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    WM
    Earnings call· Sep 2025(Q3 FY25)

    WASTE MANAGEMENT INC WM

    Oct 28, 2025 Source

    Executive summary

    Waste Management, Inc. Q3 FY25 — Strong EBITDA and FCF Growth Driven by Core Business and Strategic Investments

    Waste Management delivered a robust Q3 FY25, showcasing strong operational and financial performance driven by its core collection and disposal business and strategic investments. The company is poised to harvest benefits from these investments in 2026, with an early free cash flow outlook approaching $3.8 billion. While the WM Healthcare Solutions segment faces temporary revenue headwinds due to integration and customer-centric adjustments, its strategic value and synergy capture remain strong, contributing to overall confidence in future growth and shareholder returns.

    Highlights

    5

    • Operating EBITDA grew over 15% in Q3 FY25, with the collection and disposal business contributing over half of the year-over-year increase.

    • Free cash flow grew nearly 33% in Q3 FY25, reflecting strong earnings growth and a shift from peak investment levels.

    • WM's legacy business achieved a record operating EBITDA margin of 32% in Q3 FY25, meaningfully surpassing the 30% ambition.

    • Recycling segment operating EBITDA grew 18% in Q3 FY25 despite a nearly 35% decline in recycled commodity prices.

    • Driver and technician turnover improved by 300 basis points, reaching a record low of 16.8%.

    Concerns

    4

    • Full-year revenue is projected at the low end of prior guidance due to incremental weakness in recycled commodity prices and revised expectations for WM Healthcare Solutions.

    • WM Healthcare Solutions revenue trends reflect a more measured pace than initial projections, impacted by deferred price increases and customer credits.

    • Recycled commodity prices declined nearly 35% year-over-year in Q3 FY25, with OCC prices down due to mill closures and weaker box demand.

    • A long-term pursuit of hazardous waste landfill expansion in the Northeast was impaired, leading to a charge and a reduction in disclosed hazardous waste landfills from 5 to 4.

    Guidance & targets

    9
    CategoryTargetConfidence
    Free Cash Flow
    approaching $3.8 billion
    high materiality
    High
    Full-year Revenue
    low end of our prior guidance range
    high materiality
    High
    Full-year Operating EBITDA Margin
    between 29.6% and 30.2%
    high materiality
    High
    Leverage Ratio Target
    between 2.5x and 3x
    high materiality
    High
    Sustainability EBITDA Growth
    up ~$280 million
    medium materiality
    High
    Total Incremental Sustainability EBITDA
    near $800 million
    high materiality
    High
    Recycling Commodity Price Range
    $75-$150 per ton
    medium materiality
    Medium
    RIN Prices
    $2.20-$2.30
    medium materiality
    Medium
    WM Healthcare Solutions ERP Stabilization
    stabilization complete by end of Q1 FY26, scalable/growth period starts Q2 FY26
    medium materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Collection and Disposal
    Achieved record operating EBITDA margin, consistent with growth and margin expansion objectives, reflecting strength of post-collection assets, increased landfill volumes, and disciplined price-cost spread.
    Operating EBITDA growth: >7%Operating EBITDA margin expansion: 100 bps
    		———38.4%
    Recycling
    Strong performance despite nearly 35% decline in recycled commodity prices, due to contract management and innovative technologies.
    Operating EBITDA growth: 18%
    		————
    Renewable Energy
    New facilities drove higher year-over-year contributions, but sequential growth was lower due to timing of RIN sales. Full-year growth expectations remain consistent.
    		——lower sequentially—
    WM Healthcare Solutions
    Margin improved each quarter since acquisition. Revenue trends are more measured than initial projections due to disciplined customer engagement, credits, and deferred price increases, but synergy capture has exceeded expectations.
    Operating EBITDA margin improvement: sequential each quarterTurnover improvement: 21% since beginning of 2025On-time service delivery: highest level in over 4 years
    		———17.5%
    WM Legacy Business
    Achieved operating EBITDA margin meaningfully surpassing the long-standing ambition of sustained operating EBITDA margins above 30%.
    		———32%

    Operational metrics

    39
    Operating EBITDA Growth
    >15%YoY
    Q3 FY25

    Driven by strong operational and financial performance.

    MSW Volume Growth
    5%
    Q3 FY25

    Driven by robust disposal volumes to the network.

    Special Waste Volume Growth
    5.5%
    Q3 FY25

    Strong growth driven by new event work.

    Operating Expenses as % of Revenue
    below 60%second consecutive quarter
    Q3 FY25

    Improvement driven primarily by collection and disposal business.

    Maintenance and Risk Management Costs Reduction
    60 bps
    Q3 FY25

    Contributed to 90 basis points of margin expansion in collection and disposal.

    Total Recordable Incident Rate Improvement
    7%YoY
    YTD FY25

    Lowering risk management costs as a percentage of revenue.

    Driver and Technician Turnover
    16.8%down 300 bps
    Q3 FY25

    Investments in people, process, and technology showing meaningful results.

    Operating EBITDA Margin (WM Legacy Business)
    32%
    Q3 FY25

    Meaningfully surpassed the long-standing ambition of sustained operating EBITDA margins above 30%.

    Operating EBITDA Margin (Total Company)
    30.6%best quarterly result in history
    Q3 FY25

    Record quarterly result despite acquisition headwind.

    Operating EBITDA Margin Expansion (WM Legacy Business)
    120 bps
    Q3 FY25

    Achieved while overcoming a 30 bps headwind from alternative fuel tax credit expiration.

    Operating EBITDA Margin Expansion (WM Legacy Business, other drivers)
    60 bps
    Q3 FY25

    Additional margin expansion from these factors.

    Capital Spending
    $2.34 billion
    YTD FY25

    Tracking according to plan.

    Operating EBITDA to Free Cash Flow Conversion
    approached 42%
    Q3 FY25

    Reflects shift in investment cycle.

    Capital Returned to Shareholders (Dividends)
    $1 billion
    YTD FY25

    Part of disciplined capital allocation.

    Capital Allocated to Solid Waste Acquisitions
    $400 million
    YTD FY25

    Part of disciplined capital allocation.

    Leverage Ratio
    3.3x
    Q3 FY25

    Tracking towards target ratio.

    Synergy Capture (WM Healthcare Solutions)
    exceeded initial expectations
    Q3 FY25

    Contributing to achieving targeted operating EBITDA contributions despite revenue moderation.

    Wildfire Cleanup Revenue
    ~$115 million
    YTD FY25

    Revenue from one-time cleanup work.

    EBITDA Growth (Solid Waste Segment)
    ~$145 million
    Q3 FY25

    Accomplished in Q3 FY25.

    Recycling Commodity Price Impact on EBITDA
    $8 millionper $10 change
    future

    For automation investments, a $10 change in commodity prices equates to about $8 million.

    Recycling Commodity Price Impact on EBITDA (Base Business)
    $20 millionper $10 change
    future

    For the base business, a $10 change in commodity prices equates to about $20 million.

    Recycling Commodity Price Impact on EBITDA (Total)
    $25-$30 millionper $10 change
    future

    Combined impact of a $10 change in commodity prices.

    Industrial Volume Growth
    1.2%first positive quarter since 2022
    Q3 FY25

    Positive inflection in industrial volumes.

    Operating Expenses as % of Revenue (Prior)
    63%+
    few years ago

    Historical operating expense level.

    Operating Expenses as % of Revenue (Prior)
    under 62%
    past

    Historical operating expense level.

    Operating Expenses as % of Revenue (Prior)
    under 61%
    past

    Historical operating expense level.

    Operating Expenses as % of Revenue (Current)
    59.4%
    Q3 FY25

    Current operating expense level, showing significant improvement.

    WM Healthcare Solutions SG&A Improvement
    700 bps
    since Q3 last year

    Dramatic shift down in SG&A as a percentage of revenue.

    WM Healthcare Solutions SG&A Target
    17%
    3-year horizon

    Intended target for SG&A as a percentage of revenue.

    RNG Production Growth
    doubledYoY
    YTD FY25

    On track through the first 9 months of the year.

    Presold RNG Offtake
    45%up from last update
    2026

    Volume presold for 2026.

    WM Healthcare Solutions Customer Cross-sells
    over 7,000
    current

    Cross-sales completed, with customer split 50-50 between WM and Stericycle original books of business.

    WM Healthcare Solutions Large Customer Annual Spend Increase
    >$5 million
    annual

    Example of cross-selling success.

    WM Healthcare Solutions Renewed Business
    nearly $200 million
    current

    Renewed business with large customers.

    WM Healthcare Solutions Past Due AR Cleared
    1/3
    last 3 months

    Progress on clearing accounts receivable.

    Recycled Commodity Prices Decline
    nearly 35%YoY
    Q3 FY25

    Despite this decline, recycling segment operating EBITDA grew 18%.

    Recycled Commodity Price Basket
    $65-$68
    Q4 FY25

    Expected commodity prices for Q4 FY25.

    CPI
    2.9%-3%
    current

    Used for comparison against core price.

    WM Legacy Business Proportion
    90%
    current

    Refers to the proportion of the total business excluding WM Healthcare Solutions.

    Industry KPIs

    8
    MetricValueDetails
    Yield3.8%%
    Volumeincreased
    Core price6%%
    EBITDA margin30.6%%
    Churn retention9%%
    Safety turnover16.8%%
    Price to cost spreadgood spread
    Recycling commodity impactnearly 35%%

    Product announcements

    1
    ProductTypeDetails
    New Invoiceupdate

    Deals & partnerships

    3
    StericycleMedical waste platform

    Integration of people and operations into existing management and operating structure of 16 areas.

    Unnamed hospital customerSingle provider solution for medical waste across multistate network>$5 million

    Example of cross-selling opportunity from WM Healthcare Solutions.

    Multiple solid waste acquisition targetsTuck-in solid waste acquisitions$400 million

    ~$450 million closed year-to-date, with a handful of transactions potentially closing in Q4.

    Capital programs

    4
    Fleet Investmentunderway
    Spent to date: 6,000 trucks over the last 3 years

    Benefit: improved maintenance processes, reduced repair and maintenance costs

    Above normal spend on fleet, expected to ratchet back to about 1,500 trucks next year.

    Sustainability Growth Projectsnearing completion

    Benefit: strong returns, increased RNG production

    Moving from peak investment levels into a period of harvesting returns.

    Landfill Infrastructurenearing completion

    Moving from peak investment levels into a period of harvesting returns.

    WM Healthcare Solutions ERP Implementationunderway
    Start: late 2023 / early 2024

    Benefit: streamlined operations, improved customer experience, enhanced collaboration

    ERP implementation has been challenging but is progressing, with systems (SAP and Salesforce) now communicating. Stabilization expected by end of Q1 FY26, with scalable growth period starting Q2 FY26.

    Risks & headwinds

    8
    WM Healthcare Solutions Revenue Moderationsecond half of 2025

    more measured pace than initial projections

    Mitigation: disciplined approach to customer engagement, offering credits, deferred planned price increases, focus on maximizing customer lifetime value and building strong foundation for long-term growth.

    Recycled Commodity Price DeclineQ3 FY25

    declined nearly 35% compared to last year

    Mitigation: leveraging innovative technologies (automation), managing contract structures, expecting a bounce back in 2026 (typically 12-24 months from peak to trough).

    Expiration of Alternative Fuel Tax CreditQ3 FY25

    30 basis point headwind

    Mitigation: offset by strong operational performance and margin expansion in legacy business.

    Hazardous Waste Landfill Expansion ImpairmentQ3 FY25

    impairment of existing net book value and impact of an acceleration from former estimates in the expected closure and post-closure costs

    Mitigation: decision not to pursue further expansion, reducing disclosed hazardous waste landfills from 5 to 4.

    ERP Implementation Challenges (WM Healthcare Solutions)ongoing, stabilization by end of Q1 FY26

    affected by deferred price increases, credits given to customers, some churn

    Mitigation: clearing up past-due AR (1/3 cleared in last 3 months), rolling out new invoice, ensuring systems (SAP, Salesforce) communicate, strong team focus on work streams.

    Weakness in Recycled Commodity Prices (Outlook)remainder of FY25

    incremental weakness

    Mitigation: reflected in full-year revenue projected at low end of prior guidance, offset by increased margin expectations.

    OCC Prices Declinecurrent

    mills closed down domestically (about 10% of capacity taken out), weaker box demand

    Mitigation: expecting a bounce back sometime in 2026 with economic pickup and consumer spending.

    Plastics Prices at All-Time Lowscurrent

    all-time lows

    Mitigation: temporarily closed Natura PCR operations, monitoring market conditions for minimum content legislation and buyer willingness to pay higher prices for PCR.

    What to watch in Q4 FY25

    5

    WM Healthcare Solutions ERP Stabilization

    end of Q1 FY26
    Currentstabilization period
    Targetthrough stabilization period

    Why it matters

    Successful ERP stabilization is key to unlocking the full revenue and synergy potential of the WM Healthcare Solutions acquisition.

    we expect to be through our stabilization period by the end of the first quarter. We're then going to move into a scalable and growth period, and we think that scalable and growth period starts with Q2.

    Q&A highlights

    5

    How much did wildfire cleanup contribute to year-to-date results, and what were the details behind the plastics film plant idling, landfill impairment, and renewables charge?

    Wildfire impact was mostly Q2, totaling $115M in revenue year-to-date with higher flow-through. The plastics plant was idled due to market conditions (low virgin prices, delayed legislation). The landfill impairment was for a long-term expansion pursuit at a hazardous waste site in the Northeast that did not materialize, leading to an impairment of existing book value and accelerated closure costs.

    “total revenues for that were around $115 million for the year. And as we've talked about, the flow-through on that revenue is higher than our portfolio flow-through on incremental volume, which tends to be in the 45-ish percent range.”

    asked by Patrick Brown · answered by Devina Rankin

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Value of WM Healthcare Solutions

    The acquisition of WM Healthcare Solutions is proving to be strategically valuable, aligning with secular trends of an aging population and increased healthcare demand. The integration into WM's existing 16 areas has streamlined operations, fostering cross-selling opportunities, such as a hospital customer increasing annual spend by over $5 million. Despite initial revenue headwinds from ERP implementation and customer credits, the long-term growth potential and market position are highly confident.

    02

    Sustainability Business Performance

    The sustainability businesses demonstrated solid performance, with the recycling segment's operating EBITDA growing 18% despite a nearly 35% decline in recycled commodity prices. This resilience is attributed to effective contract management and innovative technologies, particularly automation investments that are doubling EBITDA margins at those plants. New renewable natural gas facilities also contributed higher year-over-year, with full-year growth expectations remaining consistent.

    03

    Operational Efficiency and Cost Management

    WM achieved its second consecutive quarter with operating expenses below 60% of revenue, driven by the collection and disposal business. This improvement stems from investments in fleet technology, which reduced repair and maintenance costs by 60 basis points, and a focus on retention and training, leading to a 7% year-to-date improvement in the total recordable incident rate and lower risk management costs. Driver and technician turnover reached a record low of 16.8%, improving by 300 basis points.

    04

    Capital Allocation and Shareholder Returns

    The company maintains a disciplined approach to capital allocation, returning $1 billion to shareholders in dividends and allocating over $400 million to solid waste acquisitions through the first nine months of 2025. With robust free cash flow generation, the company anticipates substantial share repurchases in the coming year, alongside continued M&A focused on core solid and hazardous waste assets.

    05

    ERP Implementation and Customer Lifetime Value

    The ERP implementation for WM Healthcare Solutions, while challenging, is progressing well, with systems now communicating effectively. The company has cleared one-third of past-due accounts receivable, partly through customer credits, which are largely one-time📎. This customer-centric approach, including deferred price increases, is aimed at maximizing customer lifetime value and building a strong foundation for sustainable long-term growth, with stabilization expected by the end of Q1 FY26.

    06

    Industrial Volume Inflection

    Industrial volumes saw a positive increase of 1.2% in Q3 FY25, marking the first positive quarter since 2022. This growth was geographically widespread and partly driven by cross-selling to WM Healthcare Solutions hospital customers. Even excluding the healthcare-related volume, the underlying industrial business showed improvement, indicating a potential rebound in broader economic activity and customer demand.

    AI-generated summary of the company’s earnings call. Not investment advice.