Waste Management (NYSE:WM) reported first-quarter financial results on Wednesday. The transcript from the company’s first-quarter earnings call has been provided below.
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The full earnings call is available at https://edge.media-server.com/mmc/p/4g576nv7/
Summary
Waste Management reported a strong Q1 2026 with operating EBITDA growing by nearly 6% year-over-year, driven by solid performance in the collection and disposal business and growth in sustainability businesses.
The company achieved a 6.4% growth in operating EBITDA in its collection and disposal business, supported by customer focus and operational excellence. Sustainable investments are yielding returns with a doubling of operating EBITDA in renewable energy.
Free cash flow doubled to $920 million, allowing Waste Management to return $730 million to shareholders through dividends and share repurchases. The company remains confident in meeting its full-year financial guidance.
Management highlighted strong pricing execution with core price growth exceeding expectations, especially in commercial and landfill lines, and noted opportunities for tuck-in acquisitions in 2026.
Despite headwinds from winter weather affecting volumes, Waste Management expects improvement in the second half of the year, with special waste and industrial volumes showing positive trends.
Full Transcript
OPERATOR
Thank you for standing by and welcome to the WM’s first quarter 2026 earnings conference call. At this time, all participants are in listen only mode. After the speaker’s presentation, there will be a question and answer session. To ask a question during the session, you’ll need to press Star one one on your telephone. If your question has been answered and you’d like to remove yourself from the queue, simply press star 11 again. As a reminder, today’s program is being recorded. And now I’d like to introduce your host for today’s program, Ed Eagle, Vice President, Investor Relations. Please go ahead, sir.
Ed Eagle (Vice President, Investor Relations)
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 8K that includes the earnings press release and is available on our website@www.wm.com. the Form 8K, 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 10K and Form 10Qs. 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 SGA 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 at the company’s website@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 1pm 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 rebroadcasting 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.
Jim Fish (Chief Executive Officer)
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 healthcare solutions. This momentum 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 four 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 seven new renewable natural gas facilities since the first quarter of 2025. In the recycling segment, even though pricing per 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 is 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 and sustainability, advancing healthcare 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.
John Morris (President and Chief Operating Officer)
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. 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’s 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 of 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 paces per 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 SGA 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.
David Reed (Executive Vice President and Chief Financial Officer)
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 cost. 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 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 reach 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 2.94 times, returning to within our target range of between 2.5 and 3 times. 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 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 and 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.
OPERATOR
Certainly. And our first question comes from the line of Jerry Revich from Wells Fargo. Your question please.
Jerry Revich (Equity Analyst)
Yes, hi, good morning everyone. 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.
David Reed (Executive Vice President and Chief Financial Officer)
Yeah, 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.
Jim Fish (Chief Executive Officer)
And then Jerry, as far as volume goes for the remainder of the year, I mean if you 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, you know, three feet of snow in Boston, I don’t think they’ve had that in 15 years. So it did impact us. 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 stair cycle facilities, 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 reason 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 will they look like. What will 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 six or seven quarter trend. We’ve been negative on roll off volumes for at least kind of a year and a half. 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’s 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.
Jerry Revich (Equity Analyst)
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 you know, 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 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.
David Reed (Executive Vice President and Chief Financial Officer)
Yeah, Jerry. I would say this, 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 dollars 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, healthcare, you can see the margin improvement in, in Q1, but I think net of the fire headwinds, I think we’re going to see good, 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. Thank you. Sure.
OPERATOR
Our next question comes from.
Brian
Brian. Is Brian up next? Hi, good morning. Can you hear me? Yes, we can hear you now. Okay. Yep. Good morning. Thanks for taking the question. Yeah, 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 …
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