the most complex market that I've been associated with to move material. What's the result of us having that network capability. We move 6,500 tonnes a day every day, 6 days a week. You can't turn it off summer, spring, it doesn't matter. It keeps coming.

So the redundancy that you have to have in that network has got to be second to none. It can't fail. That's 1 example. And now we have a terrific partnership with the city. Similar in Pacific Northwest, we're moving about 2 million tons out of the [Audio Gap] this is also a shot of the Fairless landfill just outside of Philadelphia. What you're going to see here is a couple of screenshots that are showing you some of the technology that now exists in the landfill where our folks, our operators, the folks who run the landfill can see what's happening in that ecosystem that is the landfill, whether it's gas production, leachate management, landfill airspace maximization, what you're seeing here is one of these automated well heads we've been talking about.

Those do a bunch of things. One, it reduces labor, but it's also proven to increase gas production as much as 15% on average in our landfills. That's not insignificant. Landfill drones. We used to fly over the landfills once or twice a year and take a picture with an aerial thing, and we'd see how we are progressing from a fill sequence standpoint. We've got drones and we can fly daily if we want. We have people were pilots, no drone pilots on airplane pilots. But they can go in and look at the whole ecosystem, that is the landfill. That's real time. That's somebody sitting in the landfill who's got the ability to dissect the landfill from a construction standpoint, from an operational standpoint, those are capabilities we have that we didn't have before.

And this is one of the reasons why we think that the enablement of our operations through technology is key. And then lastly, just a few seconds here. We're going to show you this is Pacific Northwest. We moved these 45-foot containers from all over the Puget Sound area, and we move them by water and by rail, but it gets shipped out of the Pugsan-byrail down to our complex shipped out of the Pugsan-byrail down to our complex in Arlington, Oregon. And again, this is 2 million tons a year. It happens every day, you don't shut it off. It doesn't matter what the weather is. You have to have the redundancy in your system to be able to do this day in and day out in order to be able to really satisfy your customers and give them the confidence that you can do this for them over the long term. So we're super proud of this.

And I'll wrap it up here. Listen, I think when you look at this, we talked about labor dependency regulatory requirements and landfill constraints. I think we're investing in all the right places to enable our folks on our operations to draw down our structural operating cost over the long term to be in a better position than anybody else to service our customers. But I think it's connecting innovations into a unified system. When you think about that first placement, think about the whole network, the whole ecosystem that is WM. And hopefully, I've given you a little bit of view of what that's going to look like and why we're going to drive so much value.

Lastly, ending where I started. We do this all with our customers in mind. We do -- we are working to modernize our business to obviously elevate labor performance, our operational performance, but really to structurally lower the cost of this business over the long term and get even a bigger lead on everybody else. I don't think -- listen, I think the business is changing, but I think we're the ones that are driving the change. And that's why I'm so excited for us and our team to demonstrate that over the next decade. I very much appreciate your time. I'm going to hand it over to my colleague, Mike Watson. Thank you.

Well, good morning, everybody. My name is Mike Watson. I'm the Chief [Audio Gap] enabler for growth now and well to the future. That is driven by our modernized customer experience, our go-to-market strategy, our top-tier analytics and our purpose-driven brand, which stands head and shoulders above our competition, we feel we have defined the sustainability space. So there's 4 things I really want you to take away from today. We are leading the industry with capabilities, and we have a value proposition that is second to none, and we are a partner of choice for customers across the landscape. Number two, we have an executed proven playbook that is founded in customer experience that can scale for growth. And you'll see that applied later on in the presentation in WM Healthcare services. Third, we are uniquely positioned with resources and capabilities and growth markets that will provide long-term growth for WM. Lastly, Jim mentioned a forever stock, we feel that we have a long-term sustainable growth platform that will propel growth well into the future. So I want to take you through really 2 things today.

I want to talk about this proven business model that we feel can scale for growth and differentiate WM. It's founded in 4 key elements: our modernized customer experience, how we're applying technology, focusing on the moments that matter and really delivering for our customers. two, our go-to-market strategy. This is about process, technology and organization to make our sales team more effective and efficient to meet the needs of our customers. Three, I mentioned our data and analytics -- we're the biggest in the business. We have the most access to data, and we're turning those data points into insights for our customers to extend customer lifetime value. Our brand, as I mentioned, we have defined sustainability. It is an enabler for growth and drives real sales outcomes.

Let's talk about modernized customer experience. We've been spending a lot of time over the last 5 years modernizing our customer experience. Our customers want really 3 things: ease, reliability and transparency. And we have been delivering that. We have invested in digital capabilities. If you went back 5 years ago, we had one that was -- you could pay WM, not really very customer-centric, frankly. Now we have 15 and really hats off to our talented customer experience group and digital partners have brought 15 capabilities. And that, for example, would be, I need to order a bulk pick up at my home or I want to find out when my truck is going to be arriving at our business. So great capabilities. In addition to that, we've invested in robust communication channels for our customers and also proactive outreach to really make sure we could communicate with our customers more effectively. What I'm really proud about is the tools we provide our agents to be much more effective in serving our customers.

So our customers are winning with these capabilities. Our employees have better tools and our shareholders are winning as well because we've increased our digital transactions by $25 million over the last 5 years. And not only that, we've reduced our cost to serve and working on those digital capabilities by $30 million over that time period. So a win for our customers, win for our employees, win for the shareholders. I think the most important point here is our customers are giving us great feedback about these tools. You see our Google rating, which is 4.3, 5 years ago, it was not there. So these tools are really paying off. And I take a look at customers, as Jim mentioned, we got a lot of feedback from our customers. I received an e-mail from a customer who's 85 years old from California goes. If these tools are easy for me to use, they should be easy for anybody. So definitely, there's a testament of what we're doing for our customers that's really paying off. So we've done some great work. We are not done yet. We've got a lot of work to do to continue to improve our customer experience and remove the friction points that we have in our customer experience.

You heard from John talk about the connected truck that's focused on reliability, safety and efficiency. That reliability, coupled with our further investments in more predictive and proactive communication and also further investments with AI-assisted agents we feel we can propel WM's customer experience to new heights. We feel that those investments will not only improve our customer satisfaction, but we have aspirational goals. We want to triple the amount of digital capabilities or transactions that we have with our customers. We want to raise our customer satisfaction. But that, most importantly, will extend customer lifetime value. And if we focus in on those friction points and remove those elements that caused a little bit of churn, we could really extend that customer lifetime value over 5 years over $100 million.

So you don't have to take my word for it. I have a quick video here. I'd like to show you that demonstrates the feedback we've gotten from our customers throughout the customer journey, but also a little bit of lean forward where we want to go as a company. around key moments that matter. Those moments that matter for our customers are onboarding smoothly, making sure that we can proactively communicate their service needs. And if we do have service interruptions, how transparent how quickly can we give them the information so they could go on with their day. So I'm going to show you a quick video on a narrate through it to demonstrate where we're heading as a company. So you can see here, these are really our focus on ease, reliability and transparency is paying off with our customers.

Just an example, across diverse customer set of where we are providing customers. seamless onboarding. We spend a lot of time on our container delivery processes and making sure that's smooth. We're further making investments through the Smart Truck technology to provide exact picture of that container. Is it in the right spot, information about their service day and also some recommendations on how they can get the most out of the recycling program, for example. I talked about the smart truck and I know John spent some time talking through. This is really the crown jewel for us. Is that moment that matter at the service location. We get visual information around the customer, our data insights, and we provide proactive service recommendations for our customers. And we feel that's really a benefit of value.

Lastly, weather happens, service gets interrupted. We want to shorten that time window between we are rescheduling that customer, and they know exactly when and when we're going to be there. And that time we do through artificial intelligence is a key focus for us. So as you can see, we spent a lot of time improving our customer experience, rate benefits all the way through the P&L, customers win, employees win shareholders win. I want to take you to the second point I have here is our go-to-market strategy. really proud of what we've done here, investing in tools, process and technology. Those investments are paying off with a more organized sales team -- we have an e-commerce platform that keeps growing and growing, which is a function of our brand and advanced brand and marketing analytics.

We talked a lot about smart truck. This has been a huge driver of revenue growth for WM. We've had $340 million worth of service upgrades in the last 5 years just by making sure we service our customers better. And lastly, we're investing to make our sales team much more efficient with AI and automation, how they are trained, how they're coached, but also how they can increase the velocity of our sales better and better, and we're seeing that pay off. data and analytics. This is where we really separate ourselves. Jim mentioned it, John mentioned it. Our ability to take data and turn it into real insights for customers is paramount.

We are focusing on the moments that matter. These moments that matter, as I mentioned, onboarding, serving and solving our customers. We're making our team much more efficient, much more proactive. But we're optimizing our price increases as well. This is the name of the game. We provide great service, great value proposition. We get great price. And we've earned price above inflation of 300 basis points over the last couple of years. Not only that, we've improved retention. So a perfect balance of how we move price and maintain volume.

Lastly, the fourth piece of the puzzle, our brand, it is synonymous with sustainability. We're purpose-driven. It sets us apart -- most importantly, we've grown our favorability and awareness through the roof. This favorability and awareness is driving real sales outcomes. Our open-market residential, skyrocketed. Our small media business has grown as well, and we feel this is truly an enabler for growth. So I've talked about our go-to-market strategy, our modernized customer experience, our data and analytics and our brand. We have 3 distinct growth markets that we feel we have the resources and capabilities to really compete and grow. The first national accounts. We've had great success there. It's been a big growth driver for us. Team Health Care Solutions. Rob is going to talk about that a little bit later and Environmental Solutions. National accounts, we have grown that 12% year on year-on-year, so the last 5 years.

Let me take it through that. When I talk about our national account customers, I want you to focus on the upper right-hand part of the page, WM is the benchmark supplier, strategic supplier benchmark, excuse me, is a benchmark for all strategic supplier partnerships. That is why we've grown this 12%. That's why we've had a 99% retention rate. We've gotten price -- it's really the great people and National Accounts, but also our seamless onboarding elements. Element is our crown jewel. This is why customers stay with us. This is why they joined WM. It's an industry-leading data platform that focuses on sustainable goals, environmental compliance and service efficiencies. Straight-through processing here, this is amazing. All that self-service on these multiple location customers really want ease of doing business. This self-service process really, really helps and really differentiates WM. We have a $5 billion TAM that we can attack with the service offering, and we're really excited about doing that.

Lastly -- or secondly, WM Healthcare Solutions. This addressable market is $2.5 billion. And that's a combination of WM's core business as well as the WM Healthcare Solutions business. We are uniquely positioned to attack this. We have the data insights, we've got the assets -- we have sustainability made simple, and we feel we can really grow this business. You're going to hear a lot from Rafa a little bit later on the presentation of bringing this to life and a cross-sell example. Most importantly, if you take one thing away from this slide, we've already converted $30 million worth of business in this space in just a short period of time. The Environmental Solutions business is also a key differentiator for WM. We have grown this business by over 44% in our post collection. We have the assets. We actually have 4 hazardous waste facilities in our network. We have the environmental expertise and the ability to provide solutions. This is just 1 example a petrochem customer where we've invested in our sustainable services, our environmental solutions to divert 90% of their -- one of their waste products. Just 1 example how provide solutions for this customer base. We have the data insights, the customer-facing technology to capitalize on a very, very robust TAM -- you see up there $8 billion in hazardous waste and over $23 billion in PFAS and also biocells. You're going to hear from Tara a little bit later on today about that. So as I wrap things up, I hope it's clear that we have an industry-leading capability. We have a proven playbook and we have the technology to really drive WM well into the future. If you talk about sustainable profitable growth and that forever stock, we feel that this growth plan will definitely achieve that. So thank you. I'd like to turn it over to Kim Stith, who's going to take you through what people first culture means at WM with leaders across our business. Thank you.

So thank you, and good morning. I'm Kim Stith, and I am the company's Chief Human Resources Officer. I'm going to talk to you today through a panel about how Waste Management positions itself as an employer of choice. We attract, develop and retain top talent. But most importantly, we position our employees to make a daily impact and understand how they contribute to the company's long-term success. And so we have this panel today, who will help me illustrate what a people-first culture means. But before I get started, I'll talk a little bit about myself. So I joined WM 24 years ago from a national law firm where I was a partner. I came to WM had a variety of roles and responsibilities in the legal department. And 9 months ago, Jim asked me to be the company CHRO.

My journey isn't unique. You'll have a chance today to meet a lot of folks in the audience and most of them have experiences like this. right? We take talent, we develop it, we watch it grow. And so I'm going to talk to this panel about that today. So first, I wanted to say that these 3 folks represent 62,000 employees across the company. First, we have Marcel Davi. He is the Vice President of Business Optimization we have Rebecca Meg Morris. She's a Senior Director of Enterprise Data Services center in the digital apartment. And we have Ron Ward, who is a Vice President in 1 of our 16 operating areas. You guys ready?

Yes.

All right. So why don't we first have you guys introduce yourselves and tell the audience a little bit about your careers. Marcel, why don't you start?

Certainly, Kim. Good morning, all. Thanks for having me. So I started my career at WM 20 years ago. I was recruited straight out of college into a brand-new operations management training program that was just started in its first year. By the way, we still operate that program today, and we train over 100 people every year to be new leaders in our organization through that program.

But when I first started, I worked at the corporate office, but I quickly found that the magic of voice management happens out in our areas. And so I wanted to get into our operations. I had an opportunity to move to Central Texas and ran our logistics and routing operations there for about 3 years. And then I had the opportunity to be the district manager of Austin. So working with our drivers and customers, helping them to drive and grow the business.

From there, I was the collection Director for Texas and Oklahoma for 8 years running the operations there of about 600 routes. And then I had the opportunity to support the opportunity to go into another management training program that we have, which we call our area general manager training program. It's really to get folks ready to be Vice President role. So my family and I moved to Florida where I oversaw not only the collection operations that I was familiar with, but also had exposure to operating our landfills, transfer stations and our sales operations. So from there, John, Kim, found me a couple of years ago and invited me to come back to corporate as the Vice President of Business Optimization and collection operations. So -- many of the technologies that you heard John talk about earlier and that we actually have on display for you here on the side tables, my team designs and deploy those technologies across our organization.

So Rebecca, I know you have a very different story than Marcel's. Why don't you share it.

Thanks, Kim. Good morning, everyone. I'm Rebecca McMorris. I'm the Senior Director of Enterprise Digital Services here at WM I have 2 primary responsibilities in our digital organization. The first is planning. And so planning consists of budget and technology investment management project management and employee engagement. And the second is our data services organization, which you've heard a lot about already this morning, what my team developed and supports many of the data and analytics solutions you've heard about today. I didn't start here at WM though. So I graduated in 2003 and was recruited by Exxon Mobil. I spent the next 19 years there in a variety of positions in their IT department. It spanned everything from application development and support for their ERP systems to major global projects that cover infrastructure projects and digital transformation.

And then I spent the last 10 years or so, focused predominantly on enterprise architecture and data and analytics strategy. And then in 2022, I received a call from a WM recruiter. And we talked about the position. And quite frankly, I was a little bit surprised. I didn't know much about the environmental services or waste industry, but I really didn't understand why they were looking for a technology professional. And as I talk to more people, I did my research, what became abundantly clear is that the scale and complexity of this business requires sophisticated technology to do it efficiently and effectively. And so I went through the interview process, actually interviewed with Tara.

And the fact that a person in her role would take the time to interview a candidate like myself, reinforce the idea that they truly do care about the people they bring into the company. And for me, that was critically important that I find a company that cares about its people. And the fact that the business was resilient and how to focus on sustainability, really didn't hurt that much either. It really aligned with what I was looking for with the company. And so I took the job. I've been here 3 years, literally this month. It's been fantastic and excited to share my experience this morning.

Well, happy anniversary. Ron, what about you?

Thanks, Kim. So I'm the Area Vice President for the capital area, which ranges from Western Pennsylvania, down to North Carolina. I'm 1 of 16 that's similarly situated. My story is a little bit different. I am an Air Force veteran, Operation Desert Storm, I went to undergraduate grade-school at night while I was in the military. And then upon exiting the military in '93, I worked for various companies first with Pharmaceuticals, I was in sales and marketing there. And then I got recruited to go to Mercedes-Benz in North America, which I was in the marketing department. I left there and I went over to Nestle, ran the sales team right here in New York City and then 2 years in, I got promoted to run the business unit. And when I left, I was running the Northeast for them their operation. I got recruited to go into the second largest beer wholesaler in the United States called Regalia beverage. So Middle Core just wholesaler in Philadelphia, PA, I ran their operation there for roughly 10 years, and then I got the magic call to come to this wonderful company, and I've been here for 5 years and very fortunate to be here.

I'm glad you all are here. So every speaker before me has talked about a people-first culture. And a lot of companies say they have that, but I always respond with, yes, we really mean it. So why don't Marcel and Ron, you kind of tell us what that really means and how it shows up.

So Kim, I'll talk about a couple of things there on the people first. I think we have some of the best benefits not only in our industry but really across any industry. And one thing I'd highlight for you is a few years ago, came forward with the program to offer fully paid college tuition, not only for our employees, but for their dependence. So it's really a great way for our employees to grow their careers and enhance their skill set, but also just a great benefit to their dependence to be able to go to college for free. But I think where I saw people first really come alive for us was during COVID, right?

When COVID first started, everyone remembers everyone was at home. Restaurants were shut down, sporting venues were shut down, airports were closed, going to malls and so it immediately changed our routes. We didn't need to run a bunch of commercial industrial routes, but our residential routes got heavier. And while other companies were talking about layoffs, our senior leadership team within a matter of days came forth and said, for all of our employees, whether we need you right now to run the routes or not, we're going to guarantee 40 hours of pay. And I think for our employees that really said, wow, you take care of us and we put our money where our mouth is. So I think our employees really saw that as a people-first organization.

More than a slogan on a T-shirt, right? What about you, Ron? Where do you see it? I mean you're out there in our operating unit and with our frontline employees.

Thanks, Kim. So as I mentioned earlier, on the military veterans. So what resonates to me is how we have guardrails around our culture, and I'll explain 2 things. First, we have a, what I would call an employee opinion survey that comes out once a year. It's very comprehensive, covers all aspects of our culture. And I'm held to those standards is in my performance review. So every year, I'm expected to make some cultural advancements with my team in terms of how we conduct ourselves, how employees feel fulfilled. So that's one prong. The second prong is that we have a speak-up culture. And that ensures that we follow values and commitments, and we have standards in terms of how we do business. So all those things that John Morris talked about, all those aspects of our business, we execute ethically. And we're held to that.

Yes. So it's 2 things, right? It's people first and success with integrity. They sort of go together. You can't have 1 without the other. So why don't we turn a little bit to talent development, right? Marcel has talked about the programs he experienced through his career here at WM. But what do you guys see now? Rebecca, why don't you talk to me about how talent development is showing up.

Yes, absolutely. So as a leader, I think one of the most important responsibilities we have is to develop our employees and that next generation of leaders for the company. And I think that, that happens in really 2 primary ways. One is through recruiting. And the other is through internal talent development. And I'll just share and highlight a couple of examples I've had in both of those areas. About a year ago, I had the need to staff a fairly senior technical role within our organization. It was our enterprise architect. And the skill set needed for that role is actually quite challenging to recruit for. It needs, obviously, the deep technical expertise that you would expect. But the person also needed to be able to communicate at various levels within the company. They needed to be collaborative because they don't really necessarily have a lot of direct authority.

And lastly, they needed to want to mentor that next generation of technical talent. And if you think about the combination of those skills, it's a little bit of a unicorn to try to find I luckily had worked with some great people in my past. So I had a candidate in mind. I reached out to her. Her name is Becky, and through various conversations through her going through the interview process, meeting tremendous people here, just like I did through my recruiting process. She joined the company about a year ago, and she has been truly phenomenal in coming into the organization. She's reached out. She's developed relationships. She's brought that next level of technical expertise that we needed in the organization. And she tells me every day how much she enjoys being here because, again, we truly care about the people. And she fills that. She's driven with the purpose. And not only is she excited to be here again, reaching out and mentoring that next group.

And so the excitement passes down. It's a bit of a force multiplier, if you will, to the technical resources that we have in our organization. And it's just a phenomenal example of recruiting external talent in. And then the other example I will give is around internal talent development. I had the recent opportunity to be an executive sponsor and our emerging leaders program. And that's a company-wide program where we bring together, I think it was over 50 this year, high-potential leaders that have been identified across the company, and we bring them into the 6-month program and they learn skills from a leadership standpoint, a communications standpoint, they get to interact and network with business leaders and themselves across the organization to build that network.

And lastly, they get to put it into practice at the end of the program. So last week was their Capstone proposals that they made to the leadership team, some of them will likely move forward to be put into practice. And you think about the people when they walked in the door and then you think about them walking out. And I think they recognize the investment the company is making in them, and that truly helps them feel rewarded and recognized.

So Ron, that development doesn't just happen in the corporate office. How have you seen some of that in the field?

Just 2 quick examples. We have an annual performance evaluation process. We call it a [indiscernible] This is a shorthand name for it. And this year, Boss and I, Chris, we talked about 1 individual who has been with the company for 30 years, and we believe he has some stretch to do other things. He's a high-potential employee. He started as a driver and 1 question that Chris asked me, he says, hey, do you think Jeff -- his name is Jeff, could benefit from having a formal education. Again, he started as a driver, straight out of high school is father was a driver as well as another company. And we discussed it and I think it's good, and we talk to Jeff about it, and Jeff agreed, and we're sponsoring his education for his undergraduate degree and he's pretty excited about it. He has one of the toughest jobs in the company is an operations director, but he's still getting done at night just like I did. The second example is Fred, who runs a business unit in Richmond. Virginia. He just finishes MBA. So those are 2 quick examples of how we make investments in our employees.

I love those examples. And after 34 years, it's never too late. I love it. So why don't we go back to talk about some of the technology that we're using, right? It's people and technology that's going to move us forward. And so I don't know, Marcel, do you want to start with some things that we're doing on the technology front?

Yes, certainly, Kim. I'll touch on 2 things that we've done recently. But you heard John say earlier that we've had onboard computing in our truck for over a decade with digitized route sheets and GPS confirmation of all of our services. But we continue to enhance that technology. And so 2 things we've launched in recent years. I'll touch on is one we call DPI Driver Performance Index. So forever in our organization, if a driver wanted to know how they did, they have to go to this wall chart that the manager prints out and hangs on the wall and kind of read their spreadsheet of how they performed yesterday. We made all of that digital. We made it custom for each driver uniquely for them every day in their hand on their tablet. And what we do is we provide their metrics around safety, service and savings. And in case they may be new or don't understand how those metrics are calculated.

We try to make it really simple as brand, silver or gold. So drivers can really understand where they're performing well and maybe where there are some opportunities. One of the unique things we did there is a bit of gamification. So we rank our drivers. So they know if they're #1 for the day, and they've got Bracken rights across the district or if they're #41. And what we find is those folks that are maybe the middle of the pack they come find our managers and they say, hey, how do I move this service metric. How do I make this better? So it's really driving performance, engaging our drivers, but driving performance for the company.

One of the other technologies I'll touch on, I don't know if you all are like me, but getting a car today the car doesn't move until you plug in GPS and you hit go, right? And just because you may not know where you're going, but you want to know how to avoid traffic, right? Where are the delays? Where might there be extense. And our drivers, especially the younger ones we hire today. They want that same experience. And so we've given them that. John touched on it, but we've partnered with a company called her map to really create garbage truck specific directions. So it knows the height of every vehicle unique to that vehicle that knows what we can carry and what bridges we can and can't go across. And so it will customize the route for that driver. So if they don't know where they're going, it will get them right to the customer. but it'll help them avoid those traffic delays and just help their job be a little bit easier every day. But also, again, driving performance for the company.

What about you, Rebecca? Do you have examples of how we're sort of embedding technology to make our people's jobs easier and more beneficial at work. How do you do that?

Yes. As a technology leader, first, I must say it's fulfilling every day to walk in and know that the company you work for gets what you do. They get the value and the purpose behind it. And that makes me want to come to work every day. And I get the opportunity to work with folks like Marcel and actually several members of the individuals at your tables to look at all of the technology projects that come to us for a proposal and consideration each year. and we sit down as a group, we look through them. We assess the cost and the value and we determine which ones we move forward with. And if I look across the portfolio of investments we have this year, it's a broad range. It includes everything from very foundational investments to make sure that the PCs, the tablets, the network infrastructure that we have is reliable and secure for our employees each and every day.

It also covers the transformational opportunities that you've heard about this morning, whether that's Mike's self-service enablement for our customers online, the routing optimization that you heard John talk about -- and if you have a chance at the break, we have over at the demo area, drone and the sensors that we use at our landfills to measure emissions and make sure we're responsibly managing them each and every day. And I think as I look forward, what I'm excited about is the opportunity that generative AI and agentic AI has, we are progressing different opportunities there from more mainstream capabilities like Microsoft CoPilot to more unique and targeted things to WM, which I hope to be able to share maybe at a future shareholder of it.

So Rebecca has taken over my job, I was supposed to ask what was she most excited about? -- what you already answered. So Marcel and Ron, lightning round. Give me 1 thing you both are excited about. Marcel, you start.

Yes, Kim. So I would say -- and Rebecca touched on, but really AI becoming embedded into these tools that we have. So the example I'll give you is our fleet planning and scheduling, and that's not new, right? It's how we plan our maintenance on our trucks with our technicians, making sure we have the right parts. But now with AI embedded in the tools, it really helps our managers understand which technicians are good at certain jobs and maybe which ones aren't. And so the example I'll give you with AI looking at the work orders, looking at the work history, what it will learn is, I'll pick on Kim. I don't get to pick on our HR Chief HR Officer very often. So I'll pick on Kim here. But it will learn over time that if I give Kim an electrical repair on a truck, that truck will come back again tomorrow and broke down with the same thing. But if I give that repair to Ron, it's fixed, and we don't see that truck again for that issue, right? So that's just the power of AI understanding what's going on with the work orders and then really helping us optimize the technicians that we signed to do which jobs.

All right, Ron, wrap it up. Just real quick. We're really excited to see you all things that come out of Marcel's shop in the field and makes us a lot more efficient. And secondly, I'm really excited about the people and you see the development of the people and the second generation of leaders in the organization.

Well, thank you all for really helping to illustrate what we mean by people-first organization. let's give our panelists a round of a flow. So I'm going to turn it over to Heather, who is going to lead a Q&A.

Good morning. I'm Heather Miller, WM's Director of Investor Relations, and I work alongside Ed Christopher to be a part of WM's IR team. I'm going to invite our first 4 speakers back up to the stage, and we're going to open the floor to Q&A live questions from folks in the room. We have a couple of microphones on hand. And I ask that you just wait for a microphone to get to you. and then state your name and your firm, and we're going to keep the questions targeted to the presentations we've heard thus far. So we'll start with Jerry.

John, I wonder if you can just expand on the logistics opportunity for you folks. I know you're working hard on a set of different trials using AI and other opportunities. Can you talk about how much do you think you can increase stops per truck when we're having this conversation 5 years from now based on the most promising leading-edge scheduling software that you're implementing in pilots, et cetera?

No, good question, Jerry. I mean, obviously, we've made a lot of progress. You've heard us talk about it on the last number of earnings calls over the last couple of years. I think aside from just using that from an efficiency and safety standpoint, you heard Marcel talk about some of the real-time navigation tools and traffic navigation that are helping us be more efficient and safer. I think the other thing that's important when you talk about connecting all the nodes, if you will, sort of our logistical network is also having a total cost of operation view, right? Efficiency is certainly one element of it. But we have the ability now to really look from a customer-specific standpoint. Think about the technology of the smart connected truck all the way through the entire ecosystem. Efficiency certainly is something in a same-store sales environment, we're looking to drive. But I think what I'm really excited about is the transparency and the amount of data that we have between Mike shop and our shop to be able to make really good total cost of operations decisions versus just efficiency. And that's where I think the lift is going to come from.

Super. And my follow-up, Jim, I'm wondering if you could just talk about the opportunity from landfills closing in the Northeast that you spoke to? It sounds like unit profitability per ton disposed is triple when the industry handles it via rail. Can you just comment? Is that where the profit pool looks like? And how much more incremental volumes could flow to from a disposal standpoint based on the range of closure scenarios over the next 10 years that you laid out on the slide.

So John might be able to answer that better than me. But I would tell you that I don't have an exact number in terms of the tons, Jerry. But as both of us discussed, I do think there is a differentiation there. I mean, it's inevitable that these sites close, they all close. They have a finite life. And when you look at that chart, you see, wow, there's a lot closing over the next 20 years, and that's an important part of our business. But the waste still comes. John said it several times. I mean the waste still comes, it comes every day, it comes every season. and putting ourselves in a position to actually be the best positioned company is really an opportunity for us. While that chart may appear to be a threat, as I said, it's a huge opportunity if we're the best positioned player. And I think what John talked about, what I talked about a bit tells you that we are the best positioned player. Not only do we have the best positioned assets. We are using technology to make them more efficient. And we have the capital to be able to add to those sites or others might not be able to add to them. So I don't have the exact tons number, but it is definitely an opportunity for us over the next 20 years.

Come to the middle right here, Toni.

Toni Kaplan from Morgan Stanley. I also wanted to ask about the constrained disposal slide. I was wondering if you saw or expect to see significant changes behavioral changes either gradually over time or a step function at some point. What do you think happens in terms of how long this plays out? And have you seen any trends towards alternatives that you're considering or others are bringing up in the industry in terms of alternative disposal methods or trends that you're thinking about?

I'll give it a shot, maybe you can jump in, John. But I'm not sure -- I think -- for the most part, this is going to be transparent to those of us who move waste out of our houses and it gets picked up and go somewhere, and we don't see it ever again. So I think for the most part, it's going to be transparent. Now it may end up going on a rail line. I mean, today, in today's world, it may go to a landfill that's down the street. In tomorrow's world, it may go to a landfill or a recycle center. It may run through a transfer station, whether it's a rail transfer station or a marine transfer station or a traditional truck transportation. But for the most part, I don't know that it really affects behavior because it's so transparent to us.

The one thing I might add, Tony, is I think former hockey player, we used the [indiscernible] skate to where the puck is going to be. I think in terms of the transformation from, as Jim said, used to take a truck to a landfill, now you take a truck to a transfer station. When you think about some of the examples I gave like here in New York City and Pacific Northwest, the planning part to be able to do that is much longer than it would be the traditional migration from a landfill to a transfer station, right? That's really not very disruptive. And to Jim's point, I don't think it's going to be disruptive from a collection standpoint. But the reason why we stood up a team of enterprise network planning experts is to make sure that we're backing up from these milestones when these facilities are going to close and make sure that we're best positioned with not only the asset on the far end, but the network that the connected network in between that and where the waste is generated, and we certainly can tell we're excited about that capability.

I think completely -- sorry, Mike, I was just going to say completely separate from that. we're always trying to encourage people to do the right thing with recycling. So I don't know -- Tara knows the number, but how much PET actually truly gets recycled. A lot of it ends up in our landfills, and we would much prefer both environmentally and economically that go to a recycle center. We could pay more money for it at through cycle Center, and it's better for the environment. So separate from just the fact that landfills are going to close over the next 20 years, we will continue to encourage people to recycle the right way.

And the only thing I was going to add to that, Jim, is I think the capacity that we brought on with the investments we made in sustainability throughput that volume and providing more opportunities for customers to recycle will extend that life of that post-collection asset as well. So I think that whole circularity, we focused on trying to differentiate ourselves with our customers to encourage more recycling. But I think the extension of the capacity online that Terry will talk about later on this morning, we'll extend that for sure.

Go ahead, Tyler.

Tyler Brown, Raymond James. John, quick question. So last Analyst Day, you talked about M100, which I think was about engineering in the middle part of the day. I think you committed to 3% improvement in efficiency. Did you get that, one; two, can you commit to more today? If so, what would that be? And how important will that be to expand margins in collection and disposal over the next, call it, 3 to 5 years.

I know I went back and read the last time. What I would say, Tyler, yes, I'm sure I did. What I would tell you is ultimately -- I mean we talk about efficiency in the same-store sales environment being something we pursue every day. I talked about total cost of operation. M100 is really part of that process discipline that I talked about early on in my presentation. We've augmented that with a lot of tools I mentioned that Marcel mentioned. What I would tell you was when you look at the margin expansion, and the return expansion. That's really the end game there. So we continue to work on efficiency. We have had efficiency gains. But as I tell everybody, we're in the game of being profitable and safe and efficiency is one of the metrics we look at.

I would also say, Tyler, that not all lines of business are created equal when it comes to efficiency. So I talked about the -- and John talked about this transition from rear load to side load. I mean with that comes a really big pop in efficiency, you can pick up a lot more houses with that automated side loader than you can with a rear loader. So you -- and then on the -- mostly on the roll-off line of business, you're getting the benefit of what Marcel talked about. I think the one that has still a pretty significant opportunity is the commercial line of business.

We'll go to this side of the room to Trevor.

Trevor Romeo with William Blair. I really appreciate the presentations today. I had a question about the labor and the turnover stats you mentioned earlier, John, I think, towards record lows. It's great to hear. First, maybe could you talk about wage inflation, what you've seen more recently, if you start to see any moderation from the last few years? And then in terms of turnover being at record lows, when you talk to our survey, your drivers and mechanics, what are some of the biggest factors that they talk about that would influence their decision to stay or leave and how you're performing on those metrics.

Do you want to try that, Kim.

In reverse order? How about that? I'm going to shake it up. So I will say that what we hear from our employees and specifically our technicians and drivers about turnovers, we do now the annual survey that Ron Ward talked about, but we also do 30, 60, 90 and 180 day surveys. And what we hear is what matters most is the person who's in front of them on a daily basis, that manager. And so the programs that we talked about, the leadership development programs are designed to make sure that, that experience is what Jim talked about, that people feel like they belong. And it's the soft skills. I mean, that's what's going to matter most in getting our employees to stay.

What also tell you that the environment everybody works in is important, whether it's the physical environment and a facility, we've invested a lot of money in making sure not that our facilities are always haven't been nice, but we've been very deliberate about making investments to upgrade a lot of these facilities and make sure that they are facilities that we take any one of our family through, and I think that's absolutely part of that equation. I think when you talk about the fleet, which is the biggest part of our population, we've bought almost 6,000 trucks, 5,700 change in the last handful of years. And so we're running a very modernized fleet. And if you think about that as similar to drove a truck 1 million years ago. That's an important environment for those folks. And then you enable a lot of these roles with technology. Tara is going to talk about what we're doing with these recycling facilities, what we've done with landfills in our collection business. The fact that we're modernizing our business model is also drawing a younger demographic into the business, right? So I think it's a combination of a lot of things. But to Kim's point, first and foremost, you could do all that right, but leadership has got to be -- is #1 on that list.

I guess makes me 1.5 million years old, if you drive a truck 1 million years ago.

Probably right now.

Noah Kaye from Oppenheimer. You showed us, John, some really compelling AI-enabled image recognition technology on the front line. First, can you level set for us how widely adopted is that technology today across the collection fleet? Where do you expect it to be in a couple of years in terms of implementation? And then just simply what's the biggest profitable growth opportunity related to that technology as you see it?

So I'm going to start, but I'll start backwards. I'm going to let Mike answer the last part of that question. So I would tell you, when you look at on screen, there is an industrial container on the screen there, that's really not as applicable there because that's more transaction-based. And we have plenty of transparency are going to happen. On the commercial fleet, it's 100% deployed with few exceptions, every transaction that we make, we have the ability to capture the still image or a video. What's more impressive, and Mike will correct me if I'm wrong, but when we first started this got it was probably 10 years ago. We used to have to process roughly half those pictures, give or take. Somebody had a lay eyes on half those pictures. Now I want to say it's a small few percentage point. So you talk about the benefits of we're getting those transactions and we're filtering them automatically. And in very few cases, does a person have to stop what they're doing to make a decision. They get delivered the information and into an automated basis we get this action, we basically get to take action on a very -- we only have to get involved in a very few of those. But to answer your question, it's 100% deployed on our commercial vehicles, and we are deploying it across our automated residential business. And that is not 100%, but pretty...

Yes, we're close on residential, but we've had a lot of maturity on our artificial intelligence around our smart truck technology. That's really been a growth driver as I mentioned in my prepared remarks, about understanding and meeting our customer needs, that information at the moment of truth, when a customer is being serviced is how we're evaluating and rightsizing their customers. We're also making further investments in AI, as I mentioned, around our customer experience and trying to aid in their tools. It's not fully automated by any stretch. In addition to that, we're investing in artificial intelligence around coaching our reps when they talk to customers how they can improve connectivity and be more effective. And then lastly, prioritizing and using AI around our prospects through some technology. How do we get the prospects warmed up and qualified at a more rapid pace. So we're just scratching the surface on the customer experience and sales side. We see continued upside in our ability to meet our customers' needs, but also grow the business as well.

And when we first started this, we actually had -- the drivers had cameras in their trucks. And we task them with taking a picture. And you can imagine, some took 20 and some took 1 a year. So...

They're actually floppy disks when we started.

Polaroids, go Mets.

Other questions Go ahead. Michael Feniger from Bank of America.

Jim, I just wanted to ask you a question. You were talking about the different customers. And when we're talking about the health care side, you laid out the secular thesis there. And you talked about the customers are more consolidated. I'm just curious how you guys think about that economics for those customers compared to maybe the collection disposal side, where you've gotten very strong pricing. Does that shift a little bit, Jim, in terms of pricing versus long-term value because the consolidated customers appreciate your digital offerings and technology, but maybe doesn't have the same pricing characteristics that we see on the collection disposal side. I just love that you comment on it, I just -- if I could squeeze in a second one, if that's okay. I'd love to understand, Jim, you gave a great pie chart and you said, kind of dispelled the notion that you can't do acquisitions that there's still a lot to go after. I am kind of curious with the presentations you guys laid out would we think incremental dollars may be going to these other areas outside of collection disposal because it's kind of more of a bigger pie now to go after.

Yes. I'll kind of answer the second one first. I think possibly, but really, that chart is primarily comprised of solid waste acquisitions. So that $64.5 billion those are solid waste acquisitions. I think the one thing that I didn't mention, Michael, and when I talked about it, is that the old model was, you have somebody that was going to sell their business, and so they'd tell it to you and then they sign a noncompete. And then the day after the non-compete expired, they're back in the business. And they do it 2 or 3x and pretty good business for them. We're not seeing that as much anymore. I think you truly are seeing consolidation. And the reasons are these. One is they don't have succession plans. They're typically private businesses, most of them, the smaller ones, are privately owned family businesses their kids don't want their -- millennials and Gen Zs don't want to run a trash business. They're happy to take the money and move to Lake Como, but they don't want to run the trash business.

Secondly, they're having -- if you think we're having challenges with labor and the shrinking pool, there's are 2x that. And then thirdly, they continue to be exposed to inflation that really is harder for them to defray. So I think there's an opportunity for the truly for the market to consolidate. And then your second question about pricing. Look, I think we've kind of slow played pricing a little bit. We're getting the ERP rolled out. We want to make sure that -- because some of the -- really, when we hear complaints. And we do hear complaints from the Stericycle customers. It's not about service. It's about the billing system. And okay, I haven't gotten the bill for 3 months or whatever. And so Davina and Gyome and that team are really working on that to iron that out. And I think we'll have that ironed out. And then I feel like we can -- we've got some customers out there that haven't had a price increase in 3 years. And -- but now is not the right time to price increase them. I want to get the ERP really kind of fully fixed and then we can price them at market.

I would add to that, though, Jim, and you'll hear more from Ralph about the opportunities to grow volume and price. I mentioned in my prepared remarks around the addressable market. And that's just share of wallet is $2.5 billion of revenue. It's split close to 50-50 between legacy WMC and WM Healthcare Solutions. So that volume opportunity is out there. I do think we want to make sure we have an appropriate customer experience, and we have a go-to-market strategy that I talked about, but we have a very sophisticated pricing team. And ultimately, we're going to work on customer lifetime value metrics. Once we get a little bit more familiar with the data. And eventually, we'll have a growth platform that will be both price and volume. But right now, we've seen some growth in -- if I think about the cross-sell that I mentioned, the $30 million, it's about 70% core WM growth and 30% of WM Healthcare. So that share of wallet and connecting the brands together is quite powerful. I think we want to take our time and make sure we use the data and analytics that we're proud of and put that to work.

We have time for 1 more question before we go to the break right over here.

[indiscernible] from Nordea Asset Management. I'll also attend to 2 questions. The first one is regarding your renewable natural gas business. Just wanted to ask from the 80% that you capture and redirect to beneficial use, how much of that actually is pipeline quality gas. Just to get a little bit of an idea that type of opportunity, how big a part of the whole it is? And the second one, just real quick on the recycling part of your business. If you could tell us a bit about how the payback periods and the returns profile compares to your core business that would also be really helpful.

[ Terry ], do you want to offline answer those.

Yes. So what we'll do, we have a presentation later in the program that's going to cover more of those topics and a Q&A that follows that. So we'll make sure to get you the microphone early in that next session. Okay. So I think to stay on time, we're going to go ahead and take a 10-minute break here. So we're going to come back about 10.25 to resume. So thank you to our first presenters.

[Break]

If everyone can start making their way back to their tables, we're going to get started here in another minute. So if you can please make your way back tables so we can continue. So we're about to get started. If everyone can please take your speed. All right. Welcome back. We've had a great start the program, and we're looking forward to continuing into the back half of the presentation. So I'm going to welcome to the stage Tara Hemmer, our Chief Sustainability Officer.

It's always hard to wrangle people after a break. So I appreciate you getting back in your seats. I'm Tara Hemmer, our Chief Sustainability Officer. I started my career with WM in Brooklyn about 27 years ago and have been in a variety of operations roles. And then 4 years ago, had the great privilege to become the company's first Chief Sustainability Officer. And I want to start with that because 6 years ago, Jim Fish stood in this very room and said that there was no clear leader in the sustainability space, but we were going to clean that space.

And I think you've heard a bit already from Jim, John, Mike and Tim, how sustainability is embedded in what we do. And we're proud that we have clearly claimed the sustainability space for the industry and beyond. So we want to walk you through some of the key themes that we're going to cover today. First and foremost, -- we are growing our company through sustainability. And at the same time, we're operating the company with sustainability in mind. We also have a really strong commitment to sustainability and innovation. They go hand-in-hand, and they're going to help us with broader secular trends and how we're able to respond to them and turn those into opportunities for us. We have a rich history of investing in sustainability, and we have this platform of renewable natural gas investments and recycling investments. We're making great progress on those. So I'll touch on that today.

And then finally, we've learned an awful lot about how we can take those investments that we've made and apply some of that to future materials that are incredibly important to our customers and our great growth opportunities for WM. At the end of the day, all of this focus is going to help us fuel growth in our core business. also help us fuel growth in WM Healthcare solutions and ultimately unlock new business lines for growth. So by now, I hope you get the picture. Sustainability really is embedded in our DNA. It's who we are. And we have bold ambitions for the future. materials repurposed, energy is renewable and communities are thriving. These aren't just fine words. They are how we operate and grow the company. You heard from Mike Watson about our broader brand promise and how it's synonymous with sustainability, also how we go to market with our customers. You heard from John about some of our operational imperatives.

6 years ago, over -- really over the past 6 years, we've delivered over 4,000 compressed natural gas trucks to our fleet, and we operate the largest low-emission fleet in North America. No one touches us. in this space. And we can use that fleet to help with our renewable energy business. This is really what we do and how we do it. And we're also driving broader shareholder value through all of it. So what does it look like when we bring this to life for our customers? Well, our customers are asking us for solutions, not just for today, but for tomorrow. And Mike touched on some of this earlier. They're asking us to really look at new material streams, whether it's food waste or biosolids or increasingly hazardous and industrial materials, and we're certainly expecting more of that with reshoring that might be happening over the next several years. At the same time, we also have a large national accounts platform and a lot of customers who are coming to us and knocking on our door to manage more materials. A great example, we had a large national retailer that several years ago, we handled 2 material streams for them, trash and cardboard. And we did about $20 million in revenue with them.

Fast forward, we now manage 10 different material streams with them. That goes to pharmaceutical waste, it's film, it's construction and demolition debris, and we're now generating over $200 million in revenue. This is really taking our deep competencies in materials management and figuring out ways to unlock opportunities with our customers. At the end of the day, though, we're really all started for WM is with recycling. So on the recycling side, we have been innovators for decades. We started single-stream recycling over 20 years ago, and we're not stopping there. We know we have long-term drivers on our side. So I want to talk to you about 2 key trends and themes that are really driving and propelling the industry forward. The first is there are regulatory requirements across the U.S. and Canada that are really generating more inbound materials, not just today but in the future for WM. And we also need to help our customers with that.

We have 7 states that have passed extended producer responsibility legislation. And the interesting thing in Canada, where we operate. Over 95% of the population is covered by extended producer responsibility. That means more material is going to be captured and needs to go through recycling facilities. Well, our recycling investments, over half of them are in states or provinces and territories that have extended producer responsibility in play. And so we're really well positioned for that. And our automation investments, all of that technology that we're putting in place and have put in place can handle more materials and different material types. The other thing that's going on is so many of our customers really are looking for circularity solutions. And what does that look like? Well, they want materials to go out their backdoor and end up on their front shelves. And we're doing that with our broader national account platform. How can we get them materials so they can meet minimum content legislation in certain states where they operate.

Again, our WM recycling facilities are the front door for circularity solutions. And we are making great progress. I want to walk you through what some of our automation investments are unlocking not just for WM but for our customers. The first thing that we did is we worked on automating our existing facilities. And when we do that, there's a couple of key things that happen. First and foremost, these are really hard to source facilities for labor. And so we're using technology to upgrade that and we're able to reduce our labor costs by 30% to 35%. We also are able to generate much cleaner material and more of it. And when we do that, we command a higher price for the commodities that we sell. And then the last thing we do, not just in our automated facilities, but also in facilities that we're building in new markets like in Fort Walton Beach, Florida or Portland, Oregon or now in Canada is we're generating a heck of a lot more capacity.

And I know someone asked a question earlier about behavioral trends and what might be happening with material streams. Well, if we get more people to recycle and legislation is on our side, we're going to be really well positioned to capture that and grow our broader core customer base. And then as Devina always likes to say, when you put all this together, what does it mean for margins and our shareholders? Well, we've demonstrated that we've been able to double our margins at our automated recycling facilities when we put all these pieces together. This is fantastic for our customers, but also fantastic for our shareholders.

It's one thing to talk about it. And now I want to show you a little bit about it and to tee up a minium mount to show. We have a facility in Elkridge, Maryland which serves the Baltimore and D.C. regions. We built this facility 20 years ago. has handled over its history over 3.5 million tonnes of material, the largest in our network. And if you could queue up the video, as you can imagine, our old facility, we had a heck of a lot of people, over [ 100 ] in the facility sorting material. Fast forward, once we've automated our facility, we have over a mile of conveyor belts. You're seeing an optical corner here, over [ 22 ] of those. And this is a bit of a visible of what an optical sorter does. It looks for material and blows that material into bunkers. We create much cleaner material when we do this, and you can see the quality right here, and we're able to sell that at a higher price point. I leave you with 1 thing. This is innovation in action. But we're not done yet. We have more room to run in the recycling space, and it really comes from 4 key areas.

The first is just like we have white space in the core solid waste business. We also have white space in the recycling business. And there are new geographies where we can enter. You heard me say earlier, we built a new facility in Portland, Oregon, and we had core solan waves there. There are other locations like that. We also have the opportunity to expand into new materials. So no secret. If you go in your home today, you have a lot more film and flexibles. And all of those CPG companies are looking for solutions for those materials. Our technology can work on any material type, and we can use AI in the future to do that. Policy changes are a huge driver for us. And we're hand-in-hand with regulators at every state level, working with them not just on extended producer responsibility, but also advocating for minimum content legislation, which is going to drive and fuel stronger demand.

And then finally, with the largest national accounts customer base in the network, all of them are prime for new materials. And we're doing this today. I hope all of you use trash bags in your homes. And maybe some of you use [ Glad ]. We're actively working with them where we're taking film from back docs, pelletizing it and giving it to them so they can have a certain portion of material in the trash bags that you use at home. This is really WM being positioned for growth in our core business through our leadership in recycling. So if recycling for us was the first frontier, we have some new frontiers ahead. And one of them is food waste. And food waste is really going to be driven by where you are located in the country or also in Canada. And I want to give you 2 examples of how this is coming to life.

The first in California. California passed legislation a couple of years ago, which was really designed to fight methane pollution and required municipalities to divert food waste from landfills. WM has really strong public sector contracts throughout the State of California. And we knew we needed to help find solutions so that we could be a true partner with our customers there. And one of the things that we did is we built out a broad landscape of composting facilities across the state. Some of those are co-located at our landfills and some of them are stand-alone. The one on the page was a purpose-built facility in Pala. And we now have over 50,000 tons of capacity that we can use to help those broader public sector customers. Canada, on the other hand, they have had taxes on landfills for quite some time, but they also passed legislation requiring residential and commercial customers to recycled food waste.

And one of the things that we were able to do in Quebec in that region was billed and we're under construction today. a brand-new anaerobic digester that's co-located at our St. Sofie landfill and also our St. Sofie renewable natural gas facility. I think you get the sense that here's how we're helping our customers, but we're also able to pull together our unique assets in a way that differentiates WM in the marketplace. So if you can't recycle it, and you can't compost it or turn food waste into new things, our material does go to landfills. And we have the largest network in North America. But we know that we can extract value from the material that goes into those facilities and create renewable energy. So I want to take a moment to just remind everyone in the room.

There is no other company like WM that is vertically integrated in this space. We have 3 key ingredients that no one else has. The first is we have decades of experience building renewable energy facilities. We've been doing it for over 30 years. It started taking landfill gas and converting it to renewable electricity. And then we were on the forefront of taking that landfill gas and converting it to renewable natural gas. The second, and it's been touched on before, with the largest fleet of compressed natural gas vehicles in North America, we are uniquely positioned to take that fleet and allocate it to the renewable natural gas that we generate to generate RINs and not give up the value. And then finally, the largest network of landfills. It's not just about how many landfills we have, but you've seen some of the technology at play where we're able to capture more landfill gas and put it to use in our renewable energy plants.

The other thing that we've done is we have been very intentional about preserving optionality. We can use our gas to drive electricity, and we did that for decades. But the better option today the better economic option is to generate renewable natural gas, and that's what we're doing. And then when we put all this together, we're able to drive unparalleled shareholder value. This is the highest return on invested capital business in WM's network, the highest. Recycling, by the way, is the third highest. So 2 of our highest return on invested capital businesses are in the sustainability space. And we're also able to drive environmental value. So yes, your trash yesterday could fuel your recycling truck? Or as Devina and I talk about yesterday's trash is tomorrow's cash. We're making great progress on our renewable natural gas journey. And the important thing that I want you to take away is we are delivering on what we said we would having our 20 facilities online and generating close to $500 million in EBITDA by 2027.

And at the same time, they're driving very strong free cash flow that can be returned either to shareholders or to generate new investments inside the core business. This really is a flywheel that reconnects to what we're doing across the network. And then we're also driving strong environmental value. This business helped save over 180 million gallons of diesel fuel every year. And from the sell side analysts in the room, I mean, we want you to come visit us, but not 20,000 round trips worth between JFK and Houston, but a huge, huge visual of the environmental value that we're driving. So I want to take you through a quick case study on our Fairless RNG facility.

If you can queue the video, Fairless is our largest landfill in our network and is within 30 miles of Philadelphia, and also within 100 miles of this facility is over 30 million people. Crown jewel of our network and building an RNG plant has really helped us deliver on landfill expansions and also being viewed as a community energy partner. This is something that we're looking to do in future plans and projects moving forward. So probably the question I get asked the most when I meet with people is really around the fact that we're building this renewable energy business inside a waste company, and that looks a little bit different from a risk perspective. I want you to know we have experience doing this with our recycling business, and we're going to continue to take a disciplined approach when you look at our renewable energy business.

First and foremost, we have the ability to access both the transportation market through our fleet and that will represent roughly 45% of our offtake and then the balance in the voluntary market. And when we do that, we're going to do it with credible counterparties that have strong balance sheets, and we know that we can access them. We also are going to make sure that we take a dollar cost averaging approach and make the best decision for WM and our shareholders. And in the middle, what you're seeing here is we've demonstrated that we can do offtake in different tranches.

So 2025, we have over 80% of our offtake locked up at over $31 per [indiscernible] And if you roll forward a couple of years, very close to our investment thesis on the voluntary market numbers that we had put out there at $26. But we also knew that the transportation market should be higher. So we're feeling very confident. Finally, we have more room to go when you think about future investments. About 65% of our landfill gas will be beneficially used leaving 35% as opportunity moving forward. And not all of that will be developable but we are actively looking at what comes next in this space. We did our richest projects first, and we have more that we can do, but we're going to look at 5 key things.

What does the regulatory environment look like. We got some positive news about 2 weeks ago with the renewable volume obligation that EPA came out with. And so it does look constructive for more renewable natural gas moving forward. We have the ability to do other things with our gas if there's policy changes related to electricity. We're also looking at the capital cost. We saw a run-up of capital costs coming out of COVID and how can we reduce our overall capital intensity when we build these plants. There's future pathways related to carbon sequestration. We're actively looking at that. And then we don't have to do these ourselves. We could collaborate with others.

The one thing I want you to take away from this, though, is the discipline that we put in place when we made investment decisions on the first 20 will be applied to anything we do in the future. And so wrapping it up, I hope you have taken away that sustainability truly is a growth lever for WM. We have the best team. We have the best assets in the network. And we are well positioned to build sustainable solutions for our customers and shareholders today and in the future. With that, I'm going to turn it over to my colleague, Rafa Carasco, and thank you.

Okay. Thank you, Tara. Good morning, everybody. My name is Rafa Carasco. I'm Senior Vice President for Strategy at WM. I'm also the President of WM Healthcare Solutions. Just celebrated my ninth anniversary with the company last week. So still makes me the rookie by far amongst all the presenters. You heard all the numbers [ 20, 30 ], all that.

But I've had a number of roles with the company. I've led our Canadian businesses, the greater Mid-Atlantic business, including the operations here in New York. And then I led the eastern half of North America as well before taking on -- this new role really excited to be here with you today to share with you that after 8 months of owning the Stericycle business, what we call now WMHS or [indiscernible] Healthcare Solutions, we have a really good understanding of what the business is going to do and where we want to take it. We're excited about it, and we think you're going to share our enthusiasm moving forward. So let's dive right into it. Why are we so excited?

Well, we can first start with the secular trends. I know it's not an exciting topic to talk about, but we're all getting older on the average. We're going to need more medical care -- in addition to that, medical procedures are on the rise. They're now back to pre-pandemic levels. There's a huge backlog of them to kind of work through as well. So if you couple that with our network of assets. We have a unique platform from which to pursue growth there. But it's not just about the trends and the assets, right? You need the right combination of capabilities and competencies in order to really extract value and WM has those, right? We have the right processes, the right technology, we have the right culture from which to build a really good business here.

In fact, for over the last 10 years, we've been actually leveraging those same attributes in service of our solid waste and our sustainability businesses to fuel growth. And those are transferable to this business segment. We're very confident of that. In fact, so confident that -- that's what led us to double the synergy estimates on the cost side to $250 million. And then last but not least, we are incredibly excited. We love the cross-sell opportunities here. We've already validated cross-sell synergies that are going to aggregate meaningfully beyond that $250 million number I just gave you.

But in order to really build your excitement for you to understand where we're coming from, I think you need to understand our network. And One of the key reasons why WM has become the leading provider or the living service provider in a solid waste space is really our unparalleled network of assets. And in particular, that moat that you heard Jim talk about that is provided by our landfills and our transfer stations. So in keeping with that advantage, what should stand out from an admittedly busy slide there is that impressive footprint and that comprehensive coverage that the healthcare solutions network provides. That type of scale and what that can do to provide ease of doing business for our customers, is really an undisputable competitive advantage. If you were to overlay that with our own WM network of assets, you get a really impressive visual of that type of scale and reach.

In fact, I think one of Jim's slides had it tucked away somewhere -- it was really dense. There was a lot of dots over the place. That's why I didn't want to do it in this slide. In this -- instead, what I chose to do is kind of showcase for you that we now also have a pretty robust network of assets in the U.K. and Ireland from which -- and we also have some business in Western Europe, by the way, from which we can grow this business. And also it gives us, I said it before, a little bit of a perch from which to evaluate kind of what the solid and industrial waste businesses are doing in that part of the world. No plans yet, but it's a good approach to have.

So look, the key message here is, once again, that size, that scale, what we can provide in terms of ease of doing business, that's what allows us to boast the most extensive portfolio of customers in the industry. So I think it makes sense to look at that network from the perspective of the customer. And a quick reminder, right, while WMHS is a specialty waste solutions provider. We do have a pretty diverse array of customers. They range everywhere from regional and national hospital networks, acute health care centers, pharma companies, labs, you name it. all the way through to nursing homes and funeral homes, schools, offices, this doesn't strike me as a body yard fan kind of audience, but 2 powers, for example, as well, irrespective of that, that waste generation that journey of waste generation from collection all the way to responsible disposal is really made seamless by that integrated network. Those customers produce a wide variety of waste streams.

All of them take different pathways throughout our network. Trace chemotherapy, for example, will require incineration I'll take 1 pathway, sharps and standard medical waste will require autoclaving and then eventually make its way to our network of landfills, different pathway. And then in turn, sensitive documents that require destruction, they'll go to our plants, they'll get shredded and then eventually to our facilities to get recycled. One of the things to keep in mind, I didn't call it out in the slide, but I think it's an important element is that for those customers that have more complex regulatory compliance requirements, we do bring to bear the largest cohort of in-hospital service technicians in the industry, 1,200 strong. And these folks are folks that are inside the 4 walls of our customers day in and day out, problem solving with them, and in many cases, understand the needs and one of the customer even before they do.

So we plan on leveraging those folks a lot more in the future. Ultimately, our customers tell us that it is that integration, all the way from collection, all the way to disposal. And the visibility that we can provide in the midst of that, that makes us the preferred choice. That is why we enjoy by far, the most market share in the industry, and we have the most customers. So with that in mind and that extensive network of customers, we are really in prime position to take advantage of the secular trends that Jim talked about, that are into with -- what you see behind you in the slide is really 3 data sets of many that you can find out there that are suggesting economically and demographically that there's growth in this industry moving forward.

The one that stands out the most to me is that change in U.S. occupancy -- hospital occupancy rate, right? And think about that in terms of hospital beds and in particular, hospital bed days. Every hospital bed day means more volume generated into our waste network, right? And I've now been to hospitals a lot this year and thankfully not as a patient, as a vendor. But I'm always impressed when I go in the amount of construction that's taking place. And when I ask the question, what's happening here, the answer is always the same. We're building wings so we can add beds, so we can get more patients through the door. Perhaps nowhere is that more pointed that in the U.K., where there is a staggering 7 million medical procedures on backlog since the pandemic. And as much as they're gaining on beds, they just can't keep up.

So the growth is real, it's undeniable and it's here to stay for a long, long time. I'm purposely moving kind of quickly through the secular trends supporting the growth of the industry because, frankly, they're not new, right? It's clear there's tailwinds for the industry. We have the largest network. We have the largest portfolio of customers. So we're in prime position to really gain more than our fair share of growth from the industry. So why hasn't it happened, right? Why has the legacy Stericycle business not been able to grow in the last few years?

Well, I want to submit to you that some business opportunities are too big or they may come along too soon in the development of a company. It's not enough to have the largest and most comprehensive disposal network. If you don't have the right logistics service delivery model to actually optimize the work. and you can have the largest pool of customers. But if you don't have the right sales coverage and customer experience platform, how do you capture and retain those customers. And if you're lucky enough to actually have both of them and you have -- you enjoy that premier market position that, that provides, well, you need to write pricing discipline in order to be able to ensure the quality of the revenue into the future. And then, of course, you need the right leadership, you need a leadership of accountability, a people-first leadership that's going to drive results. So is the right owner for the business.

We have all those strengths disciplines and processes I just talked about being required to grow the business. And any results that you have seen in the past are really not indicative of the potential of this business. I'm really excited about the synergies. I'm going to talk about them here in a second. But what I'm really excited about is that combination of the strengths of WM with the strengths of the Stericycle business to really unlock the full potential of the business moving forward. So I'm going to spend a little time kind of illustrating for you what I mean by unlocking the full potential. And I'm going to ask you to kind of bear with me here. I'm going to take you a little bit into the weeds by offering you 4 specific examples of how 1 overlays strength over strength here in this situation.

So we start with the Healthcare Solutions business having a pretty robust and full suite of medical compliance and document destruction services that are pretty well ingrained into our customer base. Well, now we're going to be able to grab those tools and analytics that Mike talked about that have propelled our national accounts business to double-digit CAGR and lay them over that providing a new suite of services for those same customers. It turns out that those large hospital networks and those sophisticated national customers in the Healthcare Solutions business, that's exactly what they want as well. And so I've actually already told you I've been to hospitals quite a few times.

When I sit across the table from hospital administrators and hospital operators. And I talked to them about this suite of tools, they're all very excited. They're wondering when we -- they can get them. and they want them because they want to understand their waste generation and they want to pursue their sustainability goals. In fact, interesting point that kind of levers or pulls on what Taro was talking about, about the horizons for recycling. The health care space enjoys very low penetration on recycling. And I'm not talking about recycling IV bags. I'm talking about just plain old recycling. So on the operations front, those same disciplines that John talked about that have enabled the adoption of technology that yielded 220 basis points in margin increase for the base business. They're already paying dividends in the WMHS business, we've seen the on-time delivery of performance improved month after month of this year, even as we have reduced the size of the fleet by more than 300 units, plenty of opportunity to continue to do that in that business.

On the sales side, we've begun to optimize the sales coverage for the business. We've already done that, by the way. We have experience doing it on the core business. And we started with the shredded business. where we now have a reduced sales workforce that has better tools and is generating more leads and enjoying a closer -- better closing rates for them. And then lastly, something you've heard us refer to in the past, which is that notion of a digital contract data mart. And that is an enabler for customer lifetime value. Well, now we're going to be able to overlay those processes and that technology to our WM Healthcare Solutions businesses. We estimate at this point that there's about $2 million a year in pricing opportunities that have been missed or miscalculated in the past. It's going to take us a little bit of time to get our customer base used to the cadence of price increases, but the early results are very encouraging.

And so we have the route foundation of competencies and capabilities. We know that to build the business into the future. But I'm also really excited to talk to you about our cross-sell synergies. We've validated those now. Mike talked about the $2.5 billion total addressable market. I won't spend too much time there. What I really want you to take away from this slide, though, is that those very disciplines and processes that I talked about is building box in the future, those are the elements that we're going to build our cross-sell strategy on and excited to share with you that using that disciplined growth, leveraging that brand, those data and analytics tools and then sales coverage, we now estimate that we're going to be producing $50 million in incremental EBITDA from cross-sell during that 3-year horizon. That's in addition to the $250 million in cost synergies for a total of $300 million.

Most exciting, though, is that we see that cross-sell opportunity in year 4 and beyond extending well into the future. So this isn't a question of a business that's cutting its way for profitability to profitability. It is a long runway ahead of us. I wanted to bring to live real quick, the cross-sell opportunity with an example of a large hospital network in the Carolinas. It was entirely a customer pool, which I think is indicative of the power of the combined value proposition of the 2 companies. Without having a concerted strategy to go to market yet fully developed, we were able to put together elements of both platforms. So that alludes to that 1 solution that is -- it was in Mike's presentation that removes the friction from doing business with the customer. and leveraging that disciplined growth and that analytics reporting the brand and then providing efficient service through 1 single provider. That was the winning formula for this. particular network, and it's going to be the foundation of us moving forward. We were able to add significant revenue on a solid waste front while securing the Healthcare Solutions revenue and enhancing the quality of that revenue as well.

So look, all that revenue from synergies is exciting in and of itself, right? But we're also really happy with the progress we're making on delivering on cost synergies, those $250 million, I say it a lot because it's important that we are committed to. We are executing really well in internalizing the waste flow using our network optimization tools. We've added the McCarran incinerator to the network. We are taking costs out of the business through fleet rationalization, through route densification. We're putting technology in the hands of our in-hospital service technicians. But importantly, and this is something that will I hope resonate with this group, in particular, it is that SG&A discipline that is helping us provide the early results as well. So when you combine all those 4, we are now tracking to the upper limit of that 2025 target synergy capture of $80 million to $100 million. That's driving better operating margins for the business.

And importantly, it's lowering SG&A, our SG&A as a percent of revenue to the lowest levels that, that legacy business has seen in 10 years. So we are now approaching 20. We will soon be under that and headed down towards those long-term goals that Jim has talked about. Importantly, though, we're integrating methodically, right? And so that ever important cultural assimilation in these large integrations is going well. We have the Stericycle personnel continuing to welcome our people for his leadership. There's legitimate excitement about welcoming the transition and integration of the Healthcare Solutions business into our existing framework of 16 areas. That's going to allow us to embed and drive accountability of the business lower into the organization and it's going to fuel disciplined growth.

So it's a great start with a lot of work yet to be done, but a lot to be excited about, which brings us to the conclusion. And so beyond the $250 million in cost synergies that we're tracking so well to deliver and the $50 million in sales synergies that have runway to become much more. That total $300 million. Beyond that, what I hope comes through is that excitement that we have as a unit here about the long-term future of this business. To put it very simply, I would say that the make of this business a resounding success, all we have to do is what we already do very well. So what my colleagues talked about we've been doing for the last 5 years. We're going to do it for the next 10 and we're going to be the leader in this segment of the business for many years to come. With that, thank you, I'm going to hand it over to Devina who will bring us home like only she can.

Thank you all. So for those of you who I don't know, I'm Devina Rankin, the Chief Financial Officer of the organization had the privilege to be part of this great company. Over 22 years and in this role for almost 9, which is hard for me to believe. I can tell you that when we stood on this stage, in this room with many of you talking about the great story WM had to share in 2019, our stock was trading at about $110. Today, we're at over $230.

And what I'm here today to tell you is there's plenty of room to grow from here. And we're excited to take what you've heard this morning about the strategy and taking that strategy moving it into execution and then taking the execution and driving results. So the things that I hope to share with you are: one, the multiyear track record. The multiyear track record will represent to you why you can trust that when we say we will do something, we will execute. We will display to you that in 2019 when we set out targets, we thought that those targets were stretched targets. And what we're going to show you is we didn't just deliver we exceeded expectations. Beyond that track record, we're going to show you our commitment to creating ongoing long-term shareholder value.

You've heard things like people first, results are oriented, disciplined capital allocation, focus on sustainability as a platform for growth. All of those things are going to come together to drive shareholder value. And what underpins this is a commitment to disciplined capital allocation. We are an organization today that understands capital allocation in a way that we didn't when I was the Treasurer -- and I am -- I recall very specifically that year-end 2012 of $829 million of free cash flow. We've meaningfully eclipsed what we even thought was possible. But it's not just about generating the cash, it's about how we spend it. And so I hope to tell you that we have the same commitment today to with discipline as we did 6 years ago, and we're going to continue to generate outsized returns in the years ahead.

So that track record I mentioned -- the page really does speak for itself, but I want to pause here because when we look at really 2 figures on this page that stand out, it is that compounded annual growth rate for both EBITDA and free cash flow. 9% EBITDA growth in the 3-year period, 13% free cash flow growth in that same period. Our focus at WM is taking every dollar we earn from our customers by working hard every day. Those 60,000 team members on the front line are serving our customers relentlessly with a focus on doing what's right for them and doing what's right for the environment. We take very seriously our responsibility to convert more and more of those revenue dollars to the bottom line through efficiency.

And then ensuring that we convert more of that to free cash flow is equally important. We do that through capital discipline, having the best balance sheet that we can possibly have and ensuring that we're intentional about tax strategy. I'll get into some of the impacts of taxes in a moment, but I think it's important to point out that in this 3-year period, we did, in fact, convert more of our EBITDA dollars to free cash flow. So the growth rate of the 2 is quite impressive. So as I move on to what's next and how do we look to the future using the past as an indication of what we can achieve I thought it was worth repeating the part of the slide that Jim showed you earlier that showcased our total shareholder return in the last decade. It really is quite remarkable.

So you look at this page and see 476% growth in a 10-year period. We're not done. And what I want to ask you to do is focus on the bottom half of this page because what the bottom half of this page does is it tells us how we got there. We got there through hard work determination, focus and execution and delivering 6% revenue growth, 320 basis points in margin expansion and 7.6% growth in operating EBITDA. Impressive numbers, right, guys, guess what, they're going to get better. So when I turn to the next page, what's really important for me is to focus on our balance sheet. And I appreciate the fact that there's -- we've got some of our rating agency partners in the room some of our banking partners.

And I can tell you that my team and I really think about the balance sheet as the foundation off of which all else is possible. WM has a great foundation. We have the best credit ratings in the industry. They're hard earned, and part of that is certainly our scale, but it's also our discipline. We also have tremendous liquidity and a maturity profile that provides strategic flexibility. Those things are important because when you look at the bottom part of the page, you certainly see that our leverage is currently elevated. That leverage is elevated because we funded the Stericycle acquisition, which you just heard Rafa speak to in terms of how important this is as an investment and the value that we will create out of this investment for the long term.

I want to remind everyone, when we announced this transaction that we mentioned that we expect the return on investment from the Stericycle acquisition to exceed the return on investment from the ADS acquisition by 150 basis points. So this elevated leverage that we took in order to fund the transaction was for good reason and good purpose, and we're going to quickly work our way down to targeted leverage. And this time next year, I expect that you'll see us in our targeted range of 2.5 to 3x. So how do we use our capital if our balance sheet is the foundation, capital allocation is kind of the house, where we live every day and how we navigate as a family because at WM, we truly are a family. I couldn't love more that you guys are surrounded by the best and brightest that this organization has to offer.

You're seeing how great our talent is. [indiscernible] talent has a lot of things that they want to invest capital in because they're really excited about what we can do for our customers and our communities. And what we do with purpose is we think about how that capital should be deployed on behalf of our shareholders. What's important is you see the 4 items on the page, #1 and 2 are not in order of importance. They are equally important to us. It is equally important to WM that we provide a long-term sustainable increase in the dividend. It's also important for us that we grow organically and reinvest in the future. You heard Tara talk about the fact that our sustainability growth investments are the number 1 and number three, return on invested capital in our entire portfolio.

So taking the shareholders' dollars and investing them in those high-return capital investment opportunities was absolutely the right thing to do, and we will continue to look for places to grow, expand and develop our business through innovation. Then beyond that, once we've taken care of the dividend and we've taken care of that strong organic reinvestment -- we focus on M&A. And we've talked a lot about the Stericycle acquisition today, and I'm going to give you kind of a 1 pager that outlines how we think about M&A strategy here in a moment. But we will be focused and disciplined. Those are the 2 words that you hear over and over from us. Share repurchases is really what gets -- where the money goes once we've done everything else.

So every other thing that we have covered is that important to us and allocating our capital is covered. And we think that WM is a buy, which we do, that's when we will start repurchasing our shares, and I'll get to share buyback in a moment. But what I want to ask you to focus on for a minute is the right-hand part of this page. And it is about driving industry-leading returns because everything I just mentioned comes to that. We have the best cost of capital in the business, but we also have the very best return on investment. And it's not even close when you look at the competition. And we will continue to prioritize making investments to have a return on invested capital spread above and beyond our cost of capital that shows the discipline of this business, but also emphasizes growth.

So the strategic criteria for M&A, this page looks virtually identical to what it did when I presented it in 2019. And when you read through this criteria, what you'll see is it very clearly says why we've done the deals that we've done for the WM shareholder. We look to extend our core competencies. We're a logistics company that focuses on collections and disposal. We evaluate our core competencies in order to determine whether or not those core competencies can extend the effectiveness, the value creation of the targets that we look to acquire. And I got to tell you, what you heard from Rafa is check, check. There's a lot that we can do to emphasize the value of the Stericycle acquisition so that the whole will clearly be greater than the sum of its parts. The dividend track record is one that I'm particularly proud of. When I was the Assistant Treasurer, we very intentionally moved from a dividend yield focus to a dividend payout ratio focus. It's one of the things that I remember having a good conversation with David Steiner about at the time.

And what I can tell you is that what that did for us is create something that was repeatable and sustainable, an 8% CAGR over the past 10 years and the dividend growth is remarkable and there's more room to go. From a share buyback perspective, we are currently on hold with respect to share repurchases as we delever. We're allocating cash to sustainability growth investments to tuck-in acquisitions and somewhat to reducing our leverage and getting the balance sheet back to targeted levels. Again, we'll be back at that target by this time next year. So this is the money slide. And what you've probably all been waiting for I can tell you, it's really exciting.

And as I mentioned earlier, it goes above and beyond what we created in the last 3 years. So establishing these new targets not for current year, but really establishing long-term targets that speak to the confidence that we have in terms of creating growth for this business in the 3-year period ahead, and that growth will be remarkable. We're talking about approaching almost $29 billion at the midpoint in revenue, $9 billion in EBITDA and over $4 billion in free cash flow by 2027. So what's that growth rate on revenue look like? It really is very exciting. And what you can see here, it's more than 9% in the 3-year period. Certainly, some of this, while it will feel like there's an organic piece in an inorganic piece, it's really important to know that so much of this is organic. And certainly, the Healthcare Solutions piece will have an inorganic piece when you move from 2024 to 2025. But the rest of this, we are focused on organic growth and the sustainability growth investments are really the exclamation point that you see on the page.

In the 2019 process, when we were coming together and saying, this is the first time in over a decade that the company has put forth long-term growth targets. We talked about how to come up with or establish the right revenue growth outlook for the business. And we talked about the magic math at the time being [ 2 plus 2 or 3 plus 3 ], 2% yield, 2% volume and 3% yield or 3% volume. And we executed well on those dynamics. But what you've heard from us today is more disciplined growth and more focused growth that is balanced between price and volume, the right volume and the right volume gives us license to get the right price.

The Healthcare Solutions business, I know we'll talk more about likely in Q&A. But what you see here is an expectation that, that revenue will grow at or above the core solid waste top line growth in this 3-year period, and that goes to the cross-sell opportunities that have been mentioned, but it also goes to our discipline and our ability to use our discipline in price and disciplined volume for the foreseeable future. So operating EBITDA, we always say is our long pole in the tent. And what you see here is 11% and compounded annual growth over this 3-year period in that figure. It is a tremendous pathway, but we know it is something that we are set to accomplish. it's going to take margin expansion.

We've talked about margin expansion coming from a combination of price growth and core execution in efficiency in the middle of the P&L. You've heard in particular from John about how we're going to drive efficiency through technology, how we're going to ensure that we take the technology and drive the safety of our employees, but also make them even more productive as a workforce tomorrow than they are today. And that is one of the things that will continue to unlock continued expansion in those EBITDA margins for this 3-year period. And then free cash flow, 8% was the CAGR I mentioned on dividend growth. And so what you see here is that we expect in the next 3 years to again have about 8% free cash flow growth on an annual basis. Another great outcome. I want to emphasize for folks because you may have a natural question, okay, tell me how that 11% and the -- and the 8% relate to one another. It's the same question that we had when we did the math.

It's really easy to say, it's taxes guys, and I'm going to let Ed and Heather answer those questions for you in more specificity. But it has to do with the impacts of the investment tax credits that we got on the sustainability businesses. We're removing the sustainability capital from these figures, but we're not removing the sustainability, EBITDA and tax impacts. And so that's what you're seeing here. But 8% is a fantastic result, and that will translate into continued investment in the business, continued growth in the dividend and strategic M&A.

So wrapping things up. I have to tell you as a proud member of this team for the last 22-plus years I have been at WM all these years because I love our people, and I love our mission. I love our focus on serving our communities and keeping our communities clean and safe. that everyone can live and work and enjoy what they do while our super heroes on the front line, take care of everything so flawlessly on behalf of all of our customers and communities. But I cannot tell you how proud I am as the CFO to say that we are also a company that will continue to generate strong and consistent growth in the years ahead. We do that with our people and by putting our people first, but we put our people first knowing that they will care for our customer, care for the community, care for the environment, and all of those things result in value for the shareholder.

So with that, I'm going to turn things back over to our CEO, Jim Fish, to close things out.

Thank you, Devina. It's always kind of a drop the mic with Devina. I don't know that I have much to say beyond that. I will tell you this. So I started with the company [indiscernible] and I had no expectation that first of all, no expectation I'd ever become a CEO, but I also had no expectation that this company would do what it's done. I'd worked for several different companies and several different industries, and it was always kind of this, maybe a little of this pretty flat. I think I get bonuses, a couple of bonuses when I was working at other industries, and it pretty much appeared to be the same thing from '01 until 2012. This. I got 5,000 options somewhere along the way, and I -- boy, when the stock hit [ $35 ], and I was out. I bought a car, Malibu, by the way, Shelby Malibu. So good car.

So -- but in 2012, things really started to change. And obviously, the stock has gone from $30 to $242 last week. And -- those of you who have been along for the ride, then congratulations. I mean it's been a great ride for you, and some of these slides are meaningful to you. But the big takeaway from today is not about what we've done over the last 10 years, over the last 12 years or whatever the time frame is. The big takeaway is that we're not here to claim victory. We're here to say there is a lot more to come with this.

And that's why we wanted to demonstrate what the strategy looks like and what it turns into in terms of the financials -- but this is a great company, and I just want to reiterate, this is a company that has some things that nobody else has in our industry. And you've heard a lot of those today. You've heard us talk about this unreplicable asset network. You've heard Rafa talk about health care solutions and why we're so excited about that. You heard Devina talk about -- the numbers that ultimately result from this, Tara talked about the fact that we've kind of claimed a space here.

And in 2019, we didn't -- we said there isn't anybody that's claimed this space. But it's not just sustainability, so we can feel good about ourselves. It's sustainability so that we can drive results for you. That's what I think the takeaway should really be from today. Here's those long-term investments kind of compelling points about People First leadership, the powerful long-term engine that unique unreplicable. And I stress that unreplicable asset network, distinct platform for growth that really focuses on those secular trends, and we are very, very diligent about looking at those and then turning them into opportunities and executing a clear disciplined capital allocation strategy for long term, hold it forever, buy it and hold it forever company. So you see the numbers there on the left. Thank you very much for your attendance today. We do have a Q&A right after this. We're going to add a few chairs up here on stage. But thank you for your participation with us in this ride, and thank you for coming today.

So we're going to take just a minute to get situated up here and then turn back to the Q&A. We're going to invite all of our presenters to come up and participate in this final Q&A session. Okay. So to kick things off, I want to revisit Michele's question from the end of the last session. for Terra. So the questions about the portion of WM's landfill gas that we're able to convert to renewable natural gas pipeline quality gas. So we'll start with that one.

So we'll frame this in 2027 terms. And what you really have to do is look at the plants that we're building ourselves. But we also have some plants that were built by third parties and those are in our platform. So the best way to think about it is about 1/3 will be renewable natural gas, 1/3 will be electricity and the remainder is landfill gas that we could continue to monetize.

Great. And I think the second part of the question was on the recycling side, which we've gotten to talk a bit about now. But just comparing the economics in that part of the business, to the core collection and disposal.

So Brent Bell, who's here today. We spend a lot of time myth-busting with recycling. And so the misbusting we do, number one, recycling is real. We want more people to recycle. But we get questions really questioning like is recycling profitable. And -- you heard me talk about it, return on invested capital, third highest in the company. And the margins are in the same range as our core business. And that's a testament to all the work that the team has done to really reshape the recycling business model.

Great. So we'll open up to questions in the room. So we'll come to Brian here in the front. So just a reminder, wait until you get the microphone and state your name and firm and proceed with your question. Right over here.

Bryan Burgmeier from Citi Research. Maybe sometimes people think 2026 is sort of the end of your sustainability CapEx program, but how much CapEx do you think you'll be spending maybe in 2027 or 2027 and beyond? It seems like there's a lot of room for incremental growth. So just trying to get a handle on -- you called out the kind of 9.5%, 10.5% CapEx for the base business, but kind of investments for sustainability.

So I'll take this in 2 pieces. On the renewable natural gas side, we built our largest plants first and the ones that had the most favorable economics we do have other plants that we can build. We're just not yet in a position to say how many of them and how quickly will go. But what I can tell you is it's not going to be the same number that -- if you think about the $1.6 billion number and the $500 million in EBITDA, it will be substantially less than that. We're going to think about this more as incremental investments that we can make over time. On the recycling side of the house, we do have more room in other geographies. We're actively looking at what extended producer responsibility means in other areas. But we have automated, I would say, close to 90% of our tons across the network. So anything else that we build would just be targeted in key geographies. And we'll deliver the same level of transparency that we did on our previous investment platform going forward in the future.

Got it. And maybe just 1 follow-up. Maybe from a high level, I guess. Can you kind of explain or help us understand how -- if tons are maybe moving from landfills, very high-margin to composting recycling, does that impede margin growth? Does that accelerate margin growth? How do we think about WM growing margins as people maybe become more sustainable.

I can take a stab at this and then, John, you can layer on. But I think a great example is our business in California and California really has been on the front line of this. And we're not seeing our margins impeded at all. We're able to continue to drive margin growth and expansion in that marketplace. Really, what it comes down to is how we think about the entire network holistically and what the customer relationship is because we recognize when we're building these new capabilities, customers have to be willing to pay -- and we've demonstrated that we've been able to do that.

I think the only thing great answer, There, the only thing I would add is when you think about mortgage, you also think about capital intensity. And as Tara mentioned, a lot of these sustainability investments compete at the highest level. from a return standpoint. Margins are certainly higher landfills, but there's a capital dependency there. That's a lot different from a profile standpoint as part of what we evaluate from a network perspective.

Saba right over here.

Saba Khan from RBC. Maybe just following up on the margin discussion. You outlined call it, 150 bps of margin improvement. And maybe across some of the buckets you outlined, technology, health care solutions. Maybe if you can just force-rank where some of the margin improvement is coming from over the next 3 years?

So I'll start, and then certainly, if anyone wants to add in. I think what's really important to emphasize in terms of accomplishing that 150 basis points of margin expansion in a 3-year period. We're doing that with a large segment of our business being historically low margin. So it speaks to our ability to scale that business for margin growth and overcome the dilution that would have naturally happened with the addition of that business. Historically, we've targeted 50 to 100 basis points of margin expansion in the core solid waste business. And what I would tell you is that the target that we've set out of 150 basis points represents maintaining that targeted growth in core solid waste and at the same time expanding margin from the 2 additions being the sustainability businesses, which Tara mentioned, the recycling business being on par with the rest of traditional solid waste. But then when you think about the renewable natural gas business, in particular, that's a very high-margin business for us. So that is something that's accretive to margin. the health care solution business is something that will have near-term margin detraction but we are working very hard to get that on par as well.

Great. And then maybe just a follow-up on maybe the health care side. And you talked about 24% SG&A today, WM obviously, far lower. Maybe if you can just talk about the cultural change or some of the impediments, maybe when you get in there convincing that team to operate in a completely different way. What's been easier, what might take a little bit more.

Maybe I'll start, and somebody else can chime in. Somebody asked me that question actually during the break about have I had any negative or positive surprises about the business and absorbing it. And maybe the most positive surprise has been how welcoming the legacy Stericycle team has been to becoming part of a winning organization. I think they've been mired for so long in this sort of and just mark kind of what Jim described might have been that 2001 to 2010 state for us. So they're not only embracing the people first culture. They're embracing what we're doing in order to optimize the work sales coverage optimization. Mike's team has done a great job already doing that and the type of results we're seeing there are second to none. So I think what you're going to see is that while we drive to lower SG&A as a percent of revenue, the drive that those teams are going to continue to have is going to boost us and enable us to meet those goals.

I think there's 2 really important things that are worth mentioning on that note. One is -- it really is as simple sometimes is saying that we're going to work smarter, not harder. And so there are some places where because of some of the systems disadvantages or process disadvantages that the legacy Stericycle team members were encountering on a day-to-day basis. We're bringing the scale of an enterprise that they now have the luxury of being part of -- so working smarter, not harder, I think, is a big takeaway there.

The second really for me is about how you think about the role of technology in transforming the way business happens today. And while this legacy Stericycle team had been on that road for many years, they really hadn't crossed the finish line that was unlocking the potential that was available there. So I think that the track record that WM has shown in terms of not just implementing technology. It's not about the implementation, it's about the adoption. And so it's moving from a period of doing all of the hard work to actually build the technology suite to the change management that will unlock the value of that technology from the customer to the employee for years to come.

Dave Manthey with Baird. I'd like to refer back to Slide 14, the landfill closure chart, which I found really interesting Jim, you said that WM is positioned better than the industry in general. And I'm wondering as the industry digests the higher costs from inflated disposal costs, is it possible that the floor yield is actually higher on a secular basis over the next, say, 10 years as those landfill closures start coming in, in 2025, 2030 and beyond.

I think there's no question about that, actually. I think we clearly will be passing some of that on as we realize a higher cost. But the reason we're looking at that slide as an opportunity is because that higher cost comes slower to us than it does to others because we have longer lived landfills than the average because we have the capital to buy adjacent properties that aren't cheap in places like Pennsylvania or Florida because we have the ability to not only purchase but also permit some of these transfer operations. There's a number of reasons that we went through today as to why that slide is an opportunity for. Us. But I do agree with you that a lot of this does get passed through in the form of price increase. And really, it's just cost recovery and then the idea would be to add some margin points on top of it.

We'll come right here on this table.

It's Konark Gupta from Scotiabank. Just had 1 major question on the health care side of the business for Rafa. I guess, if you look at holistically like the cost synergies and the SG&A savings you're talking about, is there anything structural in the health care business that prohibits the SG&A to fall down below a certain level? Like I think you're assuming, as Jim said, SG&A in your numbers at this point. But the 9% you have across the board, is that realistically achievable, first of all? And why are you not there yet in setting those targets.

Now I can establish iContact apologize. I was kind of trying to find you. No, not really. We haven't seen anything that structurally prevents us from that. It's all kind of time and progress. We need to continue to fix the ERP, and Devina talked a little bit about that. streamlining leadership. A lot of what we've done so far, particularly on the customer side of the business is we had a lot of managers and not a lot of doors, and now we're moving to -- we're flipping that model where we have -- we're leveraging what we can do with our existing leadership at WM whether it's pricing, whether it's corporate operations and logistics support, you name it. And we're driving sort of more action into the business. So nothing really stands out as an impediment. It's just time to optimize the work.

And I do want to say this because I I'd like to remind the legacy Stericycle team of this all the time because whenever you're talking about lowering SG&A as a percent of revenue, there's always this sort of inherent anxiety about, well, that means that just I'm going to be just whacked out of -- and it's really -- there's another way to do that, by the way, and that is to increase your revenue, right, your top line? And there's a great runway for us to do that. As we lay the groundwork to go in a concerted effort to cross-sell, we're going to start doing that as well.

I want to put 1 small caveat on the structural difference because it's an important 1 for us and different than normal large-scale acquisition would be in the traditional solid waste business. And that's the fact that the Stericycle business ran on its own SAP ERP historically. And we are not going to fully integrate them onto our Oracle platform. So they will run part of their business on a separate platform. from a technology perspective. And as you can appreciate, technology comes with a cost. So that is 1 thing that is structurally different between this transaction and say, the ADS acquisition.

So we'll go to the side of the room over here at upfront table.

This is Tami Zakaria from JPMorgan. One of the slides that showed the cross-sell opportunity you had for -- with a large hospital system in North Carolina and South Carolina was quite interesting to me. I think you won $1.5 million in that key study, $1.5 million of solid waste contract with Stericycle customer. So I'm curious, is there any obvious cost synergies in that sort of a cross-sell opportunity where you can maybe combine trips, for example, to pick up the way sort of bundle other services like secure information destruction that could lead to the margin on that incremental revenue to be much higher than the traditional solid waste margin.

I would say that not synergies, I think, in the sense that you're referring to in terms of cost and reducing the number of trips because, frankly, the service is going to be different, whether it is solid waste store, medical waste or secure information destruction. I think where the benefit of integrating the businesses is much more in understanding your customer a lot better, seeing the needs and want to the customer a little sooner being able to anticipate that. And where we do -- where we will find some help is when I talk about leveraging our corporate operations support and the logistics efforts there, understanding what makes the most sense, what time makes most sense to go pick up what. That is actually an inherent conflict that a lot of these large customers have which is at times they have very limited dock space, for example, right? And so when are you going to show up to pick up the solid waste versus when are you going to show up to pick up the medical waste or whatnot, right? And so having 1 service provider that understands that entire criteria is important.

I would add though the cost of sale that I mentioned in my prepared remarks, are part of the equation is we have the same customer having a Shred-it rep, a regulated medical waste rep and a WM RAP. Our goal is to have a 1 solution approach that will reduce that cost of sale, be much more efficient and less confusing for the customer. In addition to all the things we're doing to structurally change it. I think our go-to-market cost of sale will increase that margin as well.

Perfect. And probably 1 quick question for Devina. You said you expect to be between 2.5 to 3x leverage in the next 12 months around this time next year. Is there debt paydown and EBITDA growth that's leading to it or purely EBITDA growth? Any comments there?

Yes, it's a combination of the 2. So EBITDA growth outlook is certainly strong and the thing that will propel us they are the fastest, but there is some prudent debt reduction in the equation too.

Right here, [indiscernible] to Kevin.

Just 1 question for me. I guess, when you think about the national account strategy, it's Kevin from CIBC. When I think about the national account strategy slides you put up there, it seems like you're getting good pricing momentum along with kind of volume consolidation. And I guess when I think -- typically think of a customer who consolidates vendors, they typically look for a pricing discount to get a bigger part of the wallet. Just I guess wondering how you're bucking that trend? And how should we think about that moving forward, both from a national account strategy growth perspective as well as from cross-selling, as Rafa had pointed out.

Yes, that's a great question. I think we've been spending a lot of time on that value proposition. I think with the seamless onboarding, we talked about the industry-leading analytics, and that's really the crown jewel of the value proposition, whether we talk about efficiencies in their business, environmental compliance, as well as that straight-through processing. That's allowed us to earn a higher price, even from the start. The nutritional think, hey, it's a bulk national account, it's a lower price. We have the opportunity with this value prop to continue to move price consistently, and you saw that in the document. So -- and as far as cross-sell is concerned, we have a sizable share, but there's an addressable market here as industries start to consolidate, let alone the opportunities that we have in the health care space. for these multiple locations. I think that's where we're really different and separate from the pack is our asset network and environmental expertise transcends North America, and that's where we feel we could earn that price for the long term.

We'll come back over here to Tyler.

Yes. Tyler Brown, Raymond James. I'm going to go for a 3 for 1 -- then I have a follow-up. So first, even, are you -- by chance, are you reiterating your guidance for '25. I don't know if you can make any comments there. Number two, to be clear, the free cash guide doesn't include any bonus depreciation. Maybe you could tell us how much that could potentially boost those numbers. And then third, and this is really the crux of my question is around free cash conversion. So I appreciate the 45%. But why wouldn't that number creep more towards 50%. And is that something that may be -- and I don't want to do the preview for the next Analyst Day, but is that something longer term that should be achievable?

Sure. So I'm going to try and remember all 3. First, with regard to -- I know you will, Tyler. So with regard to 2025 guidance and outlook, what I can tell you is that we've been off to a great start to the year. We will give more details about 2025, specifically on the analyst call in a few weeks' time. The one thing that we have our eye on that hasn't proceeded over the course of the first 5 months of the year as we expected, is the revenue line. We talked a lot about that on the first quarter earnings call with regard to weather in particular. And then if you think about what's happened late in the second quarter, it's recycling commodity prices have come down from the levels that we anticipated and that has an outsized impact for us on the brokerage business on the top line, it doesn't significantly impact our outlook for EBITDA, our free cash flow which is why we continue to have confidence in the remaining aspects of the 2025 outlook. But we will certainly add more color to that when we're all together on the analyst call in late July. With regard to bonus depreciation, the outlook did not include any changes in tax policy for what is currently being contemplated but not currently in law.

So bonus depreciation upside for 2025 would be about $120 million. And we do think that there's a likelihood that we could see that come through. And that certainly would provide upside to the 2027 outlook. With regard to conversion, I will tell you, it really is that kind of focus taking more revenue dollars to EBITDA and more EBITDA dollars to free cash flow that is like a relentless pursuit for this business. And while 45% may not seem like the right end game for us, I would tell you, if we came down and did another Investor Day a few years from now, I expect that, that conversion rate will be higher. You think about the conversion in the recycling part of the business, the sustainability growth investments in -- those are going to be the highest conversion businesses that we have in the portfolio and to Tara's earlier point, if we're not making another leg of incremental capital investment there, then you will see tremendous flow-through where you have a different equation right now is it's too early for us to tell on the Healthcare Solutions business. What their free cash flow conversion should look like in an optimized state we think with synergy capture and cross-sell opportunities, those are great flow-through opportunities.

But fleet strategy is something that we're continuing to work our way through. they leased their vehicles, and we buy our vehicles. And while we were really optimistic that we'd be able to convert a lot of those leases pretty quickly into owned vehicles because it's just a better cost of capital and a better way of doing business. it's not economical to do so. So we're going to wait to do those things until the time is right. But landfill and the infrastructure that I think Jim and John did such a good job of bringing to life today. landfills are expensive from a capital perspective. And so that's the part of the equation that continues to be a little elevated in the core solid waste business. But really, I think, focus on the fact that tax policy is a question mark for us right now. You could have better conversion in the out years if we have clarity and tax policy especially with upside from bonus depreciation.

That was excellent. All 3 of them. Okay. A follow-up question, Jim, John. So you guys actually made quite a few comments about hazardous waste throughout the presentation. I know you have what I would consider maybe even an underappreciated fleet of hazardous waste disposal assets. Would there ever be as part of the M&A strategy, would it make sense to look more on the front end of hazardous waste, field services, industrial, emergency response, et cetera, to effectively feed those landfills?

First of all, I have to say, doesn't that make it a 4 for 1, Tyler, I mean, not just 3 for 1 probably, Tara, you could -- you or Mike answer that question, but I'm not sure we would -- I'm not sure what's included in that bucket that you just talked about there. I think -- we do like the -- and we're in a strong position in that hazardous waste space and have been in that space for quite a long time. We've looked at assets there through as acquisition targets. A lot of them haven't been priced right, and so we haven't ended up on the acquisition, kind of the winter of the acquisition. But I think we'll continue to look at that. We'll also continue to grow it organically. And then maybe, Tara, if you want to kind of tack on.

Sure. And Tyler, I'm glad that you view this as underappreciated because we have been in the business for quite some time since the '80s. And it's a business that we don't really talk about as much. But if you go back to the slide that was in Devina's deck that really outlines the qualities of what good M&A looks like for WM it is a space that could be attractive to us, but we're going to take the same disciplined approach that we would for any of the businesses that we look at. And now we have a portfolio between core solid waste, sustainability, environmental solutions, which is what this is and also health care solutions that we are the most well-rounded company in the space, and our customers recognize that.

Great. Thanks for all the great questions. We have time for 1 more. So we'll wrap up with Jerry upfront.

Jerry Revich Goldman Sachs. Tara, so for 2026, you laid out 30% have offload agreements for landfill gas sales. with an additional 45% that you can consume internally, is it fair to think you're 75% through the book? And then can you comment on post the EPA's announcement, whether you've seen the voluntary market and open back up.

I was waiting for this question from somebody, Jerry, about EPA's announcement. So I'll start with that first. We do view EPA's announcement as constructive -- of course, there's always room for opportunity. But the good news is the fact that they had a 3-year RVO is incredibly stabilizing to the broader program. And we have been having very active discussions with a whole host of counterparties in the voluntary market. And many of those we're waiting and seeing, and now we're getting phone calls on broader sales. So we think a whole lot of the industry was waiting to see what EPA did and now broader stability. We're seeing RIN prices today for 2025 at about $2.20. And -- on your question about the 45% in 2026, our fleet will be 100% allocated to WM's R&D -- and so we will be tapping into the voluntary market more heavily. We do have some voluntary market deals today, and we are in the process of negotiating more of them.

[indiscernible] So as you look at the CAGR that you laid out, [ 27 ] versus [ 25 ] and backing out the high-margin sustainability investments, looks like EBITDA is growing pretty similar to revenue. And so I just want to make sure there are no headwinds that we should be keeping in mind versus just, hey, look for a business with all of these pieces, really attractive growth rate and let's leave some upside. I just want to make sure there are no headwinds.

No headwinds. What I would say is revenue growing at about 9.5% EBITDA growing at about 11%. So the spread represents the synergy capture from the Healthcare Solutions business, combined with our focus on core solid waste growth and the strength of sustainability margins. So those are the things that lift EBITDA growth beyond the revenue growth.

Sustainability margins aren't bad.

Great. So thanks for your questions. We're going to go ahead and conclude the webcast portion and thank all of our speakers. So at this stage, we're going to move to lunch, which you can probably smell is in the room at this point. So it's a buffet lunch over here and you're welcome to come back to your tables, to mingle with the team. We'll also have our side tables open for the next 20 or 30 minutes for anyone to stop by, who hasn't had a chance yet. So thank you again for coming.