Release Date: April 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Waste Management Inc (WM, Financial) reported a strong start to 2025 with first-quarter results exceeding expectations, driven by a 12% growth in operating EBITDA.
• The company's sustainability businesses, including recycling and renewable energy, saw a combined operating EBITDA growth of over 20% year-over-year.
• WM's focus on technology and automation has led to significant improvements in operational efficiency, contributing to margin expansion.
• The integration of WM Healthcare Solutions is progressing well, with a clear path to achieving $250 million in annual run rate synergies by 2027.
• WM has a robust pipeline of tuck-in acquisition opportunities, expecting to close more than $500 million in solid waste acquisitions in 2025, indicating strong growth potential.

Negative Points

• The expiration of alternative fuel tax credits posed a 30-basis-point headwind to the company's margins.
• Winter weather in the Southeast and Gulf Coast regions negatively impacted volumes and posed challenges in the first quarter.
• The strategic exit from low-margin residential business and economic pressures on the industrial segment led to flat volumes in the collection and disposal business.
• The integration of Stericycle's ERP system has presented challenges, impacting the efficiency of the WM Healthcare Solutions business.
• The recycling brokerage revenue is down relative to expectations, although it has low margin impact.

Q & A Highlights

Q: Can you provide more details on your outlook for the second quarter, especially regarding the new healthcare business and solid waste margins? A: Devina Rankin, CFO, explained that there are no unusual seasonality impacts expected, except for the California wildfires. Solid waste business contributed 50 basis points of EBITDA margin expansion, overcoming a 30-basis-point headwind from the alternative fuel tax credit. The healthcare business is expected to see continued momentum in synergy capture and cost optimization, with the strongest margin performance anticipated in Q3.

Q: How did the yield in the solid waste business compare to expectations, and what factors influenced it? A: John Morris, COO, noted that the yield dropped about 400 basis points, but core price performance was strong across all lines of business. Anomalies in yield conversion were due to California wildfire volume and softer industrial business. Despite the negative trend, there was sequential improvement, supporting confidence in Q2.

Q: What is the synergy capture progress in the healthcare business, and what are the updated synergy targets? A: Rafael Carrasco, SVP of Operations, reported $16 million in value capture in Q1, primarily from SG&A rationalization. The company is confident in achieving the $90 million synergy target for 2025, with further benefits expected from internalization goals and sales coverage optimization.

Q: Can you provide an update on the M&A pipeline and its impact on guidance? A: Devina Rankin, CFO, stated that the pipeline is strong, with expectations to close over $500 million in solid waste acquisitions in 2025. This is an increase from previous guidance, with incremental tuck-in acquisition revenue now expected to be between $80 million and $125 million.

Q: How is the integration of the healthcare business progressing, and what feedback have you received from customers? A: Rafael Carrasco, SVP of Operations, shared that customers are excited about WM's enhanced sustainability capabilities and reporting tools. The company is working on ERP fixes to improve service delivery and billing processes, with a focus on cross-sell opportunities and expanding service offerings.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.