The paragraph introduces the WM First Quarter Earnings Conference Call, noting that it begins with a listen-only mode followed by a Q&A session. Ed Egl, Vice President for Investor Relations, starts the call, mentioning key executives present: Jim Fish, John Morris, and Devina Rankin, who will discuss financials and company strategy. The conference call is accompanied by a Form 8-K filing, including an earnings press release available on the company's website. The call will include forward-looking statements subject to risks and uncertainties, outlined in their SEC filings. John Morris will cover details about the company's internal revenue growth related to yield and volume.

During the call, Jim, John, and Devina will discuss the company's operating EBITDA, focusing on results excluding the WM Healthcare Solutions segment, and comparing them to the previous year. They will use adjusted non-GAAP measures like net income, EPS, and free cash flow for better comparability. More details and reconciliations to GAAP measures can be found on WM's website. The call is being recorded and available for replay later, but information may become outdated. Jim Fish, WM's President and CEO, expressed pride in consistently strong quarterly performances, with the first quarter results surpassing expectations.

In the first quarter, the company's operating EBITDA increased by over 12% year-over-year, driven by strong performance in its collection and disposal business, WM Healthcare Solutions, and sustainability investments. The company is confident in meeting its financial goals through customer value growth, technology optimization, and strategic sustainability investments. Despite an aging US workforce, the company plans to use technology for workforce supplementation and aims to enhance its sustainability brand positioning. The company continues to pursue growth through acquisitions, with a strong pipeline anticipated for the year. In Q1, combined EBITDA from recycling and renewable energy grew by over 20%, boosted by automated facilities. Two new recycling facilities were added, with more scheduled for 2025.

The paragraph discusses the growth and progress in the renewable energy sector, specifically driven by new RNG plants and strong natural gas and renewable electricity pricing. The company is building eight more RNG facilities and finds its sustainability investments to be high-return. WM Healthcare solutions is being integrated into the broader WM organization, offering new customers enhanced environmental expertise. The company anticipates achieving $250 million in annual synergies by 2027. The speaker thanks employees for their dedication and mentions an upcoming Investor Day in June. John Morris then reports on operational results, highlighting a nearly 5% increase in first-quarter operating EBITDA and a margin expansion of 10 basis points in the collection and disposal business.

The company experienced impressive growth in a challenging quarter, despite tough winter weather and the expiration of alternative fuel tax credits. Revenue increased across all business lines, with a 4% collection and disposal yield and a 6.5% core price, while churn remained stable at around 9%. Positive landfill and commercial collection volumes balanced out the strategic exit from low-margin residential business and economic pressure on the industrial segment. Special waste volumes benefited from California wildfire cleanup, but were partially offset by winter weather impacts. The company anticipates strong volume outlook for 2025 due to a robust special waste pipeline and ongoing fire volumes in Southern California. Operating expenses improved to 60.5% of revenue in Q1, marking the sixth consecutive quarter of operating expenses below 61% of revenue, reflecting strong margin improvement from Q1 2024.

The first quarter's strong performance was driven by focusing on frontline retention and utilizing automation and technology for efficiency. Investments in leadership and facility upgrades improved driver retention, yielding an 80 basis point increase. Improved retention enhances safety, customer service, and efficiency. Cost optimization and shedding low-margin residential customers contributed to a 130 basis point increase in the operating EBITDA margin for residential business, reaching 20% for the first time in six years. The company is on track to meet its full-year operating EBITDA target of $7.45 to $7.65 billion. The speaker thanked employees for their dedication and announced a transition to Devina Rankin, who will discuss 2025 financial results. WM's legacy business maintained a 30% margin for the fourth consecutive quarter.

The paragraph discusses a financial performance update, highlighting a 40 basis point increase in margins compared to the first quarter of 2024, aided by favorable pricing and cost optimizations in the collection and disposal business, and recycling automation projects. These gains were partially offset by a 30 basis point loss from an expired tax credit. The total company margin reached 28.5%, impacted by the addition of WM Healthcare Solutions, which saw a 20 basis point margin expansion. Technology and ERP systems are being optimized to improve customer processes. Operating cash flow was $1.21 billion, a decrease due to planned higher interest payments related to last year's acquisition of Stericycle.

In the article paragraph, the company discusses financial results and future plans. They report a headwind from working capital due to strong customer receipts in late 2024 and maintain a positive outlook for cash flow from operations for the year. Capital expenditures for the quarter reached $831 million, aligned with sustainability growth and business support. They are well-positioned for upcoming investments and fleet replacements. The first quarter free cash flow was $475 million, on track to meet their annual outlook of $2.675 to $2.775 billion. The company returned $336 million to shareholders via dividends but paused share buybacks to focus on earnings growth and reducing debt. They plan to make significant solid waste acquisitions worth over $500 million in 2025, compared to typical annual acquisitions of $100 to $200 million. Their leverage ratio was 3.58 times at the quarter's end, and they aim to reduce it to 3.15 times by the end of 2025, showing confidence in their financial and strategic management.

The paragraph discusses the financial outlook for the second quarter. Devina Rankin addresses questions on expected performance, noting no unusual seasonal impacts except for the California wildfires. The solid waste business achieved a 50 basis point EBITDA margin expansion, overcoming a 30 basis point impact from the alternative fuel tax credit, resulting in an 80 basis point year-over-year improvement. Combined with a 20 basis point gain from recycling automation, there's a 100 basis point total margin expansion. The company is optimistic about further year-over-year margin improvements and anticipates a normal seasonal increase in operating margins for the next quarter.

The paragraph discusses the outlook and financial performance of the Healthcare Solutions and solid waste businesses. The Healthcare Solutions business is expected to show improved margins as cost optimization and synergy capture accelerate, with the strongest financial performance anticipated in Q3. The company aims to realize $85 million to $90 million in synergies by 2025. Meanwhile, in the solid waste business, despite a 400 basis point drop in yield in Q1 largely due to special waste volume from California wildfires and softer industrial demand, strong core pricing led to margin expansion. The company sees sequential improvement and remains optimistic about future performance in Q2.

The paragraph is part of a conference call where Kevin Chiang from CIBC asks about yield performance, specifically noting that commercial yield growth remained flat compared to the previous quarter, while residential and industrial yields declined slightly. Devina Rankin responds by explaining that their pricing strategy is strong across all business lines, but the observed variability is due to unit differences, particularly in the industrial sector, which were influenced by temporary weather-related roll-offs. She mentions that they anticipated some softness in industrial hauls for 2024 but are optimistic that the worst trends have passed, with trends in March and April aligning with their expectations. The extreme winter weather in February had a significant impact on Q1, but they are now moving past it.

In the article, Kevin Chiang asks about the year-over-year decrease in Stericycle's healthcare revenue and its volume and pricing trends compared to the previous year. Rafael Carrasco responds, explaining that the revenue decline is primarily due to the shedding of their Spain and Portugal businesses. Despite this, the regulated medical waste business has slightly increased by 1%, with consistent churn in national and hospital channels at 3%. Rafael also mentions progress in resolving ERP challenges. On the secure information destruction side, there is a minor revenue dip, attributed to temporary weakness in event work, rather than structural issues. Overall, the revenue outlook remains positive.

The conversation involves Tyler Brown from Raymond James asking about synergy capture within the reported $95 million EBITDA for Q1. Rafael Carrasco explains that they captured $16 million in value, mainly from SG&A rationalization, and they are confident in meeting the midpoint of their synergy target range. He notes that they anticipate further benefits from ongoing sales coverage optimization and internalization efforts, particularly in the latter part of Q2 and beyond, once contracts expire and equipment is set up. Devina Rankin adds that their execution target for value capture this year is $90 million.

The paragraph discusses financial projections and operational updates. The speaker clarifies that their best estimate of an outcome is the midpoint of a projected range, now specified as $80 million to $100 million, with $90 million being the most likely. Tyler Brown inquires about a $190 million expected incremental EBITDA from RNG and recycling, questioning if it's on track for Q1, and about potential CapEx delays or increased expenses due to tariffs. Tara Hemmer responds, assuring there's no impact from tariffs on schedules or capital costs, and that business performance aligns with plans. The recycling division contributed $11 million in EBITDA through growth projects, along with significant operational improvements. In contrast, RNG plans were deployed in late 2024.

In the article paragraph, Devina Rankin and Tyler Brown discuss the improved performance due to pricing and increased volume, although some gains were offset by planned start-up operating costs. Tyler Brown confirms with Devina Rankin that there is a 30 basis point drag on the CNG margin expected every quarter, which is included in the EBITDA margin guidance for 2025. Afterward, Trevor Romeo from William Blair asks about M&A activities, noting an expected $500 million in solid waste acquisitions, an increase from the previous quarter. Devina Rankin confirms the inclusion of the full amount in the guidance and explains that while the opportunities existed at the start of 2025, the outcomes are now clearer due to progress in various processes. Devina also indicates that John will provide more details on acquisition opportunities amid economic uncertainties and the willingness of smaller companies to sell.

In the paragraph, the discussion revolves around the positive progression of transactions in the pipeline, with expected incremental acquisition revenue now projected to be between $80 million to $125 million, an increase from the original guidance of $35 million to $80 million. John Morris adds that uncertainties such as labor costs and scarcity are challenges, but the value of their network is helping in moving materials in and out of markets. This situation is prompting some organizations to consider selling. Despite these challenges, the pipeline remains strong, with $800 million in deals completed last year and more expected to close by the end of the year. Additionally, Trevor Romeo inquires about the early response and opportunities in the Healthcare Solutions business from customers, to which Rafael Carrasco responds affirmatively, indicating positive feedback and interest in their combined value proposition.

The paragraph discusses a recent West Coast tour where there were discussions with large hospital networks about WM's ability to assist in sustainability efforts through advanced reporting and analytics tools for waste management. The speaker expresses surprise at the patient and positive customer base, attributing it to WM's ownership and enhanced confidence. Conversations also focused on ERP fixes to improve customer journey and services. There is ongoing work on playbooks for cross-selling opportunities, noting that the current shared customer base where WM provides solid waste and Stericycle offers regulated medical waste services is only 17% of the total customer pool, excluding those neither company serves. The attention then shifts to Sabahat Khan from RBC Capital Markets, who asks about residential margins.

The paragraph discusses the company's efforts to improve its profit margins, highlighting that achieving over 20% margins for the first time in six years is a significant achievement. John Morris explains that while progress has been made, additional negative volume is expected in 2025 and early 2026 as the company aims to improve its residential line's competitiveness in terms of margin and return. Despite shedding volume, revenue and EBITDA are rising, indicating it's a beneficial strategy. Sabahat Khan's question to Devina Rankin reveals that the primary value capture from synergies, especially related to Stericycle, will occur in the second half of 2025, with significant actions beginning in the second quarter and major impacts visible in the third quarter.

The paragraph discusses the company's efforts to optimize sales coverage and streamline back-office processes, including migrating to a single platform for human capital management to unlock incremental value starting late in the third quarter. They aim to create long-term value in the SG&A segment and reduce it from above 24% to 15% over three years, targeting $250 million in value capture. Rafael Carrasco adds that operational discipline and process improvements are crucial, noting the online launch of the McCarran incinerator, which reduces transportation costs by handling 70% of their West Coast incinerator waste and aiming for 100% by year's end. Additionally, there's a focus on improving fleet management and reducing spare ratios, with groundwork laid to advance this in Q2 and beyond.

Toni Kaplan from Morgan Stanley asks about the company's resilience in economic downturns, specifically regarding its sustainability and health care sectors. Jim Fish responds, highlighting the diversification these sectors bring compared to their traditional solid waste business, which enhances growth prospects. He notes the resilience of their industry to economic downturns, pointing out that recent volume declines were likely due to unusual weather in January and February rather than an economic slowdown, as volumes rebounded strongly in March and April. Unusual weather, including rare snow in Houston and Louisiana, impacted operations temporarily.

The paragraph discusses the company's strong performance and resilience against economic downturns, indicating that while the industry isn't entirely recession-proof, it is recession-resistant. The company has consistently met expectations regardless of the economic or political climate. In response to a question about potential impacts of tariffs on fleet costs, John Morris explains that the company has strategically managed its truck delivery schedule, securing about a third of its trucks for 2025 with minimal cost pressure anticipated. They've also addressed potential tariff impacts in advance, expecting only low single-digit impacts. The company is well-prepared through 2025, but they may need to reassess if conditions extend into 2026.

In the conversation, representatives from a company discuss their positions and expectations for the future, particularly in regard to environmental regulations and financial performance. They address questions from analyst Noah Kaye regarding a recent EPA release on PFOS and its implications for the solid waste landfill industry. The company sees potential opportunities in managing special waste due to the regulations. Additionally, they confirm achieving $16 million in synergy value in Q1 and discuss strategies for managing commodity price exposure to improve profitability.

The paragraph discusses the impact on the commodity and volume side of the business, noting a slight decline due to a breakdown between sales and operational channels, which has now been corrected. They expect to meet or exceed budget targets in April and beyond. The company is transitioning to a fee-for-service model, which will be facilitated by offering a broader range of services. A question from Konark Gupta of Scotiabank follows, asking about revenue cadence and seasonality for the year. Devina Rankin responds that the only unusual seasonality anticipated would be due to the impact from Los Angeles (L.A.).

The paragraph discusses the company's financial outlook for 2025, emphasizing confidence in achieving a core price program increase of 5.8% to 6.2%. Despite flat volumes in the first quarter for their collection and disposal business, the company aims to meet its annual volume guidance and is optimistic about total revenue guidance due to acquisition contributions and tuck-in spending. There is a slight decline in recycling brokerage revenue, attributed to low margins, but this is not a major concern. The company is on track with its recycling and renewable energy facilities, aiming for anticipated returns. Additionally, they expect price adjustments in line with the decline in the Consumer Price Index since 2022.

The paragraph discusses how a company anticipated that prices would decrease more slowly than costs, leading to margin growth due to strategic efforts by John Morris. Konark Gupta acknowledges the company's early synergy achievements with Stericycle but questions why the Stericycle margin only increased by 20 basis points despite a 70 bps improvement in SG&A. Devina Rankin explains that this was due to disposal and fleet costs, which are part of strategic steps to optimize the business for long-term value creation. Internalizing fleet and disposal volumes is expected to yield results in the second half of the year and beyond. This discussion is followed by Tobey Sommer from Truist, who acknowledges previous questions and inquires about the learnings from Stericycle.

In the paragraph, Rafael Carrasco discusses the key outcomes and observations from the analysis of a transaction involving Stericycle. While there were no major surprises, they successfully optimized sales coverage in secure information destruction and found the Stericycle network and customer base to be resilient. Despite some ERP issues, customers appreciated the comprehensive waste management solutions offered. Carrasco also highlights the future expansion of their Rx-PRO initiatives with the integration of new capacity at McCarran, which will improve margins as they increase their incinerator network capacity. Jim Fish adds that Carrasco covered all key points.

The paragraph discusses the positive outlook of a recent acquisition, noting that no unforeseen negatives have been found. The acquisition is seen as an affirmation of the company's strategic approach, which focuses on stronger growth potential compared to solid waste. While immediate results might not be evident due to initial cleanup, growth is anticipated over time. There is an emphasis on exploring future opportunities and potential international divestitures, particularly in the UK, Ireland, France, and Germany. The UK and Ireland business is performing better than last year, and the company is evaluating how to optimize its smaller operations in Western Europe within its overall portfolio.

In this exchange, Jerry Revich from Goldman Sachs is inquiring about the inflation and cost management in the legacy business during a tough first quarter. Devina Rankin responds positively, noting that despite challenges like winter weather impacting volumes, they are satisfied with the operating expense margin and confident about achieving their long-term margin expansion goals by 2025. Tobey Sommer then asks Tara Hemmer about the pricing for landfill gas and the potential impact of a biofuel task force. Hemmer is asked to confirm if the steady pricing observed in the market aligns with their business experience and to share any insights on the biofuel task force's implications.

The paragraph discusses the company's outlook on the renewable fuel standard, noting bipartisan support in Congress. There is uncertainty in the voluntary market, influencing pricing, but expectations are that prices will recover following new RVO announcements. Tara Hemmer explains that the company has secured 75% of its 2025 volume and that a $0.25 change in RIN pricing now impacts their finances by $5 million. She confirms a 75% increase in RNG volume generation, suggesting strong year-end performance, because of new plants coming online. Tobey Sommer and David Manthey also participate in the discussion.

The paragraph discusses the impact of tariffs on materials within a commodity basket, particularly focusing on aluminum, steel, OCC (Old Corrugated Containers), and fiber. Devina Rankin notes that tariffs could positively affect domestic materials like aluminum and steel but is more concerned about retaliatory tariffs affecting shipments to Southeast Asia and India. Jim Fish highlights a shift away from reliance on China for OCC sales, crediting the brokerage team for their strategic positioning. Tara Hemmer praises the brokerage team's efforts. David Manthey attributes the success to good foresight. Jim Fish and the operator acknowledge the comments. James Schumm shifts the discussion to the potential for reducing Stericycle's SG&A costs over several years to match WM's corporate level, asking Devina about the structural differences that might prevent this.

Devina Rankin discusses the goal of achieving a 9.5% SG&A as a percentage of revenue for WM, similar to their current operations in geographic areas like Florida. The WM Healthcare Solutions and Stericycle businesses will operate on separate ERP systems, which is a structural difference impacting integration. However, the company sees a path to an optimized cost structure. James Schumm inquires about the long-term revenue and EBITDA growth targets for Stericycle's healthcare business, which are 3% to 5% and 13% to 17% annually, respectively. Jim Fish responds that these targets are still valid and highlights that their immediate focus is on reducing operating expenses and SG&A costs, with potential for extensive cross-selling opportunities.

The paragraph discusses a company's current status and challenges with their shared wallet and ERP implementation. The shared wallet generates about 5% of revenue from a collection and disposal business with potential for growth. The ERP system, intended to improve service delivery, initially caused setbacks, which are now being addressed. There is substantial opportunity, evidenced by a contract data mart developed for WM Healthcare Solutions, revealing over 1,000 contracts and nearly $200 million in revenue with unmet or overlooked performance indicators. Devina Rankin states that specifics on long-term growth projections will be shared at an Investor Day, without committing to prior Stericycle EBITDA growth estimates. The conversation then shifts to labor force developments amid challenging conditions, with Stephanie Moore from Jefferies expressing interest in the progress of related initiatives.

In the paragraph, John Morris discusses the company's progress in optimizing labor through attrition and technology implementation. To date, they've reduced or avoided refilling 2,600 roles and plan to eliminate the need for approximately 940 more roles by 2025, mainly through automating recycling facilities and residential services. Additionally, the company is enhancing technology in areas like fleet planning and scheduling to improve efficiency, reduce labor reliance, and address skill gaps. Overall, they're enthusiastic about how technology is supporting efforts to decrease labor dependency.

In the paragraph, Jim Fish, President and CEO, concludes a conference call by stating that the company has remained consistent in its performance, is on track with its yearly guidance, and has observed encouraging volume improvements in March and April after a challenging start to the year. He also mentions that the impact of tariffs for 2025 is expected to be minimal and provides updates on sustainability investments and WM Healthcare Solutions. Jim invites participants to the upcoming Investor Day in New York City in June. The call is then concluded by the operator.

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