Waste Connections (TSX:WCN) released first-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.
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Summary
Waste Connections Inc. reported a strong start to 2026 with revenue of $2.371 billion, up 6.4% year-over-year, and an adjusted EBITDA margin of 32.5%, up 90 basis points excluding commodity impacts.
The company highlighted strategic investments in AI and human capital, contributing to improved pricing effectiveness and customer retention, and plans to continue M&A activity with a pipeline expected to close deals worth $100 million by early Q3.
Future guidance remains positive with high visibility for full-year core pricing at the high end of the 5-5.5% range, despite challenges such as higher fuel costs mitigated by hedges and surcharges.
Full Transcript
OPERATOR
Hello everyone. Thank you for joining us and welcome to the Waste Connections Inc. Q1 2026 earnings call. After today’s prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, please press Star one again. I will now hand the conference over to Ron Mittelstadt, President and CEO. Please go ahead.
Ron Mittelstadt (President and CEO)
Thank you operator and good morning. I’d like to welcome everyone to this conference call to discuss our first quarter results. I am joined this morning by Marianne Whitney
Marianne Whitney (Chief Financial Officer)
Whitney, our CFO, as well as several other members of our senior management. As noted in our earnings release, we are are well positioned for 2026 following a strong start with upside potential from recent trends, we not only exceeded expectations for revenue and EBITDA, but delivered EBITDA margin of 32.5% up 90 basis points year over year excluding commodity impacts in spite of outsized weather impacts and in advance of recovering higher fuel costs against a volatile macroeconomic and geopolitical backdrop, our results reflect the durability of our model and consistency of execution as we continue to benefit from improved operating trends along with recent increase in commodities and special waste activity. Before we get into much more detail, let me turn the call over to Maryanne for our forward looking disclaimer and other housekeeping items. Thank you Ron and good morning. The discussion during today’s call includes forward looking statements made pursuant to the safe harbor provisions of the U.S. private Securities Litigation Reform act of 1995, including forward looking information within the meaning of applicable Canadian securities laws. Actual results could differ materially from those made in such forward looking statements due to various risks and uncertainties.
Ron Mittelstadt (President and CEO)
Factors that could cause actual results to differ are discussed in the cautionary statement included in our April 22 earnings release and in greater detail in Waste Connections filings with the U.S. Securities and Exchange Commission and the Securities Commissions or similar regulatory authorities in Canada. You should not place undue reliance on forward looking statements as there may be additional risks of which we are not presently aware or that we currently believe are immaterial which could have an adverse impact on our business. We make no commitment to revise or update any forward looking statements in order to reflect events or circumstances that may change. After today’s date on the call, we will discuss non GAAP measures such as adjusted EBITDA, adjusted net income on both a dollar basis and per diluted share, and adjusted free cash flow. Please refer to our earnings releases for a reconciliation of such non GAAP measures to the most comparable GAAP measures. Management uses certain non GAAP measures to evaluate and monitor the ongoing financial performance of our operations. Other companies may calculate these non GAAP measures differently. I will now turn the call back over to Ron. Thank you Marianne. On the strength of our business and consistent execution, 2026 is off to a great start with results exceeding expectations. Despite the volatility of the broader macro environment, we haven’t seen anything to date that doesn’t support our full year outlook
Marianne Whitney (Chief Financial Officer)
as provided in February. In fact, we believe we should be well positioned for incremental benefits both from external factors driving higher fuel and other commodities, and also as a result of our ongoing investments in human capital and AI which have broad implications for our operations along with continued M and a in Q1 we saw improving dynamics across our business, starting with better than expected solid waste pricing retention resulting in core price of 6%, providing visibility for the high end of our full year 2026 outlook of five to five and a half percent. Next, our landfill tons were slightly stronger than expected, offsetting the volume impacts from slowdowns and closures, related to severe winter weather which persisted in several markets, most notably in the Northeast. Landfill activity was led by higher special waste tons, up 8% year-over-year over year in Q1, the sixth consecutive quarter of improving special waste. Looking next at the aspects of our results related to crude oil prices and related volatility which are twofold. First, our E and P waste business where revenues increased sequentially and were up about 4% over a year on a like-for-like basis. We saw increases both in Canada on greater production oriented activity and higher pricing and in the US on drilling oriented activity, most notably in the Gulf. To date we haven’t seen a meaningful increase in recount or pickup in drilling activity which may be driven by sustained higher crude prices or long term supply disruptions and would be additive to the levels we are currently experiencing. Next fuel and related costs Spot Diesel in the US was up 12% year over year, including an increase of over 35% in March. That surge drove our internal fuel costs about 5 million above our expectations for Q1. Our exposure to the cost impacts is limited due to hedges we proactively put in place for over 45% of our expected diesel requirements for 2026. Additionally, in certain markets our pricing mechanisms allow for recovery of a portion of higher fuel related costs over time through surcharges which will step up in Q2 as a result of the incremental costs we have already absorbed. Based on what we have seen to date, we would expect to be largely insulated on an EBITDA basis over time from most of the effects of higher fuel costs between the benefit from any pickup in the NP waste activity, the impact of hedges and the recovery of higher diesel costs through surcharges, albeit with some lag in timing. Looking next at trends for other commodities, recycled commodity value stepped up sequentially in Q1 for the first time in seven quarters, led by improving values for fiber during the quarter. Although nominal, the increase is a positive indicator and landfill gas sales also stepped up sequentially in this case due to increased volumes unstable values for renewable energy credits or RINs. Moving next to operating trends, Q1 marked our 14th consecutive quarter of improvement in employee retention and the achievement of another milestone as voluntary turnover dropped to below 10%. We can’t overstate the value of human capital and as a differentiator and continue to see the benefits of lower turnover throughout our operations, from our record safety levels to increased employee engagement and ultimately customer retention Shifting to the subject of technology, our continued investment and focus on AI and our overall digital platform are showing promising results within pricing effectiveness, customer engagement and asset optimization. Specifically, our AI driven pricing tool has yielded approximately 20% improvement in customer retention and pricing effectiveness while maintaining our core pricing strength. We are encouraged by early results, knowing our analytics and capabilities will only get better as our technology advances further for the balance of 26 and into 2027, we are excited about our continued involvement with the field to expand our AI powered tools, reinforcing our commitment to our decentralized first model and value based approach to the business. These current and future tools will continue to expand our customer engagement and routing productivity with early indications suggesting strong returns on investment. Moving next to M and A, we continue to anticipate another outsized year of activity based on a robust and and building pipeline with high visibility and handful of deals. With aggregate annualized revenue of approximately 100 million expected to close by the end of Q2 or early Q3, we are on track for another above average M and A year. Most importantly, we remain disciplined in our approach to acquisitions and well positioned for implementing our growth strategy while also increasing return of capital to shareholders. To that end, on a year to date outlays of approximately 365 million, we’ve repurchased about 1% of shares outstanding. And finally, an update on our management of the ongoing elevated temperature landfill or ETLF event at Chiquita Canyon, our closed landfill in Southern California. We continue to make progress on mitigating the reaction which based on objective data collected to date is stable, controlled and decelerating. As noted previously, we have sought out the increased involvement and oversight of the US EPA in an effort to streamline the process. And finally, an update on our management of the ongoing elevated temperature landfill or ETLF event at Chiquita Canyon, our closed landfill in Southern California. We continue to make progress on mitigating the reaction which based on objective data collected to date is stable, controlled and decelerating. As noted previously, we have sought out the increased involvement and oversight of the US EPA in an effort to streamline the process. Over the past several weeks, the EPA has expanded its involvement at the facility which we welcome. To date, the EPA has weighed in and provided direction on two critical issues and we respect their expertise and experience which have facilitated the development of plans to resolve these matters. Consistent with our expectations, we continue to work with the EPA in a long term agreement which should provide even greater clarity. Once consummated, there is no change in our 2026 outlook for Chiquita, which reflects free cash flow impacts of 100 to 150 million. That said, we did adjust our accrual in Q1 to reflect the higher spending we saw in 2025, which was incorporated into our 2026 outlook. That said, we did adjust our accrual in Q1 to reflect the higher spending we saw in 2025 which was incorporated into our 2026 outlook. We look forward to being in a position to more formally reforecast the outlays for subsequent periods once we have a roadmap for moving forward still anticipated this year. Additionally, we continue to expect free cash flow impacts in 2027 will decline as compared to 2026 as previously communicated, and continue to step down in each year going forward. And now I’d like to pass the call to Maryann to review more in depth the financial highlights of the first quarter. I will then wrap up before heading into Q and A. Thank you ron in the first quarter, revenue of 2.371 billion exceeded our expectations and was up $143 million, or 6.4% year over year. Contributions from acquisitions net of divestitures totaled $55 million in the quarter. Organic growth in solid waste collection, transfer and disposal of 3.1% was led by 6% core price, which ranged from about 4% in our mostly exclusive market Western region to over 7% in our competitive markets. Total price of 5.9% included a reduction of about 10 basis points in fuel and material surcharges. Given the lag in recovery of higher costs. With over 75% of our price increases already in place or contractually provided for,
Ron Mittelstadt (President and CEO)
we have high visibility for full year 2026 core pricing at the high end of the range we provided or about 5.5% and given the recent step up in diesel costs, we would expect surcharges to increase accordingly, albeit with a lag driven not only by the mechanics of the surcharges but also due to advanced monthly or quarterly billing for some of our customers. As Ron noted, we have hedges in place for almost half of our diesel requirements and utilize surcharges in a portion of our markets. Yield of 4.7% reflects ongoing reductions in customer churn and implies solid waste volumes down about 1 1/2 percent, including up to about half a point attributable to outsized weather events that contributed to Q1 volume losses to varying degrees across all of our regions except the western region where volumes were up about 1.5%. Looking at year over year results in the first quarter on a same-store basis, roll-off pulls were down 1% on rates per pull up 3% and with the exception of our western region, polls were down in all regions. That said, we are encouraged by improving roll off trends especially given weather impacts as compared to Q4 year over year results. Polls were less negative by almost half a point and year over year rates per poll stepped up by 120 basis points. Landfill trends, while still mixed, are also encouraging. Total tons were up 4% on MSW, up 5% and special waste up 8%, partially offset by ongoing weakness in C&D down 5%. Increases in MSW tons were spread across our western Canadian and central regions while special waste activity was broad based driving increases in five of six of our geographic regions. Most noteworthy though was a 20% increase in special waste activity in our central region where the pickup in activity we noted in recent quarters had been lagging other markets and following up on Ron’s comments about improving commodity driven activity, recycled commodity revenues improved during Q1, led by an increase in old corrugated cardboard or occurring which averaged $89 per ton in Q1 and exited the quarter in line with the 2025 full year average price of $94 per ton. Additionally, our landfill gas sales increased sequentially as a result of contributions from one of our new RNG facilities currently in startup and also from higher natural gas prices which spiked in Q1 similar to last year. Values for renewable energy credits or RINs remain stable at about $2.40 following the EPA’s updates for renewable volume obligations. Adjusted EBITDA for Q1 is reconciled in our earnings release with $769.5 million up 8% year over year at 32.5% of revenue. Our adjusted EBITDA margin exceeded our expectations and was up 50 basis points year over year driven by 90 basis points. Underlying margin expansion by offset by about 40 basis points. Drag from commodities Outside solid waste margin expansion reflected improvement in several cost items reflecting favorable price cost spread dynamics led by strong pricing retention and magnified by benefits from employee retention and safety. These benefits were partially offset by higher fuel and related costs and finally adjusted free cash flow of 246 million was in line with our expectations and consistent with our full year outlook as provided in February of 1.4 to 1.45 billion. We were pleased to see Q1 capital expenditures (CapEx) outlays outpace last year’s slow start, largely as a result of more expeditious deliveries of fleet and equipment and faster progress on projects including our RNG facilities in development. Moving next to our balance sheet, we opportunistically access the public debt market with significant $600 million note offering in early March to further diversify funding sources following that highly successful offering and activities during the quarter including share repurchases. As noted by Ron, our debt outstanding of about $9.1 billion with a tenor of over eight years at an average interest rate of about 4% with about 80% of our debt fixed with liquidity of approximately $1 billion and quarter end net debt to EBITDA leverage of about 2.6x. We retain flexibility for acquisitions as well as returning capital to shareholders through additional repurchases and dividends. And now let me turn the call back over to Ron for some final remarks before Q and A. Okay, thank you Marianne. As we’ve said, 2026 is off to a great start and there are a number of factors working in our favor for the rest of the year. The strength of our results is a reflection of the projectability and and consistency that sets us apart regardless of the macroeconomic environment. Our industry leading results are also reminder of the importance we place on asset positioning and market selection, both of which are fundamental to our strategy and which we believe drive differentiation. Our results highlight the importance of discipline around capital allocation as well as the value of human capital and culture in driving results. These are the tenets that have guided Waste Connections approach since our founding over 28 years ago and which remain fundamental as we approach 10 billion in revenue very soon. To that end, we’re most grateful for
OPERATOR
the commitment of our 25,000 plus employees who live our values every day, putting safety first and making waste connections. Such a great place to work. We appreciate your time today. I will now turn this call over to the operator to open up the lines for your questions. Operator thanks Ron. We will now begin the question and answer session. Please limit yourself to one question and one follow up. If you would like to ask a question, please press Star one. To raise your hand to withdraw your question, please press Star one. Again, we ask that you pick up your handset when asking a question to allow for Optimum sound quality if want you. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q and A roster. Your first question comes from the line of Tyler Brown with Raymond James. Your line is open. Please go ahead.
Ron Mittelstadt (President and CEO)
Hey, good morning, Tyler. How are you? Hey, doing okay, Ron. Hey, Marianne. So I appreciate some of the comments on fuel, but I just want to make sure. Excuse me. That I’ve got it. So sorry for this, it’s kind of a multi part question. But number one, I just want to make sure that it’s clear that kind of over the course of the year you would expect fuel to be effectively a push from an EBITDA dollar perspective. But then two, if we assume where where fuel is and it stays where it is, we clearly need to contemplate higher surcharges and that will be dilutive on margins. So I assume that needs to be considered. Can you maybe size some of the dilution there? And then three, for my garbage bill, I believe I paid two months in advance. So we also need to consider that there is a lag on fuel recovery. So can you help us think about fuel dilution specifically in Q2? So I know there’s a lot there. I’m sorry about that. But just some more color on fuel. Sure, happy to address that. And there are a lot of moving parts.
Tyler Brown (Equity Analyst at Raymond James)
So here’s how I’d approach it. First of all, you have fuel impacts that are direct and indirect. And what we know is that the direct impacts are mitigated or impacted by first of all the hedges we have in place. So we’ve got hedged almost 50% of our fuel requirements. And then we get fuel surcharges in certain of our markets. And as you said, and as we said in the script, largely in terms of the dollar amounts of the impact from fuel, we, we can recover that over time through fuel surcharges. You use the term during the year. I just remind that since the spike started in March, it goes into next year. In terms of the recovery, to your point, there is a lag. The lag is driven by it’s twofold. One is the mechanism specified by whatever the what limits or provides for the surcharge. And then secondly, as you also pointed out, we advance bill customers on a quarterly or monthly basis. And so you can appreciate that when fuel ran in March, customers who we had billed in January, of course we couldn’t have recovered that. We hadn’t anticipated it. So it could take by example up until May to get that so then that brings you to the question of how quickly we recover. …
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