Q3 2023 Waste Management Inc Earnings Call

Okay.

Good day, and thank you for setting by welcome to the W. M third quarter 2023 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session. You will just press star one on your telephone.

Here, an automated message advising your hand is raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Ed <unk> Senior director of Investor Relations. Please go ahead.

Thank you Victor good morning, everyone and thank you for joining us for our third quarter of 2023 earnings Conference call with me. This morning are Jim Fish, President and Chief Executive Officer, John Morris Executive Vice President and Chief operating Officer, and Davita ranking Executive Vice President Chief Financial Officer, you'll 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 Divina will cover the details of the financials.

Before we get started please note that we filed a form 8-K that includes the earnings press release and is available on our website at Www Dot W. M. Dot com the form 8-K, the press release schedules to 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.

Recent Form 10-K.

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 to be able to discuss operating EBITDA, which is income from operations before depreciation and amortization.

Any comparisons unless otherwise stated will be with the third quarter of 2022.

Net income EPS operating EBITDA and margin and SG&A expense results 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 the earnings press release, and tables, which can be found on the company's website at www dot dot dot com for reconciliations to the most comparable GAAP measures and additional information about our use of non-GAAP measures non-GAAP projections.

This call is being recorded and will be available 24 hours a day beginning approximately one P M eastern time today.

To hear a replay of the call access the Wm website at Www dot investors that Wm Dot com.

Time sensitive information provided during today's call, which is occurring on October 25, 2023 may no longer be accurate at the time of a replay.

Any redistribution retransmission or rebroadcast of this call at any form without the express written consent of WNS prohibited.

I'll turn the call over to WNS, President and CEO, Jim fish.

Thanks, Ed and thank you all for joining us.

Our third quarter results are a testament to our team's ability to deliver on the priorities we set for 2023.

Including increasing profitability through disciplined pricing and optimism and optimizing our cost structure.

Against the challenging backdrop, we remain focused on the things we can control and diligent focus is evidenced in our third quarter results.

Adjusted operating EBITDA grew by more than 6% and margin expanded 100 basis points to 29, 6% when compared to Q3 of 2022.

Our strong results in the quarter were powered by our solid waste business organic.

Organic revenue growth in our collection and disposal business remains solid and is tracking well against our expectations.

Third quarter core price was six 6% reflects robust price performance across all lines of business.

We're also pleased with the resilience of our solid waste volumes as commercial volumes turn to mostly positive.

Special waste growth improved from the second quarter.

And what really stands out for this quarter as our success in managing the middle of the P&L.

We continue to drive SG&A leverage and.

And we're also gaining momentum on operating cost optimization and efficiency gains.

Our long term focus on using automation and technology to optimize our cost structure is paying off.

As we're choosing not to replace certain high turnover difficult to fill positions.

Since January of 2022.

We've leveraged attrition and technology to reduce head count by <unk> hundred 50 positions.

We continue to be focused on the full opportunity of 5000 to 7000 position eliminations through attrition and technology over four years to five years and we're pleased with this progress to date.

You'll hear more details about our cost performance from Jonathan Davina.

Putting it all together our focus on price efficiency and cost control translated into the strong operating leverage we produced in the quarter.

Turning to our strategic investments in sustainability growth.

The investment proposition for growing our renewable energy and recycling business.

It remains strong and our project execution is tracking well.

Our seventh renewable natural gas plant and a third of 20 facilities and our growth program is expected to be in service in January.

And we have another four facilities on track for completion in 2024, including two of the largest projects in the portfolio Fairless in Pennsylvania and.

In Orchard Hills in Illinois.

On the recycling front, we've completed technology and automation upgrades at two facilities in the quarter.

And we have two more upgrades and a new facility in Nashville slated to begin service by the end of this year.

Our automated network continues to drive great results by pushing our labor and processing cost slower improving throughput and driving enhanced material quality, which benefits the recycling business in any commodity environment.

Yes, again in the third quarter, we saw materially lower labor cost per ton.

At our automated facilities and about 35% below the rest of our recycling network.

Our investments in.

In developing a blueprint for a modern recycling facilities sets us apart within the communities we serve.

And our unlocking further growth opportunities.

With one quarter remaining in the year, we're well positioned to deliver on the 2023 financial outlook, we provided last quarter, including adjusted operating EBITDA growth of 6% at the midpoint.

We continue to expect our margin run rate exiting the year of about 29% underpinned by 62% operating expenses as a percent of revenue.

9% SG&A as a percent of revenue.

So we're pleased with our results through the first nine months of the year. Our team is very focused on price discipline and cost optimization.

Deliver a strong finish to the year and lay the groundwork for further growth in 2024.

I want to thank each of our team members for their commitment to our customers and their many contributions to our success I will now turn the call over to John to discuss our operational results for the quarter.

Thanks, Jim and good morning, I'd like to open by highlighting the strides we're making in optimizing our cost structure.

Third quarter operating expenses as a percentage of revenue improved 90 basis points year over year to 61, 3%.

The collection and disposal business contributed 70 70 basis points of this improvement due to the strong operating leverage provided by our cost optimization efforts in.

In addition, we achieved pricing leverage as core price exceeded cost inflation by an estimated 100 basis points in the quarter.

We're pleased with the progress we've made in managing our labor costs as well as expenses related to repair and maintenance. Our efforts have resulted in a meaningful decline in WNS underlying cost of inflation since the beginning of the year to mid single digits in the third quarter.

Our focus on efficiently managing labor expenses is yielding positive results.

So far this year, we have automated a 141 residential routes and have a target to convert more than 400 routes in 2024.

As we shift to more automated routes, we've seen a nearly 14% decrease in the number of helpers needed in our residential business. In addition, our focus on reducing turnover continued to produce produce improvements in Q3 building on the consistent progress we've made over the past 12 months. Our collection efficiency has also exhibited steady progress throughout the year.

<unk> with commercial industrial and residential business lines showing improvements every quarter.

While these focus areas on managing our business are contributing to the improvement in labor costs.

Turning to repair and maintenance expenses, despite some lingering effects of inflation and the timing of fleet delivers deliveries, we're making progress for the first time in several years, we expect to get an allotment of vehicles that aligns with our fleet replacement strategy with more than 1200 received to date.

This has allowed us to remove older trucks from our fleet and also reduce rental truck usage by over 40% since the start of the year.

Furthermore, our spending on third party technicians has been reduced by two thirds compared to the second half of 2022 and continues to improve.

With the progress we've achieved in third quarter. We believe we've turned the corner on this expense line and are optimistic about ongoing improvements as we close out the year.

Turning to our revenue growth, we continue to execute on our revenue management programs to recover cost increases and improve margins, our third quarter organic revenue growth in our collection and disposal business was five 7% on a workday adjusted basis.

This growth was led by core price of six 6% with collection and disposal yield of 5%.

Our differentiated service offering is generating value with our national account customers as well as commercial customers. We continue to focus on maximizing customer lifetime value and our Q3 churn up 9% remains at the low end of our historical range demonstrating the positive momentum we are seeing with customers value our service offerings looking.

At volumes.

Third quarter collection and disposal volume grew by 7% on a workday adjusted basis, our landfill business drove most of the volume growth as special waste grew 11, 1% on a workday adjusted basis in the quarter.

As a reminder, we do not separate special waste into yield in volume and in Q3, we benefited from several high priced projects that drove the increase.

So we've highlighted in previous conversations the timing and pricing of special waste projects is subject to variability due to their discretionary nature. However, our project pipeline remains robust.

In addition, workday adjusted MSW volumes were up one 7% in the quarter. Our overall collection volumes were down modestly due to the intentional steps. We continue to take the price every contract to achieve acceptable returns as well as the impact of lower volumes from a roll off business, both revenue and operating EBITDA continue to grow in each line of business.

<unk> that we are prioritizing profitable volume growth.

Net new business and net service increases remains solidly positive and growth in our strategic accounts business driven by our different differentiated offerings continues to outpace our expectations.

Thus overall collection and disposal organic growth is on pace for the year.

With regard to recycling and renewable energy our third quarter results were in line with our expectations and our recently automated recycling facilities are delivering strong results.

As Jim discussed our sustainability growth projects are tracking well and we're confident that our operating EBITDA expectations for the year remain in the range provided last quarter.

In closing I would like to express my gratitude to our frontline teams for their dedication to providing safe and dependable service to our customers and communities. Each day I'll now turn the call over to Divina to discuss our financial results in further detail.

Thanks, John and good morning.

Our third quarter results reflect our continued focus on the fundamental value drivers of our business.

The planned revenue growth and cost optimization.

Executing on these fundamentals position us to deliver Debbie.

Our operating EBITDA margin in the third quarter at 29, 6%.

This is a 100 basis point improvement compared to Q3 of 2022 and it can be attributed almost entirely to 70 basis points of margin expansion in the collection and disposal business.

SG&A SG&A leverage provided the remaining expansion.

Pleased with the team's focus on optimizing costs, and reducing discretionary spending which together position us to deliver SG&A cost as a percentage of revenue of 9%.

That this long term goal is not just achievable it is largely in hand.

While the current quarter result has some benefit from lower current year incentive compensation costs.

This level of SG&A is sustainable, particularly as revenue growth.

While there were a number of other margin impact in the quarter, mostly related to fuel energy and commodities.

Basically offset each other giving us confidence that this quarter's results are based on the steps, we're taking to price our services above inflation and to permanently reduce our cost structure.

Through the first nine months of 2023, we've expanded operating EBITA margin by 40 basis points to 28, 5%.

Squarely on track to achieve our full year target of operating EBITDA margin of 24 to 28, 6%.

Our operating performance has translated into robust cash flow from operation.

The first three quarters of the year cash flow from operations exceeded $3 3 billion.

Positioning us to deliver more than $4 $5 billion of cash from operations for the year.

As we expected cash flow associated with operating EBITDA growth in 2023 has been largely offset by higher interest taxes and incentive compensation payments.

Despite these known headwinds our conversion of revenue dollars to cash from operations and operating EBITDA dollars to free cash flow in the base business were above near peak levels in the quarter, demonstrating the sustainable value creation from our diligent focus on optimizing the middle of the P&L Andrew Kaplowitz.

Hey, Josh.

Capital spending in the first nine months of the year totaled almost $1 9 billion.

With $1.456 billion related to normal course capital and $397 million of spending on sustainability growth projects.

We now expect sustainability growth capital spending of about $750 million in 2023.

The $150 million decrease from prior expectation is based on a shift in the timing of spending across the next two to three quarters.

As a result of this lower anticipated capital spending 2023 free cash flow is expected to be $150 million above our prior expectation.

In the range of $1 85 to $1 $95 billion.

Free cash flow through the first nine months of the year was $1.552 billion and free cash flow before sustainability growth investments with $1.949 billion.

We're confident in our ability to achieve our full year target of free cash flow before sustainability gross investment of between $2 $5 75, and $2 $75 billion.

Year to date, we've returned $855 million to shareholders through dividend and repurchased $990 million of our stock are.

Our leverage ratio at the end of the quarter with $2 seven three times, which is at the midpoint of our target ratio of between two five and three times.

9% of our total total debt portfolio is at variable rates in.

And our pre tax weighted average cost of debt for the quarter with three 9%.

Our balance sheet is strong and we remain well positioned to fund growth opportunities.

Look getting looking at our full year expectations, our solid operational performance in the first nine months of the year positions us to achieve the operating EBITDA guidance, we provided last quarter of $5 775 to $5 $8 $75 billion.

This strong result will be achieved with continued focus on pricing our services can recover cost inflation differentiating wm value proposition with customers to maintain and grow the right volumes.

And optimizing both operating costs and SG&A.

Expect full year revenue growth to be modestly below the midpoint of our July 2023 guidance of three five to $4 two 5%.

Most aspects of our revenue outlook remain intact, but we have seen lower revenue than planned and our recycling brokerage businesses.

Given the relatively small operating EBITDA impact from the brokerage business. This refreshed revenue outlook does not impact any other components of our guidance.

To sum it up we're pleased with our performance throughout 2023.

Operator: Good day, and thank you for sending by. Welcome to the WM 3rd quarter 2023 earnings conference call. At this time, all participants are now listening only mode.

Firmly believe that leveraging technology and automation to enhance our operations and investing in our sustainability businesses are positioning us for future success.

Operator: After the speaker's presentation, it will be a question and a session. As a question during session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised to withdraw your question. Please press star one one again.

We're grateful for the hard work of the entire Wm team their dedication to safely serve our customers and communities will ensure we finished the year strong and move into 2020 for even stronger.

Operator: Please be advised that today's conference is being recorded.

With that Victor let's open the line for questions.

Operator: I will now like to hand a conference over to speaker today.

Thank you.

Edward Egl: Ed Egl.

As a reminder to ask a question. Please press star one on one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.

Edward Egl: Senior Director of Invest Relations, please go ahead. Thank you, Victor. Good morning, everyone, and thank you for joining us for our third quarter 2023 earnings conference call. With me this morning, our Jim Fish, President and Chief Executive Officer, John Morris, Executive Vice President and Chief Operating Officer, and Devina Rankin, 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.

Yes.

Our first question comes from the line of Bryan Bergin Meyer from Citi. Your line is open.

Good morning, and thank you for taking the question.

Morning.

Thinking about some of the underlying guidance components volume is maybe a little bit better than your original view.

Edward Egl: John will cover an operating overview and Devina will cover the details of the financials. Before we get started, please note that we file a form 8K that includes the earnings press release and is available on our website at www.wm.com. The form 8K, the press release, and the schedule for 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.

Maybe just a little bit of upside on recycling and renewables versus the guidance you provided July I guess.

Do you agree with that to be.

Seem like maybe could be pointing towards the higher end of the EBITDA range. I think you said, 6% EBIT growth at the midpoint, which is maybe a touch higher.

Edward Egl: 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 files of the SEC, including a most recent form 10K. 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 of Jim John and Devina will discuss operating EBITDA, which is income from operations before depreciation and amortization.

I don't want to go.

A word here.

Any detail you can add there. Thank you.

Yes, So I guess a couple of you mentioned volume then you mentioned the EBITDA range. So I'll tackle volume first here Brian.

When we look at volume.

We're obviously pleased with a couple of things special waste as I mentioned was slightly better some of that was rate related really but.

Edward Egl: Any comparisons, unless otherwise stated, will be with the third quarter of 2022. Net income, EPS, operating EBITDA on margin, and SGNA expense results have been adjusted to enhanced comparability by including certain items that manage[inaudible] Time sensitive information provided during today's call, which is occurring on October 25th, 2023, may no longer be accurate at the time of a replay. Any redistribution, retransmission, or re-broadcast of the call in any form without the express written content of WM is prohibited.

For the most part volume was.

As we expected which was fairly flat, we said at the beginning of the year that volume would be flat and it's and it's been fairly flat all year third quarter was slightly better than the first two quarters.

The collection volumes have been have been flat pretty much all year long it's been it's been a.

It's different from one line of business to another.

Almost really by design has been down probably for a couple of years at roll off.

<unk> was probably the more disappointing of the lines of business and then commercial might've been the one that was more encouraging so commercial was up slightly roll off down and then resi by design and then within the landfill line of business.

Not anything.

Really unexpected there other than maybe special waste and maybe seeing a little bit sandy as it has.

A little bit of a mix there and then particularly when you get to the fourth quarter Sandy is really going to be a difficult comparison because of the hurricane last year.

James Fish: Now I'll turn the call over to WM's president and CEO Jim Fish. Thanks, Ed. And thank you all for joining us.

But overall volume I think it is not it's not going to be a big change when you get into the fourth quarter and honestly.

James Fish: Our third quarter results are a testament to our team's ability to deliver on the priorities we set for 2020. Including increasing profitability through discipline, pricing, and optimizing our cost structure. Against the challenging backdrop, we remain focused on the things we can control. And this diligent focus is evident in our third quarter results. Adjusted operating EBITDA grew by more than 6% and margin expanded 100 basis points to 29.6% when compared to Q3 of 20%.

What youre going to see in 'twenty, four and we will give of course, our guidance when we get to the next quarter, but 24 is going to sound pretty similar to 'twenty three I think.

When it comes to volume.

I guess when it comes to the EBITDA range and we anticipated that there would be a question of okay. So so nice nice performance on EBITDA, So why not give us a number in the higher end of the range and I would just tell you theres going to be a natural level of conservatism here because.

James Fish: 2022. Our strong results in the quarter were powered by our solid waste business. Organic revenue growth in the collection and disposal business remains solid and is tracking well against our expectations. Third quarter core price of 6.6% reflects robust price performance across all lines of business. We're also pleased with the resilience of our solid waste volumes as commercial volumes turn to mostly positive and special waste growth improved from the second quarter. And what really stands out for this quarter is our success in managing the middle of the PNL.

Whether it is not that were affected much by geopolitics, but theres a lot going on right now that makes.

It makes it a little bit hard to too.

To see.

Out into beyond a month or two.

I think thats why 'twenty four is still a question for US had a 24 look we're going to wait three months before we really try and put a pin on 24, but for 'twenty three we're comfortable with the range, we feel comfortable with the quarter.

And to the extent that it ends up.

James Fish: We continue to drive SGNA leverage and we're also gaining momentum on operating cost optimization and efficiency gains. Our long-term focus on using automation and technology to optimize our cost structure is paying off as we're choosing not to replace certain high turnover difficult to fill positions. Since January of 2022, we've leveraged attrition and technology to reduce headcount by 1,650 positions. We continue to be focused on the full opportunity of 5,000-7,000 position eliminations through attrition and technology over four to five years and we're pleased with this progress to date. You'll hear more details about our cost performance from John and Davina. Putting it all together, our focus on price, efficiency and cost control translated into the strong operating leverage we produced in the quarter.

What do we expect them to then.

We were right to not change it if it is higher than we expected and beat us up at that point.

Understood. Thank you for all the detail.

Last question for me if I heard you correctly in the prepared remarks, I think you said, you're looking to bring four five R&D facility in Hawaii next year, I think that would be essentially in line with your original plan from January.

Is it fair to assume that most of the construction delays that we're seeing in the Capex line are related to recycling can you put a finer point on it.

<unk> might be coming online in 'twenty, four or is it a little bit too soon to speculate right now.

Yeah.

Sure. This is Tara hemmer, Chief sustainability officer.

There are two key takeaways that we want you to hear from us related to our sustainability related investments and the first is our level of confidence in our 2026 EBITDA projections, the 500 million for renewable energy the $240 million for recycling. We've spent a lot of time really looking.

James Fish: Turning to our strategic investments in sustainability growth, the investment proposition for growing our renewable energy and cycling business remains strong and our project execution is tracking well. Our seventh renewable natural gas plant and the third of 20 facilities in our growth program is expected to be in service in January. And we have another four facilities on track for completion in 2024, including two of the largest projects in the portfolio, Fairless in Pennsylvania and Orchard Hills in Illinois.

At our project and we're very confident in our ability to deliver those numbers in 2026.

The second thing that is important to note and it's one of the reasons why we have this level of confidence is in 2024, we expect to have about 40 projects under active construction. So that gives you a sense of the momentum that we're building within the platform.

James Fish: On the recycling front, we've completed technology and automation upgrades at two facilities in the quarter. And we have two more upgrades and a new facility in Nashville slated to begin service by the end of this year. Our automated network continues to drive great results by pushing our labor and processing costs slower, improving throughput, and driving enhanced material quality, which benefits the recycling business in any commodity environment. Yet again in the third quarter, we saw materially lower labor cost per ton at our automated facilities at about 35% below the rest of our recycling network.

If you look at B dub.

The capital related to some of the ships it is related to both recycling and renewable energy its not just specific to recycling. So want to leave you with that but the important thing to remember is these capital shifts that we see we see something similar in our traditional business, where new construction projects really don't know calendar.

In years and so some of this is about shifting some things from Q4 into Q1 and Q2.

James Fish: Our investments in developing the blueprint for a modern recycling facility sets us apart within the communities we serve and are unlocking further growth opportunities. With one quarter remaining in the year, we're well positioned to deliver on the 2023 financial outlook we provided last quarter, including adjusted operating even dog growth of 6% at the midpoint. We continue to expect a margin run rate exiting the year of about 29%, underpinned by 62% operating expenses as a percent revenue, and 9% hestia NA as a percent revenue.

Thanks, a lot.

Thank you one moment for our next question.

Absolutely.

And our next question comes from the line of Tyler Brown from Raymond James Your line is open.

Hey, good morning, guys.

Hey, John I know, it's early but.

It does feel like unit cost inflation is starting to ease.

Just curious you said mid single digit unit cost inflation in the quarter, but can you be a little bit more specific on what that was and two just any early thoughts on how you guys are thinking about core price into next year in order to offset unit cost inflation, you get to that 29% margin that <unk> talked about.

James Fish: We're pleased with our results through the first nine months of the year. Our team is very focused on price discipline and cost optimization to deliver a strong finish to the year and lay the groundwork for further growth in 2020. 24.

Yes. Good question Tyler I would tell you let me start with wages, because that's what I've used as a barometer. When you look at where we were beginning of the year Q1. It was double digits. It was 10 or 11%. When you look sort of right. The big buckets of labor drivers technicians have equipment operators those numbers are down between five and 6% in Q3, so almost half of where they were.

James Fish: I want to thank each of our team members for their commitment to our customers and their many contributions to our success.

John Morris: I'll now turn the call over to John to discuss our operational results for the quarter. Thanks, Jim. Good morning.

John Morris: I'd like to open by highlighting the strides we're making and optimizing our cost structure. In the third quarter, operating expenses as a percentage of revenue improved 90 basis points year over year to 61.3%. The collection and disposal business contributed 70 70 basis points of this improvement due to the strong operating leverage provided by our cost optimization efforts. In addition, we achieved pricing leverage as core price exceeded cost inflation by an estimated 100 basis points in the quarter.

So that's part of what we're seeing from an inflation moderation I think on the MLR side to maintenance and repairs and part of my prepared remarks is we've got 200 trucks will wind up with about over 1500 for the year and we're seeing the same thing we're seeing the same kind of progress and our maintenance and repair expenses. When you look at it in whole dollars or on a percentage basis.

We've sort of gone from the mid teens down to low double digits and now we are in the 6% to 7% range for Q3. So it's Davina said, we're not claiming victory there yet, but I think the combination of us getting assets. Some moderation in the big buckets labor being one of them or what youre seeing translate to the 61, 3% in the quarter from an opex.

John Morris: We're pleased with the progress we've made in managing our labor costs as well as expenses related to repair and maintenance. Our efforts have resulted in a meaningful decline in WM's underlying cost of inflation since the beginning of the year to mid single digits in a third quarter. Our focus on efficiently managing labor expenses is yielding positive results. So far this year, we have automated 141 residential routes and have a target to convert more than 400 routes in 2024.

<unk> perspective on the core price side, I mean, Jim said it in his opening comments.

Not really been so much about the core price going through it's about what are we retaining and I think when you look at the margin expansion you saw relative to the Opex and you heard my prepared remarks about us banking margin and EBITDA improvements in all lines of business I think that's the end result, we're shooting for so our pricing strategy Holistically is working and I don't think youre going to see changing that Tyler I'll just add a little.

John Morris: As we shift to more automated routes, we've seen a nearly 14% decrease in the number of helpers needed in our residential business. In addition, our focus on reducing turnover continued to produce improvements in Q3, building on a consistent progress we've made over the past 12 months. Our collection efficiency has also exhibited steady progress throughout the year with commercial, industrial and residential business line showing improvements every quarter. All these focus areas on managing our business are contributing to the improvement in labor costs.

But a color in terms of the specific amounts when we look at core price covering cost inflation for that portfolio. Overall, we talked about in Q3 that getting to a positive 100 basis points, which is fantastic for us to see as you can appreciate pricing activities don't link directly to when we.

John Morris: Turning to repair and maintenance expenses, despite some lingering effects of inflation and the timing of fleet deliveries, deliveries were making progress. For the first time in several years, we expect to get an allotment of vehicles that aligns with our fleet replacement strategy with more than 1200 received to date. This has allowed us to remove older trucks from our fleet and also reduce rental truck usage by over 40% since the start of the year.

Cost inflation and so when we look at Q1 and Q2 the Q1.

Variance between those two measures was a negative 500 basis points in Q2, we had improved to negative 250 basis points. So what you see is the continued progress in terms of making sure that on an annual basis. We are seeing those pricing activities cover our cost inflation and when you couple that with the cost.

John Morris: Furthermore, our spending on third-party technicians has been reduced by two thirds compared to the second half of 2022 and continues to improve. With the progress we've achieved in third quarter, we believe we've turned the corner on this expense line and are optimistic about ongoing improvements as we close out the year.

<unk> efforts that we're putting forth to more efficiently run the business.

And getting some help from truck deliveries were really starting to see the math associated with price covering inflation.

John Morris: Turning to our revenue growth, we continue to execute on our revenue management programs to recover cost increases and improve margins. Our third quarter organic revenue growth and the collection and disposal business was 5.7% on a workday adjusted basis. This growth was led by core price of 6.6% with collection and disposal yield of 5%. Our differentiated service offering is generating value with our national account customers as well as commercial customers. We continue to focus on maximizing customer lifetime value and our Q3 turn of 9% remains at the low end of our historical range, demonstrating the positive momentum we are seeing with customers' value on our service offerings.

And hopefully getting to a point at some point, where we start to see that as a lever for incremental margin expansion as well.

Really take hold in the third quarter.

Perfect and I totally get the timing so I can't even if you're just a little bit this is for Jim and Tara.

I get it that you guys are not giving guidance and I totally appreciate that but I do get a lot of questions about the EBITDA contribution from Orange and reflect specifically in 'twenty four because if you go back to the Investor Day, I think you're supposed to get something like 225 million combined incrementally from those two.

But on the other hand, you guys are pushing capex it sounds like Theres some delays.

John Morris: Looking at volumes, third quarter collection and disposal volume grew by 0.7% on a workday adjusted basis. Our landfill business drove most of the volume growth as special waste grew 11.1% on a workday adjusted basis in the quarter. As a reminder, we did not separate special waste into yield and volume and in Q3 we benefited from several high price projects that drove the.., increase. We've highlighted in previous conversations the timing and pricing of special waste projects is subject to variability due to their discretionary nature.

I guess it may be that that build was directional but can you just give any broad strokes on what.

That EBITDA contribution would be next year I think it would be extremely helpful.

Yes, we can both kind of addressed this.

Alright, I think first of all it's important to understand and Tara mentioned it in her first question there.

We really would prefer that you anchor on that $740 million. That's the number that truly has to be modeled against.

John Morris: However, our project pipeline remains robust. In addition, workday adjusted MSW volumes were up 1.7% in the quarter. Our overall collection volumes were down modestly due to the intentional steps we continue to take to price every contract to achieve acceptable returns, as well as the impact of lower volumes from our real off business. Yet both revenue and operating eva doc continued to grow in each line of business, demonstrating that we are prioritizing profitable volume growth.

The other numbers.

Hey look.

Because of the movement and we anticipated some movement and capital spending we anticipated some movement and permitting we had we've had a good story on permitting in Canada. So.

But we've also had delays on supply chain and hence the movement around in the capex from but from one quarter to another.

John Morris: Net new business and net service increases remain solidly positive and growth in our strategic accounts business driven by our different differentiated offerings continues to outpace our expectations. Thus, overall collection, the disposal organic growth is on pace for the year.

So the numbers that we gave were really more of a build up to that 740 and not intended to be guidance.

So thats.

I think first point.

The second point here is that.

John Morris: With regard to recycling and renewable energy, our third quarter results were in line with our expectations and are recently automated recycling facilities are delivering strong results. As Jim discussed, our sustainability growth projects are tracking well, and we're confident that our operating eva doc expectations for the year remain in the range provided last quarter.

With 40 active projects ongoing there.

Yes.

And a lot of movement by the way.

Both in recycling commodity prices and <unk> III Ren pricing natural gas pricing those businesses are really it's why we wait to give guidance until February I know company to give a lot of guidance at this time of year.

John Morris: In closing, I'd like to express my gratitude to our frontline teams for their dedication for providing safe and dependable service to our customers and communities each day.

But our preference is to wait and give ourselves a bit more time, particularly in today's in today's climate, where visibility isn't it's fantastic.

Devina Rankin: I'll now turn to call over to Divina to discuss our financial results and further detail. Thanks, John, and good morning. Our third quarter results reflect our continued focus on the fundamental value drivers of our business. Disciplined revenue growth and cost optimization, executing on these fundamentals, positioned us to deliver the best ever operating eva doc margin in the third quarter at 29.6%. This is a 100 basis plan improvement compared to Q3 of 2022, and it can be attributed almost entirely to 70 basis points of margin expansion in the collection and disposal business.

You can't look after about a ship and safer for 20 miles. So now it's not 10 feet either.

It's not 20 miles so we're really giving ourselves the benefit of all.

A little bit of extra time before we try and answer that question directly and I'm not trying to.

To your question, but.

It is just going to be much easier for us for tariff for Shire for that whole team for Brent Bell.

Give a very precise answer in early February than it is today and will be much further along in our construction.

Devina Rankin: SGNA leverage provided the remaining expansion. We're pleased with the team's focus on optimizing costs and reducing discretionary spending, which together positioned us to deliver SGNA costs as a percentage of revenue of 9%. Showing that this long-term goal is not just achievable, it is largely in hand. While the current quarter result has some benefit from lower current year incentive compensation costs, we see this level of SGNA is sustainable, particularly as revenue grows.

Process for those 2024 projects.

Yes, I can.

Totally get it and maybe just my last one the same vein I'll try again, a little bit different way, but.

It looks like you deferred about $230 million I think from your original original guidance on Green Capex. So should we think about 750 kind of maybe being a number to use for next year as well I'm just kind of capex side. Thanks.

Devina Rankin: While there were a number of other margin impacts in the quarter mostly related to fuel energy and commodities, these items basically offset each other, giving us confidence that this quarter's results are based on the steps we are taking to price our services above inflation and to permanently reduce our cost structure. Through the first nine months of 2023, we have expanded operating eva doc margin by 40 basis points to 28.5%. Putting a squarely on track to achieve our full-year target of operating eva doc margin of 28.4 to 28.6%.

Heather I'll take that really quickly the deferral in 2023 with $350 million in the aggregate from where we started the year and some of that will roll into 'twenty four as Tara mentioned, because it really is just kind of not writing the check in December but instead, writing it in January or February.

But then we do expect that some of what we had anticipated at 24 capital could move into 2025.

Let's say that will just take that $350 million and added on to what we had previously projected for 24, because we will have some shift from 'twenty four 'twenty five but all in all those projects are confident then that Tara spoke to I think is the most important point for us.

Devina Rankin: Our operating performance has translated into robust cash flow from operations. Through the first three quarters of the year, cash flow from operations exceeded $3.3 billion. Positioning us to deliver more than $4.5 billion of cash from operations for the year. As we expected, cash flow associated with operating EBITDA growth in 2023 has been largely offset by higher interest taxes and incentive compensation payments. Despite these known headwinds, our conversion of revenue dollars to cash from operations and operating EBITDA dollars to free cash flow in the base business were both near peak levels in the quarter, demonstrating the sustainable value creation from our diligent focus on optimizing the middle of the P&L and our capital expenditures.

It's making sure that we do the right thing from a working capital management perspective and pay for this capital when it's placed into service are allowing us to as best we can.

Okay, Alright, I appreciate it thank you.

Thank you.

Moment for our next question.

And our next question comes from the line of Tobey Sommer from tourist Securities. Your line is open.

Hey, Good morning. This is Jasper bibb on for Tobey I wanted to ask about the SG&A optimization effort I think if I heard you correctly in the prepared remarks, there was a comment about current SG&A levels being sustainable so as we look out to 'twenty four should we think about SG&A at 9% of revenue being a good starting point for the year or any contact.

Devina Rankin: Capital spending in the first nine months of the year totaled almost $1.9 billion, with $146 million related to normal course capital and $397 million of spending on sustainability growth projects. We now expect sustainability growth capital spending of about $750 million in 2023. The $150 million decrease from prior expectations is based on a shift in the timing of spending across the next two to three quarters. As a result of this lower anticipated capital spending, 2023 free cash flow is expected to be $150 million above our prior expectations and in the range of $1.825 to $1.925 billion.

There would be helpful.

Yes, that's exactly right when we look at it.

The levers that have been used to deliver SG&A in the current year. It really is our focus on technology and optimization, particularly with some of the success that we've seen in customer experience and sales and that customer engagement model is something that we know will continue to create momentum in the years ahead.

Cost discipline as well has been really important so 9% as a percentage of revenue. We feel like is a new long term sustainable level of SG&A going forward, it's probably worth mentioning here too.

Devina Rankin: Free cash flow through the first nine months of the year was $1.552 million and free cash flow before sustainability growth investments was $1.949 million. We're confident in our ability to achieve our full year target of free cash flow before sustainability growth investments of between $2.575 and $2.675 billion. Year to date, we've returned $855 million to shareholders through dividends and repurchased $990 million of our stock. Our leverage ratio at the end of the quarter was 2.73 times, which is at the midpoint of our target ratio of between two and a half and three times.

I mentioned it in my in my prepared remarks, the $5 to 7000 positions that would come out through attrition.

That has to date and so far it's the.

The number I gave was 650 positions since January of 2022.

To date that has mostly been SG&A type positions.

The big buckets going forward to get us to that 5% to seven are mostly opex.

<unk>, so when I think about what's happened today most of those positions came out of our customer experience Department.

We've used technology to really automate a lot about our call volume.

Has been down as much as 25% so those positions that had high turnover, 50% ish type turnover, we just chose to not replace.

Devina Rankin: 9% of our total debt portfolio is at variable rates and our pre-tax weighted average cost of debt for the quarter was 3.9%. Our balance sheet is strong and we remain well positioned to fund growth opportunities. Looking at our full year expectations, our solid operational performance in the first nine months of the year positions us to achieve the operating EBDA guidance we provided last quarter of $5.775 to $5.875 billion. This strong result will be achieved with continued focus on pricing our services to recover cost inflation, differentiating WM's value proposition with customers to maintain and grow the right volumes and optimizing both operating costs and SGNA.

Going forward, the big buckets, where youll gets.

Up to that.

Five to seven range, the big buckets become recycling automation now that is ongoing I talked about a 35% reduction in labor cost per ton, but as Tara mentioned, there's a lot of projects ongoing we're not even close to two third of the way through those so there's a lot of positions.

Yet to come out in <unk>.

Our recycling bins.

US those largely fall into the Opex category.

John mentioned the.

The conversion from railroad to Asl Asl some of those have taken place this year, but probably three times as many next year and then the last bucket, which is probably the most difficult one and we have talked about it quite a bit but as route optimization that involves a lot of technology.

Devina Rankin: We expect full year revenue growth to be modestly below the midpoint of our July 2023 guidance of 3.25 to 4.25%. Most aspects of our revenue outlook remain intact but we have seen lower revenue than planned in our recycling brokerage businesses. Given the relatively small operating EBDA impacts from the brokerage business, this refreshed revenue outlook does not impact any other component of our guide.

It involves a lot of process change, but theres also.

A lot of payback in that when we get it right. So those buckets are mostly opex buckets. The previous buckets in that 650 positions were mostly SG&A.

That makes a lot of sense and then I was hoping to follow up on the sustainability capital spending.

Devina Rankin: To sum it up, we're pleased with our performance throughout 2023. We firmly believe that leveraging technology and automation to enhance our operations and investing in our sustainability businesses are positioning us for future success. We're grateful for the hard work of the entire WM team. Their dedication to safely serve our customers and communities will ensure we finish the year strong and move into 2024 even stronger.

What are the most frequent issues youre seeing that are delaying these projects, whether it's supply chain or permitting.

And the projects that were already delayed earlier this year.

Any color on what's been the experience or the timeline on resolving those are aware delays.

Sure the biggest issues that we had been seeing where really in two key categories. The first is on utility interconnect and.

And we're making progress on utility Interconnects for us.

Operator: With that, Victor, let's open the line for questions. Thank you. As a reminder, to ask a question, please first start one one on your telephone and wait for your name to be announced. To withdraw your question, please first start one one again. Please send out, we can pause the Q&A roster.

On the electrical side, and then also getting the connectivity to be able to push the gas into the system and so we've been working hard on making sure that we have those agreements in place and then the second piece.

Construction related but I would put it more into the permitting category and we've made a lot of progress on obtaining many of our permits that are necessary on the R&D side from a supply chain perspective, we have done a fantastic job of really making sure that we have build slots on equipment for both arms.

James Fish: Our first question will come from the line of Brian Burgmeier from City. Your question. Good morning, and thank you for taking the question. I'm thinking about some of the underlying guidance components, you know, volume is maybe a little bit better than your original view. And I'm not maybe points a little bit above side on recycling and renewables versus the guidance you put out in July. I guess, you know, A.D, you agree with that.

Cycling business.

Our renewable energy business, so thats less of a risk.

Terry.

We talked about yesterday.

James Fish: The you know, it doesn't seem like we maybe could be pointing towards the higher end of the EBITR range. I think you said 6% even grew up at the midpoint, which is maybe a touch higher, but I don't want to go towards your mouth. Very detail you could have there. Thank you. Yes, so I guess a couple of you mentioned volume and then you mentioned the EBITR range. So I'll tackle volume first here, Brian.

The single biggest plant as I mentioned in my in my remarks, which is fairless in Pennsylvania that is our single biggest plant that we will build in the 20 <unk>.

To give you some perspective of that plant was originally originally scheduled for opening.

In the second quarter beginning of May.

And it's pushed a little bit and right now it looks like it's scheduled to open at the end of June. So it's pushed a couple of months, but I think that gives you a good feel for for what's happening here, we're not talking about pushing things back 12 to 15 months Theyre moving in kind of 60 day 30 to 60 day.

James Fish: When we looked at volume, you know, we were obviously pleased with a couple of things, special waste as I mentioned was slightly better. Some of that was rate related really, but for the most part, volume was as we expected, which was fairly flat. We started to be in a year that volume would be flat and it's been fairly flat all year. Third quarter was slightly better than the first two quarters. The collection volumes have been flat pretty much all year long.

But it is having some effect.

On Capex for example in 'twenty, three but I think the fact that we've got 40 active recycle and R&D plants and 24, you'll have quite a few more you'll have another big chunk of 25, and then when we get to 'twenty six we're very comfortable with the end number.

James Fish: It's been different from one line of business to another. Rezi almost really by design has been down probably for a couple of years. Rolloff was probably the more disappointing of the lines of business, and then commercial might have been the one that was more encouraging. So commercial was up slightly, rolloff down, and then Rezi by design. And then within the Lancelina business, not anything really unexpected there, other than maybe special waste, and maybe CND a little bit.

That's super helpful. Thanks for taking the questions.

Yeah.

Thank you one moment for your next question.

Our next question comes from the line of Jami Rubin from Goldman Sachs. Your line is open.

Yes, hi, good morning, everyone.

Hi, Jerry.

I'm wondering if you folks can talk about the.

Opportunity for lower R&M, and what that could mean for you folks who really interesting in the quarter to see.

Operating expenses essentially flattish given John inflation items that you mentioned earlier and so as you folks get the truck deliveries online et cetera.

James Fish: CND has a little bit of a mix there, and then particularly when you get to the fourth quarter, CND is really going to be a difficult comparison because of the hurricane last year. But overall volume, I think it's not it's not going to be a big change when you get into the fourth quarter. And honestly, what you're going to see in 24, and we'll give of course our guidance when we get to the next quarter, but 24 is going to sound pretty similar to 23, I think, when it comes to volume.

How much further could the cost structure improve off of the.

Strong levels, we're seeing in <unk>.

Yes, Gary I think it's a great point and John and I have spoken a lot about this I think one of the best indicators is when you look at the year over year increase that we had been seeing in the first half of the year for repair and maintenance cost that was 14, 1% in the first six months of the year.

James Fish: I guess when it comes to the EBITDA range, and we anticipated that there would be a question of, okay, so nice performance on EBITDA, so why not give us a number in the higher end of the range? And I would just tell you there's going to be a natural level of conservatism here, because whether it is not that we're affected much by geopolitics, but there's a lot going on right now that makes it a little bit hard to see out into beyond a month or two.

Third quarter that was up only six 9% as the deliveries that we've talked about finally are getting on the road and we're able to get the older.

Assets off the street.

The team members are having to run much longer than our plan because we hadn't gotten our allotted trucks for the last 18 months or so so when we look at sustainable levels of repair and maintenance increase we think that there's some good tailwind coming in the fourth quarter and into early <unk>.

James Fish: I think that's why 24 is still a question for us. How does 24 look? We're going to wait three months before we really try and put a pen on 24, but for 23, we're comfortable with the range. We feel comfortable with quarter, and to the extent that it ends up, you know, where we expect, then... We were right to not change it. If it's higher than we expected, then beat us up at that point.

24, when you just look at that one metric alone I think it's a great indication.

Thank you just to clarify.

It sounds like.

It could be not just lower inflation going forward it sounds like it could actually be a decline in spending if I understood your comments correctly.

So welcome.

We're hesitant to say as a decline in spend because while there are some parts inflation.

James Fish: Yeah, thank you for all the details. The last question for me, if I heard you correctly in the prepared remarks, I think you said you're looking to bring four or five RNG facilities online this year. I think that would be essentially in line with your original plan from January. It is fair to assume that most of the construction delays that we're seeing in the cat-backed line are related to recycling. Can you put a finer point on the facilities might be coming online at 24 or is it a little bit too soon to cycle these right?

Places, where we've actually seen costs going backward and that should give us some benefit.

Tara Hemmer: Thanks, and I'll turn it over.

There are places, where we're just still catching up with regard to making sure that we've got the right assets in the right places to service the customers.

We do think in the first half of next year you could see.

Effectively flatter costs and repair and maintenance.

And that's what we're working I think I think the other benefit Jerry isn't this a little bit more detail than the MSR question, but it's not just MLR. We're also seeing it show up in other parts of the business in particular labor inefficiency right, because we're putting new newer trucks on the street.

Tara Hemmer: Sure, this is Tara Hammer and Chief Sustainability Officer. I think there are two key takeaways that we want you to hear from us related to our sustainability related investments. And the first is our level of confidence in our 2026 EBITDA projections, the 500 million for renewable energy, the 240 million for recycling. We spent a lot of time really looking at our projects. We're very confident in our ability to deliver those numbers in 2026.

That obviously benefits in other places just as opposed to maintenance and repairs and we're seeing that show up in efficiency.

Super.

Can I switch gears.

Ask you if you don't mind, how are you thinking about the allocation.

So it's coming online towards the transportation versus a utility so it looks like based on the EPA October report Theres about $10 million and with.

Tara Hemmer: The second thing that is important to note, and if one of the reasons why we have this level of confidence, is in 2024, we expect to have about 40 projects under active construction. So that gives you a sense of the momentum that we're building within the platform. If you look at the capital related to some of the shifts, it is related to both recycling and renewable energy. It's not just specific to recycling, so I want to leave you with that.

Btu shortfall towards transportation applications and so.

Do you think about where you're putting the gas to us.

Satisfying and making sure that that market gets enough supply factor into your decision versus the allocation plan that we spoke about at the sustainability there.

Yes, I mean, we're still targeting and using that framework that we had in place really thinking one year out having 70% to 90% of our volume locked up two years out.

Tara Hemmer: But the important thing to remember is these capital shifts that we see, we see something similar in our traditional business where construction projects really don't know calendar years. And so some of this is about shifting some things from Q4 into Q1 and Q2.

In that 40% range and then three years out 10% to 30% I think.

What we have to be clear about is when we think about that is it is transportation versus voluntary market, but you can also do.

Operator: Thank you.

Fixed priced or longer term deals in either market and we're going to be accessing both of those.

If you think about our portfolio for 2020 for one thing that's important to note as we had done some deals in the voluntary market. A great example is we did one with.

Tyler Brown: One moment for our next question.

Tyler Brown: Tyler Brown from Raymond James, your line is open. Hey, good morning, guys. Morning.

A large utility 20 year agreement with pricing Thats north of $20 a ton sorry, $20 Brendan Thank you.

Tyler Brown: Hey, John, I know it's early, but it does feel like unit cost inflation is starting to ease. I'm just curious. You said mid single digit unit cost inflation in the corner, but can you be a little bit more specific on what that was? And two, just any early thoughts on how you guys are thinking about core price in the next year in order to offset unit cost inflation and get to that 29% margin that David talked about.

Old Garbus gallon me.

<unk>.

$20 from MBT and so on.

On a blended basis. If you look at 2024, we have roughly 30% today of our volume locked up and that will of course have an impact on pricing. We are tracking very closely the transportation market and we've been watching what's happening with the rins.

Tyler Brown: Yeah, a good question. Tyler, I would tell you let me start our wages because that's one I've used as a barometer when you look at where we were beginning of the year Q1. It was, you know, double digits. It was 10 11%. When you look sort of right, the big buckets of labor drivers technicians have equipment operators. Those numbers are down between 5 and 6% in Q3. So almost half of where they were.

And the price pop what's important to note there, though is we don't necessarily access the spot market. We are looking at the spot market, but also selling forward. So we want to just caution people about just taking a $3 40.

Tyler Brown: So that's part of what we're seeing from an inflation moderation. I think on the MNR side too, maintenance and repairs part of my prepared marks as we got 1200 trucks and we'll end up with about over 1300 for the year. And we're seeing the same and we're seeing the same kind of progress in our maintenance and repair expenses when you look at it and hold hours around a percentage base, is sort of gone from the mid teams down to most double digits and now we're in the 6 to 7% range for Q3.

RIN price that <unk> are trading at today for future pricing in 2020, and it helps the futures market absolutely absolutely like we are.

Sure.

We're positive on pricing going forward in Q.

Fourth quarter and of course 2024.

Super Thank you.

One moment for our next question.

Tyler Brown: So as Devina said, we're not claiming victory there yet, but I think the combination of us getting assets, some moderation in the big buckets, labor being one of them are what you're seeing translate to the 61.3% in the quarter from an op-ex perspective. On the core price side, I mean, Jim said it in his opening comments. It's not really been so much about the core price going through. It's about what are we retaining?

Okay.

Our next question comes from the line of Noah Kaye from Oppenheimer. Your line is open.

Thanks, So much first just a clarifying question following up from Tyler, 29% margin is that the <unk> number or is that kind of the bogey for 2024, I just want to make sure that we all understand that are on the same page.

Yes, the way that we've looked at the 29% and basically the second half of 2023, our target was to deliver 29% EBITDA margin. What you see is at 29, 6% in the third quarter that modestly outpaced our expectations for the quarter. So it gives us.

Tyler Brown: And I think when you look at the margin expansion, you saw relative to the op-ex and you heard my prepared remarks about us picking margin and even the improvements and all lines of business. I think that's the end result we're shooting for. So our pricing strategy holistically is working. And I don't think you're going to change in that. Tyler, I'll just add a little bit of color in terms of specific amounts when we look at core price covering cost inflation for the portfolio overall.

Some room in terms of our fourth quarter expectations Q4, you can expect us to be in the range of the 25% to 29% margin.

Tyler Brown: We talked about in Q3 that getting to a positive 100 pieces. Which is fantastic for us to see. As you can appreciate, pricing activities don't link directly to when we see cost inflation. And so when we look at Q1 and Q2, the Q1 variance between those two measures was a negative 500 basis points. In Q2, we had improved to negative 250 basis points. So what you see is the continued progress in terms of making sure that on an annual basis, we are seeing those pricing activities cover.

Perfect. Thank you.

Clearly a big story this quarter as those gains right in margins largely from managing the middle.

So I wanted to delve a little bit more into both labor and equipment availability.

On the labor side.

Where is turnover currently how has that progressed.

And then I think in the release there was a call out of a modest cost for upcoming collective bargaining anything we.

You should be aware of there in terms of how it might impact labor trends, yes.

Tyler Brown: And when you couple that with the cost optimization efforts that we're putting forth to more efficiently run the business. And getting some help from truck deliveries, we're really starting to see the math associated with price covering inflation. And hopefully getting to a point at some point where we start to see that as a lever for incremental margin expansion as well, really take hold in the third quarter. Yeah, perfect. Totally get the timing.

Yes.

The bargaining comment was simply some some dollars we spend in preparation for.

Tyler Brown: So I kind of want to shift gears just a little bit.

Some contracts, we had in the Midwest, which thankfully got resolved but.

When we have big agreements like that it's not uncommon for us to spend some money to make sure. We're prepared for the worst so to speak but in this case it was a better outcome and those are behind us and on the labor front.

Part of my comment earlier was just in the moderation of rate inflation that we've seen from 10, 11% coming out of last year into the first quarter or two of this year and now being closer to the 5% to 6% range in terms of the rate that labor is going up and you put that against the backdrop of our pricing strategy, which Jim commented on.

James Fish: This is for Jim and Tara. I get it that you guys are not giving guidance. And I totally appreciate that. But I do get a lot of questions about the EBITDA contribution from orange and recycling specifically in 24 because if you go back to the investor day, I think you're supposed to get something like 225 million combined incrementally from those two. But on the other hand, you guys are pushing cat backs. It sounds like there's some delays.

We continue we're seeing a better spread between what's happening with inflation in some of those costs in this case specifically labor.

And the turnover, yes go ahead please.

Is it turnover still a good story that was part of my prepared remarks, too and driver being the biggest we have about 21000 drivers on the network and we're continuing to see.

James Fish: I guess it may be that that build was directional, but can you just give any broad strokes on what that EBITDA contribution would be next year? I think it would be extremely helpful. Yeah, we can both kind of address this. I think first of all, it's important to understand and Tara mentioned in her first question that we really would prefer that you anchor on that 740 million. That's the number that truly is to be modeled against the other numbers.

<unk>, they're down into the low twenty's from probably a peak of in the high Twenty's to close to 30% 18 months ago.

Yes, I was just going to say no.

What you're really hearing here and it's not just specific to your questions, but but to all questions.

What we've been saying for several quarters, which is.

There's a few things that are outside of our control.

And we're very focused on those things that are within our control might sound obvious, but it's not going to sound that different when we get to 'twenty four and while we're not giving specific numbers for 'twenty four I would tell you that when we get to 'twenty four.

James Fish: Look, there's because of the movement and we anticipated some movement in capital spending. We anticipated some movement in permitting. We had we've had a good story on permitting in Canada. I mean, you know, so. But we've also had delays on supply chain and hence the movement around in cat backs from one quarter to another. And so the numbers that we gave were really more of a build up to that 740 not intended to be guidance.

Pricing is going to continue to be good we're going to continue to focus as Davina said and John have said on the middle of the P&L, we feel good about the progress we're making on an opex, we feel great about the progress we've made on on SG&A. It wasn't that long ago that we were talking about getting below 11%.

Now, we're saying that the number is 9% so but I think for the.

James Fish: So that that's, I think, first point. The second point here is that with 40 active projects ongoing, and a lot of movement by the way, both in recycling, commodity prices and the three rent pricing, natural gas pricing, those businesses are really, it's why we wait to give guidance until February. I know companies give a lot of guidance this time of year, but our preferences to wait and give ourselves a bit more time, particularly in today's climate where visibility isn't fantastic.

The technology that we've been talking about for probably three years.

Is finally, starting to show that it that it really is going to produce some results and then this bit of a hangover from the pandemic, where we where there were some things that we simply didn't expect.

That effect of turnover that affected supply chain, obviously inflation all of that I think we've really really gotten our hands around and now we're starting as John mentioned in his detailed prepared remarks.

Full units out that had been sitting on the fence that really we've been keeping there.

James Fish: You know, you can't look out off the ball with a ship and see for 20 miles. Now, it's not 10 feet either, but it's not 20 miles. So we're really giving ourselves the benefit of a little bit of extra time before we try and answer that question directly. And I'm not trying to punch your question, but it is just going to be much easier for us, for Tara, for Shide, for that whole team, for Brent Bell, to give it a little bit of extra time before we try and answer that question directly.

As just kind of.

A cautionary move on our part so 24 is going to look I think.

Pretty similar it's kind of look fairly flat on volume. It is going to look good on price. We finally, we will get a little bit of tailwind when it comes to our sustainability businesses. Because 23 was tough from that standpoint, and finally, we will see some some year over year positive comps.

James Fish: And I'm not trying to punch your question, but it is just going to be much easier for us, for Tara, for Shide, for that whole team, for Brent Bell, to give a very precise answer in early February than it is today. And we'll be much further along in our construction process for those 2024 projects.

One on commodity prices I think in our R&D business, we've talked a lot about about Ren pricing that that looks like it's it could end up being a good positive year over year comp same with natural gas last year Q4 was difficult because of the Ukraine.

James Fish: Okay. Yeah, no, I completely get it. And maybe just my last one, kind of the same thing. I'll try again in a little bit different way, but it looks like you deferred about 230 million, I think, from your original original guidance on green capExo. So should we think about 750, kind of maybe being a number to use for next year as well on just on the capExide? Thanks. So, you know, Tyler, I'll take that really quickly, but the pearl in 2023 was $350 million in the aggregate from where we started the year.

Spike in natural gas pricing all of that kind of went away. If you look at natural gas pricing in the first quarter. So so I think youre going to see a fairly.

Another year, where we're saying here's what we're focused on we're not going to try and predict what happens with the economy, but those things that we can control I think we're doing a pretty darn good job of controlling them.

James Fish: Some of that will roll into 24 as Tara mentioned because it really is just kind of a not writing the check in December, but instead writing it in January or February. But then we do expect that some of what we had anticipated as 24 cap, it all could move into 2025. So it's difficult to say that we'll, you know, just take that $350 million and add it on to what we had previously projected for 24 because we will have some shift from 24 into 25.

For sure and thank you for that.

And I just wanted to follow up just quickly on the truck delivery side.

Been great and clearly you are seeing that benefit on the <unk> of those increased deliveries you already commented for what you expect this year I know there had been some some investor questions around the impact of the UAW strike at Mac, but we do have build slots opening up for 2020 for now can you just comment into visibility into continued.

Strong truck deliveries.

Yes, we're actually in pretty good shape.

That's an unfortunate situation, but we've talked to our supply chain team between Divina and I and the build slots that we have in the trucks really going into the first half of next year don't look like they're going to be impacted partly because we take delivery of chassis a lot earlier than we take delivery of the truck because it's another manufacturer. It is involved in that so we're in pretty good shape there.

James Fish: But all in all those projects, the confidence in them that Tara spoke to I think is the most important point for us is making sure that we do the right thing from a working capital management perspective and pay for this capital when it's placed into service or allowing those to as best we can.

Excellent. Thank you.

James Fish: Okay.

James Fish: All right. I appreciate it. Thank you.

Thank you one moment for our next question.

Operator: One moment for our next question.

And our next question comes from the line of Stephanie Moore from Jefferies. Your line is open.

Jasper Vibon: And our next question of confluent of Toby summer from tourist securities. Hey, good morning. This is Jasper Vibon for Toby. I want to ask about the SGNA optimization effort. I think if I heard you correctly in a prepare remarks. There's a comment about current SGNA levels being sustainable. So as we look out the 24 should we think about SGNA at 9% of revenue being a good starting point for the year or any context there would be helpful.

Hi, this is on for Stephanie.

I was just curious if we could sort of bridge the one.

100 bps of margin expansion I know you guys kind of called out sort of optimizing the overall cost structure and the collection of disposable side, but just curious if you could sort of parse out the other item impacts like fuel ITC in M&A.

Sure so.

Collection and disposal, a 70 basis point, plus SG&A of 20 basis points basically tells the story, but then we've got puts and takes and the biggest.

Jasper Vibon: Yeah, that's exactly right. When we look at the the levers that have been used to deliver SGNA in the current year, it really is our focus on technology and optimization particularly with some of the success that we've seen in customer experience and sales and that customer engagement model is something that we know will continue to create momentum in the years ahead and the cost discipline as well has been really important. So 9% as a percentage of revenue we feel like is a new long term sustainable level of SGNA.

Piece, there is the timing of the alternative fuel tax credits and that was a headwind of 50 basis points that was almost entirely offset by the impact of lower fuel prices and our surcharge structure and that was a 40 basis point impact in the quarter and you had recycling and renewable energy recycling with positive.

20 basis points renewable energy was negative 20 basis points. So again, those two offset each other.

Jasper Vibon: It's probably worth mentioning here too that I mentioned it in my prepared remarks, the 5 to 7,000 positions that would come out through attrition, that has today, and so far, the number I gave was 1,650 positions since January of 2022. So when I think about what's happened today, most of those positions came out of our customer experience department where we've used technology to really automate a lot of that, our call volume has been down as much as 25%.

And we've talked all year about having some dilutive impact from M&A because of that.

The type of acquisitions, we have on the recycling brokerage side as well as just the typical ramp of getting good solid waste tuck in acquisitions to Wm standards that impact has lessened in the third quarter relative to what we've seen in the first half of the year and that was at about four.

The basis points in the first half down to about 20 basis in the third quarter.

Got it that's helpful.

And then just kind of shifting gears a bit just kind of curious if you could talk about the greatest what do you have the greatest sort of pricing opportunity and how should we think about your pricing power in a lower inflationary environment.

Jasper Vibon: So those positions that had high turnover, 50% ish type turnover, we just chose to not replace. Going forward, the big buckets where you'll get up to that 5 to 7,000 range, the big buckets become recycling automation. Now that is ongoing, I talked about a 35% reduction in labor cost per ton, but as Karen mentioned, there's a lot of projects ongoing, we're not even close to even a third of the way through those.

And it was also just sort of wondering if you could just remind us.

What percent of the restricted book is tied to waste sewer trash collection portion of CPI.

Versus actual headline CPI, but I think it's kind of important.

That kind of component has been accelerating kind of for most of this year.

Probably we'll average.

Jasper Vibon: So there's a lot of positions yet to come out in our recycling business, those largely fall into the Optics category. Then John mentioned the conversion from real load to ASL, some of those have taken place this year, but probably three times as many next year. And then the last bucket, which is probably the most difficult one, and we have talked about it quite a bit, but is is route optimization, that involves a lot of technology, it involves a lot of process change, but there's also a lot of payback in that when we get it right. So those buckets are mostly OpEx bucket, the previous buckets in that 1,650 positions were mostly SGNA. And that makes a lot of sense.

A point or two higher than headline CPI, which yes.

<unk> on pricing next year.

Yes, the number we usually give is about 40% of.

Is tied to some type of index not necessarily water sewer trash that's one of the indices.

But about 40% is tied to an index there tends to be a bit of a look back on that a lag. So so to the extent that that number is climbing that ends up being a positive for us. It just it takes a little while to get to that full positive.

I think to your first question about <unk>.

Where are we expect pricing to be good because I think I think pricing has been pretty consistently good okay.

Across the board in years past.

Particularly probably as far back as five years ago pricing was pretty good but it was very focused on one line of business that has changed over the last few years, where we've been.

Jasper Vibon: And then I was hoping to follow up on the sustainability, capital spending. I guess what are the most frequent issues you're seeing that are delaying these projects, whether it's supply chain or permitting. And the projects that were already delayed earlier this year, any color on what's been the experience or the timeline on resolving those earlier delays. Sure, you know, the biggest issues that we have been seeing were really into T categories.

Good with pricing across the board, but I think the piece that we've all touched on a little bit here today that I'll reiterate is really the net price. It's not something we used to talk about because there wasn't a whole lot of inflation in the economy, but but if I just use Q2 of 'twenty two because that was kind of the high watermark for inflation.

So CPI at nine 5% in Q2 of 'twenty, two and if I look at our core price for collection disposal was seven 5% in Q2 of 'twenty, two and yield was six 2%.

Jasper Vibon: The first is on utility interconnects, and we're making progress on utility interconnects for us that's on the electrical side, and then also getting the connectivity to be able to push the gas into the system. And so we've been working hard on making sure that we have those agreements in place. And then the second piece, it's construction related, but I would put it more into the permitting category, and we've made a lot of progress on obtaining many of our permits that are necessary on the RNG side.

Now we're looking at a CPI in the 4% range I think $4 one was the exact number.

At our Q3 question disposal core price was six 6% and yield was 5%. So we've completely flipped the tables. There were in Q2 of 'twenty to CPI is three or 400 basis points in front of our.

Of our price and now we flipped the table. So collectively we're kind of recovery, we're adding margin now, whereas we were five quarters ago seeing margin decline.

Jasper Vibon: From a supply chain perspective, we've done a fantastic job of really making sure that we have build lots on equipment for both our recycling business and our renewable energy business, so that's less of a risk. You know, Terry, we talked about yesterday, the single biggest plan, and I mentioned it in my remarks, which is fearless in Pennsylvania. That is our single biggest plan that we will build in the 20, and to give you some perspective, that plan was originally originally scheduled for opening in the second quarter beginning of May.

But overall I think we're on a nice trajectory with respect to.

To margin growth.

And that really is a function of having a more manageable CPI one of the questions that quarter was what's the optimal.

Jasper Vibon: And it's pushed a little bit, and right now it looks like it's scheduled to open at the end of June. So it's pushed a couple of months, but I think that gives you a good feel for what's happening here. We're not talking about pushing things back, you know, 12 to 15 months. They're moving in kind of 60-day, 30 to 60-day increments, but it is having some effect on CAPEX, for example, in 23.

Level of inflation and Mike Mike.

Smart answer was well, it's not nine 5% I think.

If I were asked that question today, I'd say, we're much closer to an optimal level of inflation, because we're able to recover it with our pricing programs across the board. The only thing I would add there Jim is and when you look at our customer metrics, which is another benchmark and you look at our new business or lost business or net new or churn numbers are rollbacks, all those kpis around how thats impacting the customer are still.

On a good trajectory as well so to your point it feels like overall, we're in a good spot.

Got it Super helpful and if I could just sneak one more question then.

Just kind of curious with labor turnover improving.

Jasper Vibon: But I think, you know, the fact that we've got 40 active recycle and RNG plants in 24, you'll have quite a few more. You'll have another big chunk in 25, and then we'll get to 26. We're very comfortable with the end number.

Wondering how we should maybe think about productivity or efficiency gains as employee kind of mature into their positions.

Jasper Vibon: Thank you. That's super helpful. Thanks for taking the questions.

Yes, I think it's a great question one of the friction points. Obviously, a turnover is the experience level and that does translate to two things one it can translate to safety and that could translate to efficiency and we've seen positive momentum since the beginning since the beginning of the year for each quarter and each line of business and two of the three lines of business went back back positive in the quarter.

Jerry Revich: Thank you for a moment for the next question.

Jerry Revich: Our next question comes from Jerry Revich from Goldman Sachs. Your line is open. Yes, hi. Good morning, everyone. I'm wondering if you folks can talk about the opportunity for lower RNM and what that could mean for you folks are really interesting in the quarter to see, you know, your operative expenses, you know, essentially flatish given John the inflation items that you mentioned earlier. And so, you know, as you folks get the truck deliveries online, et cetera. How much further could the cost structure improve off of. The strong levels we're seeing in free queue.

All three were positive in September we're seeing that.

Positive efficiency momentum continue into <unk> until October so that's probably the best benchmark for us to look at in terms of where that shows up.

Got it thanks.

Thank you.

Our next question.

Our next question will come from the line of Dave Manthey from Baird. Your line is open.

Dave Manthey from Baird. Your line is open.

Jerry Revich: Yeah, Jerry, I think it's a great point and John and I have spoken a lot about this. I think one of the best indicators is when you look at the year over year increase that we have been seeing in the first half of the year for repair and maintenance cost. That was 14.1% in first six months of the year. In the third quarter, that was up only 6.9% as the deliveries that we've talked about finally are getting on the road and we're able to get the older assets off the street that the team members are having to run much longer than our plans because we hadn't gotten or a lot of trucks for the last 18 months or so.

Okay.

Yes.

Can you hear me now Hello, Yes, yes, yes.

Okay, great. Thank you.

Good morning. So my question is is any of the $350 million sustainability capex being cut at all or is it just being pushed to the right and then is the plan to catch up between now and 2026 or is the timeline potentially elongated premiere.

So none of it is cut and yes. The plan is is to catch up is divina mentioned earlier it would be spread throughout 2024 and 2025 with.

Jerry Revich: So, when we look at sustainable levels of repair and maintenance increase, we think that there's some good tailwind coming in the fourth quarter and into early 2024 when you just look at that one metric alone, I think it's a great indication.

Some of what was originally in 'twenty, four and moving into 2025.

Okay. Thank you.

A couple of random modeling questions. Here 11, 73 returns you generate per ml btu.

Jerry Revich: Thank you. Just to clarify, so it sounds like it could be not just lower inflation going forward. Sounds like it could actually be a decline in spending funders that your comments correctly. So what we're hesitant to say is a decline in spend because while there are some parts inflation places where we've actually seen costs going backward and that should give us some benefits. There are places where we're just still catching up with regard to making sure that we've got the right assets in the right places to service the customers.

Is that a constant or can that fluctuate for some reason over time and then second I think you told us last quarter that something like 19% of your debt is floating rate what is that percent today.

There'll be 11, 77% constant that's a constant conversion rate on the Rins and then on the floating rate debt. We're at 9% currently.

Nine.

Yes.

Perfect. Thank you.

Yes.

A quick piece of color on the 9% just in July.

Jerry Revich: We do think in the first half of next year you could see effectively flatter costs in repair and maintenance and that's what we're working towards. I think the other benefit Jerry isn't a little bit more detail than the M&R question, but it's not just them and are we're also seeing it show up in other parts of the business in particular in labor and efficiency, right? Because we're putting newer trucks on the street, that obviously benefits in other places just than as opposed to maintenance and repairs and we're seeing that show up in efficiency.

We went into the markets and secured really strong fixed rate debt on a long term basis.

<unk> $4, 875% and so when you see the 10 year Treasury, where it is today you can certainly say that we're really pleased with that timing.

Thank you one moment for our next question.

And our next question comes from the line of Brian Butler from Stifel. Your line is open.

Tara Hemmer: Super and can I shift gears and Tara ask you if you don't mind. How are you thinking about the allocation of gas that's coming online towards a transportation versus utilities. So you know, it looks like based on the EP act over report, there's about a 10 million M&BQ shortfall towards transportation applications. And so as you think about where you're putting the gas to use, how does satisfying and making sure that that market gets enough supply factor into your decision versus the allocation plan that we spoke about at the sustainability day.

Good morning, Thanks for fitting me in can you hear me.

Yes.

Great just trying to keep it quick on the on the pricing side, when you talked about kind of that spread over inflation being negative in the first half of the year and kind of a positive 100 basis points, how should we think about that going into the fourth quarter, and then maybe longer term, where does that spread where do you hope that spread or target that spread to kind of even out.

In 2024 and kind of beyond.

Yes, it's a little bit of the answer I gave previously which was the.

Tara Hemmer: Yeah, I mean, we're still targeting and using that framework that we had in place really thinking, you know, one year out having 70 to 90% of our volume locked up two years out in that 40% range and then three years out, you know, 10 to 30% I think what we have to be clear about is when we think about that it is transportation versus voluntary market, but you can also do a fixed price[inaudible] Yeah, the collective argument was simply some dollars we spent in preparation for some contracts we had in the Midwest which thankfully got resolved but you know when we have big agreements like that it's not uncommon for us to spend some money to make sure we're prepared for the war so to speak but in this case it was a better outcome and those are behind us and on the labor front I was part of my comment earlier was just in the moderation of rate inflation that we've seen from 10-11% coming out of last year into the first quarter or two of this year and now being closer to the 5-6% range in terms of the rate that labor is going up and you put that against the backdrop of our pricing strategy which Schumm comment and on we continue we're seeing a better spread between what's happened with inflation and some of those costs in this case specifically labor and the turnover is yeah go ahead please and it's the turnover still a good story that was part of my prepared remarks too and driver being the biggest we have about 21,000 drivers in the network and we're continuing to see improvement there down into the low 20s from probably a peak of in the high 20s to close to 30% 18 months ago Yeah, I was just going to say no I mean what you're really hearing here and it's not just specific to your questions but to all questions is what we've been saying for several quarters which is there's a few things that are outside of our control and we're very focused on those things that are within our control might sound obvious but it's not going to sound that different when we get to 24 and while we're not giving specific numbers for 24 I would tell you that when we get to 24 pricing is going to continue to be good we're going to continue to focus as Davina said and John have said on the middle of the P&L we feel good about the progress we're making on OPEX we feel great about the progress we made on SG&A it wasn't that long ago that we were talking about getting below 11% now we're saying that the number is 9% but I think the technology that we've been talking about for probably three years is finally starting to show that it really is going to produce some results and then this bit of a hangover from the pandemic where there were some things that we simply didn't expect that affected turnover, that affected supply chain, obviously inflation all of that I think we've really really gotten our hands around and now we're starting as John mentioned in his detailed prepared remarks pull units out that have been sitting on the fence that really we've been keeping there as just kind of a cautionary move on our parts so 24 is going to look I think pretty similar it's going to look fairly flat on volume it's going to look good on price we finally will get a little bit of tailwind when it comes to our sustainability businesses because 23 was tough from that standpoint and finally we'll see some year over year positive comps on commodity prices I think in our RNG business we talked a lot about about rent pricing that that looks like it's it could end up being a good positive year over year comp same with natural gas last year Q4 was difficult because of the Ukraine spike in natural gas pricing all of that kind of went away if you look at natural gas pricing in the first quarter so I think you're going to see a fairly you know another year where we're saying here's what we're focused on we're not going to try and predict what happens with the economy but those things that we can control I think we're doing a pretty darn good job of controlling For sure, and thank you for that.

The spread obviously was working against US five quarters ago. When you had you had inflation.

Approaching 10%.

We're not able to get to that number.

On either core price or yield. So we were looking at seven and a half to core price six 2% yield and now that that relationship is really flipped around.

So youre looking at somewhere in the neighborhood of 4% CPI.

And declining by the way.

And then prior.

Whether its yield at 5% our core price at $6 six.

We feel pretty comfortable that.

By the way I don't think inflation.

Is going to 1% anytime soon I think youll, probably see inflation in this range.

For the foreseeable future. So if that's the case.

I'd like to be able to maintain.

Our own price.

In this position, where it's slightly above.

The inflation rate and by the way as John has mentioned.

Our own inflation is it doesn't track perfectly with CPI. So while we certainly have come down on labor inflation from the.

10 11, 12%.

That we were seeing a year year and a half ago, we're still above that that's kind of 3% to 4% CPI number. So so we need to get.

Price in the 5% to 6% range, which is where I think youll, probably see it going into 'twenty four.

Alright Thats helpful.

Then on the I know, we talked a lot about the productivity and optimization, but just at a very high level. I mean, when you think of what's left to do and what's been done is it reasonable to believe that 24 can can produce.

A similar kind of levels, if not better than what you saw in 'twenty three.

I think we will talk about 24, when we get to February but if you just look at what the progress we made kind of quarter by quarter first half second half that would certainly give us a better exit ratio from an operating perspective, and a margin perspective, and I think theres been a comment on that earlier, we still feel we have upside and we've always talked about 50 to 100 basis points of EBITDA margin expansion and as Jim mentioned, we've been chasing that.

A little bit the last couple of years because of supply chain inflation or whatnot. It feels like we're in a much better spot coming out of 'twenty three than we were coming out of 'twenty two yes by the way one thing we really don't talk about much when we talk about this rear load to ESL conversion, we talk about the.

The heads coming out because there is obviously a helper on the back of a rear loader. While we don't talk much about is the is the pickup in efficiency or productivity because we are the our history and we've got a long history of making these conversions we are much more productive on an asl than we are on a rear loader. So there is a I don't know John 20% 25.

Pickup in productivity.

And the resi line of business, where you're making those conversions that's a good number.

Okay, and then one last quick one on the.

Sustainability deferred spending is that's all process related that's not waste management, making a decision based on where market prices are to delay any of it. It's really just a matter of going through the mechanics of getting the approvals and things like that.

Correct. We are full steam ahead as I mentioned with that about 40 projects under construction in 2024 that'll tell you what you need to know there where we're moving forward.

Alright, great. Thanks, again for taking my fit me in.

Thank you you bet.

One moment for our next question.

Our next question comes from the line of Kevin Chiang from CIBC. Your line is open.

Thanks for taking my question, maybe just one for me and I know this has been tackled.

A bit here, but.

It does sound like you have a number of maybe I'll call idiosyncratic.

Cost containment programs in place once that maybe your competitors or smaller peers don't have when you think longer term about that and that price over inflation spread in the typical margin expansion you would want to get.

Wouldn't that women that increase given those idiosyncratic opportunities.

What would your price above your own inflation versus.

Let's say industry inflation and essentially those savings get.

For lack of a better word maybe competed away.

As you go into the market.

I think it's a great question.

What's most important is that while we compete in the marketplace. We also compete with ourselves and working to continuously improve our business and so price is one element of how we grow our business in another part of how we grow our business is ensuring that our cost to serve continue to improve over time, we do.

Do you believe some of those cost improvement items actually translate into top line growth over time as well and the Best example of that is actually in the National account business, where W. M is completely differentiated itself in the marketplace and therefore is getting outsized growth on the volume line the other.

That I think is important and we don't tend to do this but I wanted to do a quick comparison, our 29, 6% margin in the quarter actually compares to our largest competitors at 31, 1% because of the impact of the recycling line of business and accretion and so.

We think about how our margins are comparing in this space, we're really proud of the progress we're making.

That 31, 1% demonstrates the strength of the.

Process improvements that we've been putting in place and the price execution we've had.

That's great color and actually.

Very helpful. Thanks, again, and congrats on a good quarter there.

Thanks, Kevin.

One moment for our next question.

Yes.

Our next question comes from the line of Jim <unk> from TD Cowen Your line is open.

Hey, Thank you and good morning.

You talked a lot about price, but you also mentioned that churn is at historical lows.

Why not try and push price a little bit more here what's the.

I know you can lose some business, but given the churn is low why not push price more.

It's a good question I think listen we I mentioned it earlier, we're very focused on customer lifetime value and when you look at the defection rate coming down those are some of them are our most valuable customers and I think youre seeing that show up across our customer metrics and in the margin expansion and as we've talked about a few times I mean getting price for price is one thing but.

Getting it over our cost of inflation and been able to grow the business and Divina mentioned, our national account business being a great example, where we've differentiated showed shown value and continue to grow the top line there.

So.

On the disposal side of the business I think it's important to.

Really emphasized some recent success the third quarter was the best ever disposal core price that we've had in our business and where.

Pricing new business up 9% on a year over year basis in the central part of our business I think it indicates the strength that we're having there and pricing has typically in this business than on the collection side and what you're seeing is we're taking that discipline and customer customer lifetime value approach and extending it Aldo.

James Fish: And I just wanted to follow up less quickly on the truck delivery side. It's been great and clearly you're seeing that benefit on the M&R of those increased deliveries are already common to what you expect this year. I know there have been some some investor questions around, you know, the impacts of the UAW strike at Mac, but, you know, we do have builds lots opening up for 2024 now. Can you just comment into visibility into continued, you know, strong top deliveries?

Through our value chain the last point I'd make on that is a line of business, which is we've been very focused on in terms of pushing price to get the right margin is residential and core price of six 9% yield of six three I think as an example of where we are absolutely pushing price.

James Fish: Yeah, we're actually in pretty good shape. You know, that's an unfortunate situation, but we've talked to our supply chain team between Devina and I, and the builds lots that we have and the trucks really going into the first half of next year, don't look like they're going to be impacted. Partly because we take delivery of chassis a lot earlier than we take delivery of the truck because it's, you know, another manufacturer's involved in that. So we're in pretty good shape there.

Operator: Excellent. Thank you.

John is transfer stations.

For many many years, Jim we never even tougher.

Price increase I mean transfer station pricing was <unk>, 5% and if you look at our transfer station pricing, which really is kind of a proxy for for landfill.

For all intents and purposes, they're kind of closer in landfills you'd want to think about it that way and our transportation pricing and the yield number for transfer was seven 1% and that is a.

Kevin Chang: One moment for next question. And our next question come from land of Stephanie Moore from Jeffries. Your line is open. Hi, this is Hans Allen for Stephanie. We're just curious if we can sort of bridge, you know, the hundred bits of margin expansion. I know you guys kind of pulled out sort of optimizing the overall cost structure. In the collection disposable side, but just curious if you could sort of parse out the other item impacts like fuel.

Honestly, it's kind of close to.

Historical highs I mean, we did have an eight 9% in that line of business.

In Q1, but other than that it's close to the highest number on my entire phase. It goes all back to 2017, so not saying we can continue to push price. We absolutely believe we can we do have to be conscious of that customer lifetime value that John mentioned.

Got it. Thank you very much last one from me. So you see you made about $370 million of share repurchases, but werent very active on the M&A front can you just talk about how you're thinking about M&A versus share repurchases right now.

Kevin Chang: IPC and M&A. Sure. So collection and disposal of 70 basis points plus SDA of 20 basis points basically tells the story, but then we've got put in takes and the biggest piece there is the timing of the alternative fuel tax credits and that was a headwind of 50 basis points. That was almost entirely offset by the impact of lower fuel prices and our surcharge structure and that was a 40 basis point impact in the quarter.

Well, yes, let me let me say this about the M&A market here.

First of all at a time when interest rates are kind of a multi decade highs and there is a bit of uncertainty about the economic outlook here.

Matt I'd, rather pay three times this.

$740 million that we've talked a lot about today, then get into a process based on kind of a rosy forward forecasts.

Kevin Chang: Then you had recycling and renewable energy recycling was positive 20 basis points renewable energy was negative 20 basis points. So again, those two offset each other. And you know, we talked all year about having some diluted impact from M&A because of the, you know, the type of acquisitions we had on the recycling brokerage side as well as just the typical ramp of getting good solid waste token acquisitions to WN standards. That impact had lessened in the third quarter relative to what we've seen in the first half of the year and that was it about 40 basis points in the first half down to about 20 basis in the third quarter. Got it. That's helpful.

And race to the top and Thats kind of what it feels like in some respects in the M&A market today. So it doesn't mean, we're not going to be in the M&A market, we will be and when we're in that market.

We're going to very much focus on strong strategic growth opportunities and tuck in acquisitions, but I just don't want to I don't want to get into.

Our competition, particularly based on these these kind of future forecasts that may or may not be become realistic or achievable.

As it compares to the overall capital allocation plan.

Kevin Chang: And then just kind of shifting gears a bit. Just kind of cares. You could, you know, talk about, you know, the greatest, what do you have the greatest sort of pricing opportunity and, you know, how should we think about, you know, your pricing power and a lower inflationary environment. And, you know, it was also just sort of wondering if you could just remind us, you know, what percent of the restricted book is tied to, you know, waste and sewer trash collection portion of CPI.

Share repurchase we've laid out that we had $1 $5 billion in authorization and we've talked about.

$1 3 billion being being the actual number.

Look at all kind of aspects of that capital allocation plan, what we will continue to evaluate dividends share repurchase M&A.

Kevin Chang: Versus, you know, actual headline CPI. So, you know, I think it's kind of important as, you know, you know, that kind of component has been accelerating kind of for most of this year. And, you know, probably will average, you know, you know, a point or two higher than headline CPI, which, you know, could have some impacts on pricing next year. The number we usually give is about 40% of its tide to some type of index.

Divina has talked about the balance sheet and she has always done such a great job of keeping that balance sheet in a good place.

But most of if you think about it as M&A dollars a lot of that has not been technical M&A. Its been these investments that the terrorists talked a lot about and those are basically an acquisition.

We're paying three times four instead of 12 or 14 times for them.

Kevin Chang: Not necessarily water sewer trash, that's one of the indices but about 40% is tied to an index. There tends to be a bit of a look back on that, a lag. So to the extent that that number is climbing, that ends up being a positive for us. It just takes a little while to get to that full positive. I think to your first question about where are we expecting to be pretty good?

Right right, Okay, alright, great. Thank you for the answers I appreciate it.

Yeah.

Thank you and one moment for our next question.

Okay.

Your next question comes from the line of Stephanie <unk> from Jpmorgan. Your line is open.

Hi, good morning.

I was just looking at the average yield guide for 2023, I think the expectation was going to be over five percentage points and based on the trend year to date. It seems like there should be a big step up in the fourth quarter is that typical seasonality or is there any.

Kevin Chang: I think pricing has been pretty consistently good across the board. In years past, particularly probably as far back as five years ago, pricing was pretty good but it was very focused on one line of business. That has changed over the last few years where we've been good with pricing across the board. But I think the piece that we've all touched on a little bit here today that I'll reiterate is really the net price.

Being abnormal with year over year comps this year, implying a big ramp in average yield in the fourth quarter.

Kevin Chang: It's not something we used to talk about because, there was a whole lot of inflation in the economy, but if I just use Q2 of 22, because that was kind of a high watermark for inflation, the CPI at 9.5% in Q2 of 22, and if I look at our core price for collection disposal was 7.5% in Q2 of 22 and yield was 6.2%. Now we're looking at a CPI in the 4% range.

Well the way that we're looking at it right now we actually expect our fourth quarter yield to be pretty well in line with what we produced in Q3 and that would put the full year to right at that five 5% that we had targeted.

I would tell you from a conversion of core price to yield perspective, the trend that we saw in Q3 isn't really representative of a long term trend or revision and the strength that we had seen a converting more of our core price dollars into yield dollars.

Kevin Chang: I think 4.1 was the exact number. And our Q3 collection disposal core price was 6.6% and yield was 5%. So we've completely flipped the tables there. Q2 of 22 CPI is three or four hundred basis points in front of our price and now we flip the tables. So collectively, we're adding margin now whereas we were five quarters ago seeing margin decline. But overall, I think we're on a nice trajectory with respect to margin growth and that really is a function of having a more manageable CPI.

Instead mix related and also because of some of the impact of noise from Hurricane een that were particularly significant in Q3, and Q4 of 2022, and that's impacting our year over year conversions.

I think the key message here is confidence in our ability to deliver yield for the year of around five 5%.

Okay. Thank you that is very helpful.

And then if I can just go back to the comment about the futures market for RIN pricing and how.

Kevin Chang: I know one of the questions that quarter was, what's the optimal level of inflation and my kind of smart answer was, well it's not 9.5%. I think if I were asked that question today, I'd say we're much closer to an optimal level of inflation because we're able to recover it with our pricing programs across the board. The only thing I would add there, Jim, is when you look at our customer metrics, which is another benchmark and you look at our new business, our lost business, our net new, our churn numbers, our rollbacks, all those KPIs around how that's impacting the customer are still on a good trajectory as well. So to your point, it feels like overall we're in a good spot. Got it. Super helpful.

Youre not necessarily pricing at the spot market $3 in place that RIN price.

Can you just help educate me a little on is there an actively traded futures market for brands and is maybe waste management meeting that development of the futures market.

I think what's important to note is this is a market even in the transportation market that has been evolving pretty quickly as more renewable natural gas is coming online and as EPA has is raising the RVO and also the fact that they set a three year RVO, which had never happen.

Kevin Chang: And if I could just, you know, sneak one more question then, you know, just kind of curious, you know, with labor turnover improving. Just sort of wondering how we should maybe think about, you know, productivity or efficiency gains as, you know, employees kind of mature into their positions. Yeah, I think it's a great question. One of the friction points obviously of turnover is the experience level and that does translate to two things.

Before so this is something that historically, there hadn't been a robust market, where you could train forward and Thats certainly evolved and something that we are seeing activity in.

Okay. That's helpful. Thank you.

Kevin Chang: One, it can translate to safety and it can translate to efficiency and we've seen positive momentum since the beginning of the year for each quarter in each line of business. And two of the three lines of business went back positive in the quarter, all three were positive in September. We're seeing that positive efficiency momentum continue into October. So that's probably the best benchmark for us to look at in terms of where that show. Thank you.

Thank you.

Moment for last question.

And our last question comes from the line of Toni Kaplan from Morgan Stanley. Your line is open.

Thanks very much.

Berlin earlier in the call you talked about commercial being encouraging I was hoping you could add any additional color to that and I know that you don't want to go too much into 'twenty four but maybe just give some color on.

Dave Manthey: One moment for our next question. Our next question will come from the line of Dave Manthey, from Beard, United's Open. Dave Manthey, from Beard, United's Open. Thank you. Can you hear me now? Hello? Yeah, yeah, yeah, yeah. Oh, you got me now. Okay. Thank you.

Whether where you're most optimistic whether it's commercial <unk> industrial.

Coverage of roll off anything that.

Thinking could be better than <unk> 24 versus 23. Thanks.

And youre, referring specifically to volume.

Yeah, Okay, yeah, So I guess specific to commercial and that may be the line of business that we have the most the highest level of optimism.

And it's because our national accounts business, where we really feel like we have a differentiated offering there whether it's through data and analytics reporting.

James Fish: Good morning. So my question is, is any of the $350 million sustainability catbacks being cut at all? Is it just being pushed to the right? And then is the plan to catch up between now and 2026, or is the timeline potentially elongated from here? So none of it is cut. And yes, the plan is to catch up. As Devina mentioned earlier, it would be spread throughout 2024 and 2025 with, you know, some of what was originally in 24 moving to 2025. Okay. Thank you.

Or.

Service itself that business has been growing and it's been growing fairly fairly significantly over the last three years. So as I look at commercial volume as we said last quarter. Our piece of the commercial volume has been has been a bit of a swaps. So we've traded some of that.

National account and we have seen.

<unk>.

Fairly muted small and medium business performance and the net of the two on the volume line has been slightly positive. So if you. If you asked me to kind of place a bet on a line of business for the FERC, maybe where we're the most optimistic in 'twenty four I'd, probably put it on commercial or maybe on the.

James Fish: And second, a couple of random modeling questions here. 11.7 D3 Rins, you generate per MMB to you. Is that a constant, or can that fluctuate for some reason over time? And then second, I think that you told us last quarter that something like 19% of your debt is floating rate. What is that percent today? So the 11.727 is constant. That's a constant conversion rate on the Rins. And then on the floating rate that we're at 9% currently.

Our landfill line of business itself, I think youre going to continue to see residential be negative because we continue to kind of pair down some of that is unprofitable work and we just went through our quarterly reviews with our vice Presidents last week and there still is some unprofitable work out there that's kind of when the contract comes up we're either going to bid it up.

James Fish: Nine? Yes. Perfect. Thank you. Yeah. A quick piece of color on the 9% just in July. We went into the markets and secured really strong fixed rate debt on a long-term basis at a coupon of 4.875%. And so when you see the 10-year treasury where it is today, you can certainly say that we're really pleased with that timing. Thank you. One moment for an next question.

Or we're going to we're going to.

Lucid intentionally so I wouldn't expect to see volume in resi.

Get back to flat or positive probably for at least a year and rollout is so dependent on the economy and we just don't have a great view of what the economy is going to look like we'll know more in three months, but I'd probably put it on commercial is the one where we're most optimistic.

Thanks very much.

Okay.

Thank you.

And with that I would now like to turn the conference back over to Jim Fish, President and CEO for closing remarks.

Brian Butler: I don't think it's a question from the line of Brian Butler from Stiefel. Your end is open.

Okay. Thank you very much.

Thanks very much for all your questions. This morning really good questions. We appreciate them.

Brian Butler: Good morning. Thanks for fit me in. Can you hear me? Yes. Great. Just try to keep it quick on the pricing side when you talked about kind of that spread over inflation being negative in the first half of the year and kind of positive hundred basis points. How should we think about that going into the fourth quarter and then maybe longer term, where does that spread, you know, where do you hope that spread or target that spread to kind of even out in 2024 and kind of beyond.

We do look forward to talking to you in the interim period and.

Brian Butler: Yeah. It's a little bit of the answer I gave previously, which was, you know, the spread obviously was working against us five quarters ago when you had you had inflation, you know, approaching 10%. And we just were not able to get to that number on either core price or yield. So we were looking at seven and a half core price 6.2% yield. And now that that relationship has really flipped around. So you're looking at some are the neighborhood of 4% CPI and declining, by the way, and then price, whether it's yield at 5% or core price at 6.6.

Between now and when we report on.

Our fourth quarter.

And in that period, we have some holidays. So please enjoy your holidays. Thanks, so much.

This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.

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Brian Butler: We feel pretty comfortable that by the way, I don't think inflation is going to 1% anytime soon. I think you'll probably see inflation in this range for the foreseeable future. So if that's the case, I'd like to be able to maintain our own price in this position where it's slightly above the inflation rate. And by the way, as John's mentioned, you know, our own inflation is doesn't track perfectly with CPI. So while we certainly have come down on labor inflation from the, you know, 10, 11, 12% that we were seeing a year, a year and a half ago. So we're still above that that's kind of 3 to 4% CPI number. So we need to get price in the 5 to 6% range, which is where I think you'll probably see it going into 24.

Brian Butler: All right, that's helpful. And then on the, I know we talked a lot about the progativity and optimization, but just at a very high level, I mean, when you think of what's left to do and what's been done, is it reasonable believe that 24 can can produce, you know, kind of the similar kind of levels, if not better than what you saw in 23? I think we'll talk about 24 when we get the February, but if you just look at what the progress we made, kind of quarter by quarter, first half, second half, we would certainly give us a better exit rate, ratio from an operating perspective and a margin perspective, and I think to be in a comment on that earlier, we still feel way of upside, and we've always talked about 50 to 100 basis points of even done margin expansion, and as Jim mentioned, we've been chasing out a little bit the last couple of years, because of supply chain and inflation and whatnot, it feels like we're in a much better spot coming out of 23, then we were coming out to 22, yeah, by the way, one thing we really don't talk about much when we talk about this real low to ASL conversion, we talk about the, you know the heads coming out because there's obviously a helper on the back of our real loader, what we don't talk much about is the pick up inefficiency or productivity, because we are our history, and we've got a long history of making these conversions, we are much more productive on an ASL than we are on a real loader, so there's a, I don't know, John, 20%, 25% pick up in productivity in the residue line of business where you're making those conversions, that's a good number.

Brian Butler: Okay, and then one last quick one on the sustainability deferred spending, is that's all process related, that's not, you know, waste management making a decision based on where market prices are to delay any of this, it's really just a matter of going through the mechanics of getting the approvals and things like that. Correct, we are full steam ahead, as I mentioned with that, about 40 projects under construction in 2024, that'll tell you what you need to know there, we're moving forward. All right, great, thanks again for taking me in. Thank you.

Operator: One moment for our next question.

Stephanie Moore: All right, next question, a couple of lines of Kevin Chang from CIBC, for mine is open. Thanks for taking my question, maybe just one for me, and I know this has been tackled quite a bit here, but it does sound like you have a number of, maybe I'll call it idiosyncratic, cough containment, programs in place, you know, ones that maybe your competitors or smaller peers don't have. When you think longer term about that price over inflation spread, and you know, the typical margin expansion you'd want to get, wouldn't that increase given those idiosyncratic opportunities, or would you price above your own inflation versus, let's say, industry inflation and essentially those savings get, you know, for lack of a better or maybe competed away, you know, as you go to the market.

Stephanie Moore: You know, I think it's a great question. I think what's most important is that while we compete in the marketplace, we also compete with ourselves and working to continuously improve our business. And so price is one element of how we grow our business, and another part of how we grow our business is ensuring that our costs to serve continue to improve over time. We do believe some of those cost improvement items actually translate into top line growth over time as well.

Stephanie Moore: And the best example of that is actually in the national accounts business, where WM is completely differentiated itself in the marketplace, and therefore is getting outside growth on the volume line. The other thing that I think is important, and we don't tend to do this, but I want to do a quick comparison, our 29.6% margin in the quarter actually compares to our largest competitors at 31.1%, because of the impact of the recycling line of business and accretion.

Stephanie Moore: And so when we think about how our margins are comparing in the space, we're really proud of the progress we're making, and I think that 31.1% demonstrates the strength of the process improvements that we've been putting in place and the price execution week.

Tony Kaplan: That's great color and actually very, very, very helpful. Thanks again and congrats on a good quarter there. Thank you, Joe. One moment for our next question. Our next question comes from Lane, Jim Schumm from P.D. Callan. Your line is open. Hey, thank you and good morning. You talked a lot about price but you also mentioned that churn is at historical lows. I mean, why not try and push price a little bit more here? What's the, I mean, I know you can lose some business but given that churn is low, why not push price more?

James Fish: It's a good question. I think, listen, I mentioned it earlier. We're very focused on customer lifetime value and when you look at the defection rate coming down, those are some of our most valuable customers. I think you're seeing that show up across our customer metrics and in the margin expansion. And as we've talked about a few times, I mean, getting price for price is one thing but getting it over our cost of inflation and being able to grow the business.

James Fish: And Davina mentioned our national account business being a great example where we've differentiated showed shown value and continue to grow the top line there. So on the disposal side of the business, I think it's important to really emphasize some recent success that third quarter was the best ever disposal core price that we've had in our business. And we're pricing new business up 9% on a year over year basis and the disposal part of our business.

James Fish: I think it indicates the strength that we're having there and pricing has typically in this business been on the collection side and what you're seeing is we're taking that discipline and customer lifetime value approach and extending it all the way through our value chain. The last point I'd make on that is a line of business, which is that we've been very focused on in terms of pushing price to get the right margin as residential and core price of 6.9% yield to 6.3.

James Fish: I think as an example of where we are absolutely pushing price. But the other one, John, is transfer sessions. I mean, you know, for many, many years, Jim, we never even took a price increase. I mean, transfer session pricing was 0.5%. And if you look at our transfer session pricing, which really is kind of a proxy for for Lancel. I mean, you know, they're for all intents, bermises, they're kind of close in Lancel if you want to think about it in that way.

James Fish: And our transfer session pricing and the yield number for transfer was 7.1%. And that is a, you know, honestly, it's kind of close to historical highs. I mean, we did have an 8.9% in that line of business in Q1. But other than that, it's close to the highest number on my entire page. It goes all the way to 2017.

James Fish: So not saying we can't continue to push price. We absolutely believe we can. We do have to be conscious of that customer lifetime value that John mentioned. Got it.

James Fish: Thank you very much. Last one for me. See, you made about 370 million of share of purchases, but weren't very active on the M&A front. Can you just talk about how you're thinking about M&A versus share of purchases right now?

James Fish: Well, yeah, and let me let me kind of say this about the M&A market here. I first light at a time when interest rates are kind of a multi decade highs. And there's a bit of uncertainty about the economic outlook here. I'd rather pay three times, you know, this $740 million that we've talked a lot about today, then get into a process based on kind of rosy forward forecasts and race to the top.

James Fish: And that's kind of what it feels like in some respects in the M&A market today. So it doesn't mean we're not going to be in the M&A market. We will be. And when we're in that market, you know, we're going to very much focus on strong strategic growth. Opportunities and tucking acquisitions, but I just don't want to I don't want to get into a competition, particularly based on these, these kind of future forecasts that may or may not be become realistic or achievable as it compares to the overall capital allocation plan and, you know, share a purchase.

James Fish: We've, we've laid out that we had, you know, 1.5 billion in authorization. And we've talked about, you know, 1.3 billion being the actual number. We look at all kind of aspects of that capital allocation plan, what we will continue to evaluate dividends, share a purchase M&A, you know, Devina has talked about the balance sheet and she's always done such a great job of keeping that balance sheet in a good place. But most of if you think about it as M&A dollars, a lot of that has not been technical M&A. It's been these investments that the terrorists talked a lot about. And those are basically an acquisition that's we're paying three times for instead of 12 or 14 times for. Right.

James Fish: Okay. All right. Great. Thank you for the answers. Appreciate it. Thank you.

Operator: And one moment for next question.

Stephanie Moore: Our next question from offline of Stephanie from JP Morgan. Your line is open. Hi. Good morning. I was just looking at the average yield guide for 2023. I think the expectation was where to be over five and a half per day. That's what we're looking at right now. So the way that we're looking at it right now, we actually expect our fourth quarter yield to be pretty well in line with what we're producing to three.

Stephanie Moore: And that would pull the full year to write at that five and a half per cent that we had targeted. I would tell you from a conversion of core price to yield perspective, the trend that we saw in Q3 isn't really representative of a long term trend or revision in the strength that we had seen of converting more of our core price dollars into yield dollars. It's instead mixed related and also because of some of the impacts of noise from Hurricane Ian that were particularly significant in Q3 and Q4 of 2022 and that's impacting our year over year conversions.

Stephanie Moore: So I think the key message here is confidence in our ability to deliver yield for the year of around five and a half. Okay, thank you. That is very helpful.

Stephanie Moore: And then if I can just go back to the comment about the futures market for rent pricing and how you're not necessarily pricing at the spot market $3.40 rent price, can you just help educate me a little on is there an actively traded futures market for rents and is maybe Waste Management leading that development of the futures market? I think what's important to note is this is a market even in the transportation market that has been evolving pretty quickly as more renewable natural gas is coming online and as EPA is is raising the RVO and also the fact that they set a three year RVO which had never happened before. So this is something that historically you know there hadn't been a robust market where you could trade forward and that's certainly evolved and we're something that we're seeing activity in. Okay, that's helpful. Thank you.

Tony Kaplan: One moment for our last question. And our last question of line of Tony Kaplan from Morgan Stanley, your line is open. Thanks very much. Early in the earlier in the call you talked about commercial being encouraging. I was hoping you could add any additional color to that and I know that you don't want to go too much into 24, but maybe just give some color on you know whether where you're most optimistic, whether it's you know commercial, resie industrial, like recovering and is of roll off, you know, anything that you're thinking could be better in 24 versus 23.

Tony Kaplan: Thanks. Are you and you referring specifically to volume there. Yeah. Okay. Yeah. So I guess specific to commercial and that maybe the line of business that we have the most the highest level of optimism. And it's because our national counts business where we really feel like we have a differentiated offering there, whether it's through data analytics reporting or you know service itself. That business has been growing and it's been growing fairly fairly significantly over the last three years.

Tony Kaplan: So as I look at commercial volume. As we said last quarter, a piece of the commercial volume has been has been you know a bit of a swap. So we've traded some of that national count and we have seen, you know, a fairly muted small and medium business performance and the net of the two on the volume line has been slightly positive. So if you if you asked me to to kind of place a bet on on a line of business for for maybe where we're the most optimistic in 24, I'd probably put it on commercial or maybe on the landfill line of business itself.

Tony Kaplan: So I think you're going to continue to see residential be negative because we continue to kind of pair down some of that unprofitable work and we just went through our quarterly reviews with our vice presence last week and there still is some unprofitable work out there that's going to when the contract comes up, we're either going to bid it up or we're going to we're going to you know lose it intentionally. So I wouldn't expect to be volume and ready to get back to flat or positive probably for at least a year and and roll off is so dependent on the economy and we just don't have a great view of what the economy is going to look like will no more in three months. But I'd probably put it on commercial as the one where we're most optimistic. Thanks very much. Thank you.

James Fish: And with that, I would now like to turn the conference back over to Jim Fish, President and CEO for Close Your Marks. Okay, thank you very much. Thanks very much for all your questions this morning, really good questions. We appreciate them. We do look forward to talking to you in the interim period and between now and when we report our fourth quarter. And in that period, we have some holidays. So please enjoy your holidays. Thanks so much.

Operator: This includes today's conference call. Thank you for participating. You may now disconnect everyone. Have a great day.

Operator: Thank you.