Detailed Narrative
Operational Excellence and Cost Discipline
WM achieved a full-year operating expense as a percentage of revenue of 60.7% in 2024, the first time below 61% and a 100 basis point improvement from 2023. This was driven by strong execution, automation, and technology adoption. Labor costs as a percentage of revenue declined by 60 basis points year-over-year, despite acquisition impacts. Annualized driver turnover reached a record low of 15%, improving over 300 basis points from 2023. Repair and maintenance costs also declined as a percentage of revenue due to increased truck deliveries, fleet optimization, and streamlined maintenance.
Sustainability Growth Investments
In 2024, WM brought 5 renewable natural gas (RNG) facilities online and advanced automation upgrades at 10 recycling facilities, adding recycling facilities in 2 new markets. These investments are expected to contribute operating EBITDA approaching $800 million in 2027. The company is confident in the demand for RNG and the overall investment thesis for these assets. All but 2 of the 20 planned RNG plants will have completed construction by the end of 2025, with the remaining 2 in early H1 2026.
Stericycle Acquisition and Integration
The successful completion of the Stericycle acquisition in November 2024 broadens WM's solutions in medical waste management and secure information destruction. Integration efforts are underway, with commercial operations, support, and back-office functions integrated within three months. Synergy estimates have been doubled to $250 million over three years, with up to $100 million expected in 2025. The synergy capture is primarily from internalization, SG&A, and OpEx, with significant opportunities in optimizing sales coverage and consolidating recycling capacity. The WM Healthcare Solutions business is expected to grow about 9% in EBITDA before synergies in 2025.
Residential Business Optimization
WM's residential line of business saw its operating EBITDA margin grow over 400 basis points, approaching 20% for the full year 2024. This improvement was driven by automating over 500 residential routes and exiting an additional 400 lower-margin routes since 2022. The company continues to shed unprofitable residential business, with 25% of residential customers still having an EBIT margin of zero or less, indicating further opportunity for optimization.
Capital Allocation and Deleveraging
In 2024, WM returned $1.47 billion to shareholders, including over $1.2 billion in dividends. The company invested about $800 million in tech and acquisitions for traditional solid waste and recycling, and $950 million in sustainability growth initiatives. For 2025, capital expenditures are targeted at $3.175 billion to $3.275 billion, including $625 million for sustainability and $225 million for WM Healthcare Solutions. Share buybacks have been paused to focus on deleveraging, with a target leverage ratio of approximately 3.1x by the end of 2025, down from 3.5-3.6% in 2024.
ERP Challenges and Opportunities in WM Healthcare Solutions
The WM Healthcare Solutions business is undergoing an ERP transition. WM's team is focused on integrating technology with change management and operational connectivity, which was previously lacking. An incremental spend of $35 million to $40 million is expected for this initiative in 2025. The ERP implementation is also expected to drive significant cash improvement, potentially up to $150 million, through DSO improvement, primarily in early 2026.