The speaker introduces the WM Second Quarter 2024 Earnings Conference Call and introduces the company's executives. They discuss the availability of important information on the company's website and the risks and uncertainties associated with forward-looking statements.

The paragraph provides an overview of the topics that will be discussed during the call, including yield and volume, operating EBITDA, and adjusted measures. It also includes information about accessing a recording of the call and mentions the company's strong operating performance and outlook for the full year.

The company has achieved a 30% operating EBITDA margin for the first time, thanks to technology investments and pricing strategies. They are on track to deliver strong financial results for the year and are focused on finding future opportunities to leverage their expertise. The recent acquisition of Stericycle presents another opportunity for growth in the medical waste industry. The company is also continuing to position their solid waste network for future growth through tuck-in acquisitions, having completed over $750 million in acquisitions so far in the year.

The company has made strategic acquisitions to strengthen their core operations in North America and has also invested in renewable natural gas projects. They have several projects in the works and are exploring future opportunities for growth in renewable energy. They are also focusing on recycling and automating their facilities to differentiate themselves from competitors and expand their network.

The company's automation investments have resulted in consistent financial results and improved labor costs and commodity sales. They have completed several automation projects and plan to add more facilities by the end of the year, increasing their capacity. The company is pleased with their second quarter results and is optimistic about the future. The team's dedication is credited for their success. The company's operating expenses have improved, resulting in enhanced overall operating EBITDA margins. In the second quarter, operating EBITDA in their collection and disposal business grew and margin expanded.

The company's use of technology and automation has led to significant improvements in operating costs, particularly in labor and fleet efficiency. This has resulted in increased EBITDA margin and reduced driver turnover. The company remains committed to optimizing costs and has seen improvements in repair and maintenance and fuel costs. Revenue growth has also been in line with expectations, thanks to the company's customer lifetime value model and focus on price increases.

The company has seen strong performance in the first six months of 2024, with operating EBITDA growing by 12% and all growth being organic. This puts them on track to meet their full year outlook of 10% operating EBITDA growth, which is well above their long-range target. The growth is expected to be driven by two factors.

In 2024, the company expects to see benefits from price and cost optimization in the first half of the year and incremental earnings from investments in recycling and renewable energy in the second half. They are confident in meeting or exceeding their operating EBITDA guidance range and have seen a 130 basis point increase in operating EBITDA margin in the second quarter. This is due to margin expansion in the core business and the use of technology and processes. As a result, the company has seen strong growth in operating and free cash flow in the first six months of 2024.

In the first half of the year, the company has seen strong growth in operating EBITDA, favorable working capital trends, and lower cash incentive compensation payments. Capital expenditures for sustainability growth investments are on track to exceed previous guidance, and the company has generated $1.24 billion of free cash flow in the first six months. The company remains committed to a strong balance sheet and prioritizes return on invested capital in making strategic growth decisions. They also plan to finance the acquisition of Stericycle with a combination of bank debt and senior notes, which will result in a leverage of about 3.6 times post-close.

The company has decided to temporarily suspend their share repurchase program in order to reduce their elevated leverage. This is due to the impact of additional Tuck-In acquisitions and their commitment to maintaining a strong investment grade credit profile. The company remains pleased with their strong results and is focused on achieving their goals for 2024. During the Q&A portion of the call, an analyst asked about the expected margins for Q2 and Q3. The CFO explained that the risk management impact of 50 basis points in Q2 was unexpected and affected their target of north of 30% margins. However, she stated that without this impact, they would have met or exceeded their target. For Q3, there have been some changes, but the CFO did not provide a specific margin target.

The paragraph discusses three factors that are impacting the company's third quarter outlook. These include lower industrial volumes, elevated commodity prices, and lower contribution margins from integrated M&A revenue. These factors are expected to result in an EBITDA range of 30.5% to 31% for the third quarter. The company has also spent $750 million on acquisitions through July, but there are some factors working against them, such as the impact of recycling brokerage and lower contribution margins from integrated M&A revenue. The expected revenue contribution from M&A in 2024 is not mentioned.

In the second quarter, the company acquired $77 million in revenue and expects to acquire $300 million by the end of the year. The first half of the year saw a $415 million growth in Solid Waste EBITDA, with a slight offset from the risk management headwind. The sustainability businesses are expected to contribute $115 million in EBITDA for the year, with higher commodity prices in the recycling business and a slowdown in construction projects affecting the renewable energy business. Overall, the company expects a 10% EBITDA growth for the year, with most coming from the solid waste business and contributions from the sustainability business.

Jim Fish, speaking to Tyler, explains that the 25 in their forecast includes the Winter Bros acquisition and some sustainability factors. He emphasizes that their EBITDA growth of almost 10% is the strongest they have seen since the 1990s, despite flat volume and a stumbling economy. He also notes that the growth is mostly organic, as it was last year.

The company is seeing growth and increased profitability due to their focus on technology, sustainability, and operational processes. This has led to a 10% EBITDA growth, 160 basis points of margin growth, and 5% revenue growth. Acquisitions, such as Stericycle, have also contributed to this growth. The company is optimistic about their future, with plans to give guidance for 2025 in February. They have invested in sustainability and expect to see even more EBITDA growth in the future. The company is not concerned about the upcoming election.

The speaker discusses the potential impact of the upcoming election on R&G and RINs. They mention that the company has been closely monitoring the situation and note that the current market for R&G is different from the previous administration. They also mention the RVO that is in place through 2025 and state that analysts do not expect a significant decrease in RIN pricing under a Trump presidency. They reiterate their investment thesis of $26 per MMBTU.

In the paragraph, Jim Fish and Devina Rankin are discussing the company's performance in different regulatory environments. They state that the business does well in most environments, but could be affected if landfills were suddenly closed. They also mention that the recent Hurricane Beryl had little impact on the company's volume and top line growth. The next question from Jerry Revich is about Stericycle and their struggles with pushing pricing, which Jim Fish attributes to their autoclave business.

The speaker, Jim Fish, is discussing the impact of Stericycle's new systems on pricing in the medical waste industry. He mentions that their own systems give them better visibility and allows for smarter data and analytics. However, as they have not yet acquired the business, they are not sure how this will affect pricing. He also mentions that the aging population in many countries may lead to an increase in medical waste volume, but he is unsure why Stericycle's volumes have been slower than expected.

The speaker discusses the future potential of a business with a strong volume trajectory and a focus on larger national account customers. They mention their own success with national accounts and how this aligns with the business in question. In response to a question about risk management costs, the speaker explains that the costs incurred in the second quarter were due to unfortunate incidents and are not expected to repeat in the future. They clarify that these costs are not representative of long-term trends or out of the ordinary.

The speaker discusses the expected seasonal trends and the impact of roll-off volume on these trends. They mention that they did not see the expected pickup in roll-off volume and are cautious about this going into the third quarter. They also mention the strength of the commercial collection line of business. The speaker then answers a question about the expected timeline for realizing the $125 million cost synergies from the deal, stating that they are currently in the process of determining this and did not give a breakdown of when they will be realized.

The speaker discusses the potential synergies and cost savings that can be achieved through the acquisition of a new business. They mention that the $125 figure is conservative and that more details will be provided once the acquisition is complete. They also mention that the timing for achieving these synergies may differ from previous acquisitions due to the new business's recent completion of an ERP implementation.

Jim and Devina discuss the progress of the ERP implementation journey at Stericycle and how it has affected the company's ability to provide a timeline for achieving their goals. They also mention a $775 million outflow in the investing line due to repurchasing tax-exempt bonds in light of the Stericycle acquisition. Noah asks about the softness in volume in certain parts of the economy, and the team notes that organically they are still delivering growth and maintaining a positive price-cost spread.

Jim Fish, CEO of Waste Management, discusses the strength of the consumer and their ability to maintain a healthy price and cost spread. He notes that the consumer has been resilient through COVID and the economy rebound, especially in the commercial line of business. However, there has been softness in the temp roll-off and industrial space. Fish believes that the consumer will continue to be strong, which is good for the company. He also mentions the potential for operational efficiencies with the acquisition of Stericycle.

The speaker discusses how the same trucking methods used in the medical waste industry can also be applied to the waste management industry. The speaker also answers questions about the risk management margin and tax rate for 2024. They clarify that the risk management margin will only affect the second quarter and the tax rate for 2024 is projected to be 22%, but may change due to investment tax credit benefits and a change in accounting related to low-income housing tax credit investments.

The analyst asks about a write-down in waste diversion technology and the company's venture capital investments. The company responds that this was their largest investment of its kind and there are no significant similar investments in the pipeline. They are still focused on finding sustainable solutions for MSW. The next question is about the Winter Bros acquisition and its strategic implications. The company responds that the acquisition includes waste-to-rail assets, which could potentially create opportunities for other deals. Winter Bros was also a carter for an operator in New York City, but it's unclear how that will affect the company's commercial zone operations. Winter Bros also has shredding services, but it's uncertain how this will impact the proposed acquisition of Stericycle and its shredded assets.

Jim Fish discusses Winter Bros, a company that Waste Management recently acquired. He explains that they were attracted to Winter Bros because it is a white space for them and has disposal constraints that align with their network capabilities. He also mentions that Winter Bros has intermodal assets and capabilities that play well into their network. However, their interest in Winter Bros was not related to the commercial waste zone issue. Fish also mentions that Winter Bros has about 150 routes and 500 employees. He clarifies that the intermodal assets create a platform for future use and were a key factor in the strategic outlook for acquiring the business.

James Schumm from TD Cowen asks about the modest increase in landfill revenues and the flat tons. John Morris explains that while the yield spread is different than last quarter, it is due to a large pickup in volume from an area with lower rates. Jim Fish adds that this area has a below-average market rate, which affects the overall yield calculation.

John and Jim discuss the core price and yield of the company, as well as the strong performance of their special waste volume. They also address recent news reports about a potential sale of their R&G assets for $3 billion, stating that the price is far too low and that they are not currently looking to sell. Their focus is on the 20 plants they are constructing and they will continue to explore potential sales at the right price.

The speaker addresses a question about the company's projected EBITDA growth and clarifies that the majority of capital expenditures will be spent by the end of the year, leading to significant growth in 2025 and 2026. They mention the potential for selling assets at the right price, but for now, the focus is on building out 20 plants and evaluating additional opportunities. The speaker acknowledges the desire for incremental EBITDA growth and suggests that M&A and commodity prices could contribute to this, while also mentioning that certain aspects of the business may have underperformed.

The speaker addresses a question about the company's performance and acknowledges that there have been some challenges, such as lower volume and minor delays in plant openings. However, he also highlights the company's ability to offset these challenges and achieve strong EBITDA growth. He also mentions the impact of shutdown costs in a good commodity price environment.

The speaker discusses the impact of the acquisition on the company's performance, noting that there will be a decrease in shutdown costs in 2025. They also mention potential negative factors, such as delays and shutdown costs, as well as the possibility of a higher tax rate. They express optimism for 2025, but acknowledge the challenges of the industrial temp roll-off business. The speaker then addresses the question of pressure from supply chain and technology investments, and mentions labor as another area of pressure for companies.

The company has been able to make significant changes in wages and overall compensation, resulting in lower turnover, improved safety, and reduced labor costs. However, there is still some pressure in areas such as supply chain costs. The company is on track to finish $1 billion in tuck-in acquisitions and is focused on areas with growth opportunities. The labor expense trend has been positive due to lower turnover and experienced employees, leading to improved efficiency and safety. The company expects this momentum to continue into next year.

The speaker discusses the company's low turnover rate and its focus on reducing labor intensity in frontline roles through technology and automation. They also mention the benefits of converting from rear load to ASL trucks, which reduces the need for helpers and allows for more efficient pickup of homes. The company has already eliminated 2000 positions and aims to remove 5000 in total.

An unidentified analyst asks about Stericycle's document destruction business and how it fits into Waste Management's portfolio. CEO Jim Fish explains that while it wasn't a reason to buy Stericycle, the automation and size of Waste Management's recycling business can benefit Stericycle. COO John Morris adds that there are similarities between the two companies' routes and customers, and they will further explore this once the acquisition is complete. Another analyst thanks them and wishes them luck.

The speaker is responding to a question about the company's international assets and their plans for them. They mention that document destruction is not a reason for buying Stericycle, but they are not considering divesting it. They also mention the importance of keeping an eye on the sustainability and recycling objectives in the UK market. The speaker then answers a question about their optimism for 2025, mentioning that they are currently in the end of July and cannot share much detail, but that they are optimistic due to factors such as potential volume market growth and pricing improvements.

The speaker is unsure about the industrial side of the business, but is optimistic about pricing and volume for next year. They mention the potential impact of the economy and the strength of the consumer. They also mention the addition of a new business and the impact of sustainability investments in 2025.

Jim Fish, President and CEO, thanks Sabahat Khan for their question and provides further color on the topic. The operator then announces that there are no further questions and turns the call back over to Jim Fish for closing remarks. Jim expresses gratitude for the questions and shares optimism for the current and future years. The operator then concludes the conference.

This summary was generated with AI and may contain some inaccuracies.