Q4 2023 Waste Management Inc Earnings Call

Operator: Good day, and thank you for standing by. Welcome to the WM 4th Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 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 Egl, Senior Director of Investor Relations. Thank you, Josh. Good morning, everyone.

Ed Egl: And thank you for joining us for our fourth quarter and full year 2023 Earnings Conference Call. With me this morning are Jim Fish, President and Chief Executive Officer, John Morris, Executive Vice President, Chief Operating Officer, and Devina Rankin, Executive Vice President, Chief Financial Officer. You'll hear prepared comments from each of them today.

Ed Egl: Jim will cover high-level financials and provide a strategic update. John will cover an operating overview, and Devina will cover the details of the financials in our 2024 Outlook. Before we get started, please note that we have filed a Form 8K that includes the Earnings Press Release and is available on our website at www.wm.com. Form 8K, the press release, and the schedules of the press release include important information.

Ed Egl: During the call, you will hear forward-looking statements which are based on current expectations, projections, or opinions about future periods. However, 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 our filings with the SEC, including our most 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 Devina will discuss operating EBITDA, which is income from operations before depreciation and amortization Any comparisons, unless otherwise stated, will be with the prior year period. Net Income, EPS, Income from Operations, and Margin, Operating EBITDA and Margin, SG&A Expense, and Prior Period Operating 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.

Ed Egl: Please refer to our earnings press release and tables, which can be found on the company's website at www.wm.com, for reconciliations to the most comparable gap measures and additional information about our use of non-gap measures and non-gap projections. This call is being recorded and will be available 24 hours a day beginning approximately 1 p.m. Eastern Time today. To hear a replay of the call, access the WM website at www.investors.wm.com. Time-sensitive information provided during today's call, which is occurring on February 13th, 2024, may no longer be accurate at the time of a replay. Any redistribution, retransmission, or rebroadcast of this call in any form without the express written consent of WM is prohibited.

James C. Fish: Now I'll turn the call over to WMS President and CEO, Jim Fish. All right, thanks, Ed, and thank you all for joining us. The WM team delivered a remarkably strong finish to 2023, driving fourth-quarter operating EBITDA 15% higher. This accelerated earnings growth led to a full-year operating EBITDA that exceeded the high end of our most recent guidance rank by nearly $25 million dollars and achieved the midpoint of our original expectations from the beginning of the year. Our strong financial results. For both the quarter and the year, we are powered by our collection and disposal business. This performance starts with disciplined organic revenue growth that exceeded our expectations. And once again, our success in managing the middle of the P&L really stands out in our results, as do our We will continue to make progress in optimizing our cost structure with the help of technology and automation.

James C. Fish: Combining our revenue performance with the improvement in operating costs, we saw a widening of our price-to-cost spread and increased profitability. Operating EBITDA margin reached a record 29.9% in the fourth quarter.

James C. Fish: Full Year Margin, Expanded 90 Bases. 28.9% As 2024 kicks off, we're confident that our continued focus on Optimizing Our Cost Structure and Executing on Sustainability Growth Projects sets us up for another year of outsized growth. We anticipate operating EBITDA growth of 7.7% at the midpoint of our guidance. That translates to more than $450 million, of which $115 million comes directly from our sustainability growth investment.

James C. Fish: We remain excited about the economic and environmental benefits of expanding our renewable natural gas and recycling platforms. Our execution is tracking well. We expect to commission five new NRNG facilities by the end of the year.

James C. Fish: 30% of our run rate renewable natural gas volume. We're also on track to complete automation upgrades at 10 recycling facilities and add three recycling..., and Newmark. Turning to capital allocation, you'll hear from Devina on this topic in more detail, but I want to stress our confidence and our ability to continue to allocate capital to all of our priorities, which includes investing in our high-return sustainability growth project. Acquiring a Creative Business and returning cash to shareholders through dividends and share repurchase. Our Tuckin' Acquisition Pipeline is robust.

James C. Fish: And there are some indications that 2024 could have heightened activity in this regard. We're committed to a disciplined approach to acquiring... The Bulletproof Executive, 2013. In closing, I want to thank the entire WM team for another great year. We were just at the WM Phoenix Open last week, and I've said before... We work hard for this event to create a representation of the bigger company, with a central focus on people and the environment. We've been the title sponsor for 15 years now, and the tournament's been recognized as the largest zero-waste sporting event in the world for 12 years running.

John J. Morris: It makes me proud to see the WM team out there making waste diversion operations run smoothly and demonstrating our sustainability leadership so well. I look forward to working with this great team in 2024 as we continue to drive growth by executing our operating plans and progressing our investments in technology, automation, and sustainability. I'll now turn the call over to John to discuss our operational performance. Thanks, Jim, and good morning. We're more than pleased with the strong operational performance our team achieved in 2023, showing continuous improvement throughout the year with standout results in the fourth quarter. During this period, operating expenses as a percentage of revenue improved 240 basis points year-over-year, landing at 60.3% and marking our second-best quarterly performance ever. This improvement was primarily fueled by our collection and disposal business, benefiting from the robust operating leverage of our strategic cost optimization. Our proactive measures to accelerate and improve cost efficiency include leveraging technology to manage labor, managing repair and maintenance costs, and optimizing our overall cost structure. These initiatives led to a substantial improvement in WM's cost-to-serve metrics, bringing estimated unit cost inflation to low single digits by the fourth quarter.

John J. Morris: When combined with solid results from our pricing initiatives, we greatly enhanced overall margins. Our strong second-half performance translated into full-year operating expenses as a percentage of revenue of 61.7%, an improvement of 70 basis points. That momentum has carried into 2024 and is evident in our January results, even as we face severe weather in some areas we serve. Two of the key cost categories driving our operating improvements are labor and repair and maintenance. On the labor front, this begins with our persistent focus on reducing turnover.

John J. Morris: In the fourth quarter, we achieved a noteworthy milestone as driver turnover reached its lowest point at 18.4 percent, showing improvement as the year progressed. Additionally, our strategic automation initiatives are yielding positive results in collection efficiency, with all three lines of business improving meaningfully in the fourth quarter compared to last year. The results of our technology and automation investments gained traction in the latter part of 2023, leading to significant strides in labor cost management. We expect this to continue into 2024 as we broaden the deployment of our tools across additional sites.

John J. Morris: Turning to repair and maintenance, with a full lot of trucks received in 2023, we successfully removed over a thousand excess assets from our operation. We've improved the age of our routed fleet and reduced truck rental utilization by nearly 60% since the beginning of 2020. Throughout 2023, our emphasis remained on streamlining maintenance processes, which has resulted in enhanced technician productivity, reduced overtime expenses, and diminished reliance on external repair services. This is paid off in the form of lower repair and maintenance costs, in both dollars and as a percentage of revenue compared to 2020. We accomplish all this with an unwavering commitment to safety and by enhancing the quality of our fleet.

John J. Morris: We're proud of the strides we made throughout 2023 and look forward to sustained progress. Another core element of the equation that fueled our strong financial results is disciplined organic revenue. Growth from price and volume in the collection and disposal business totaled 6.3% for the year, which outpaced our expectations. Our pricing programs continue to be focused on striking the right balance between maximizing customer lifetime value and increasing price to recover higher costs. Our full-year churn rates remain at the lower end of the historical range at about 9%, and the year-over-year improvement underscores our consistent delivery of quality service to our customers.

John J. Morris: Looking ahead to 2024, we anticipate sustained momentum in our discipline pricing programs to result in a core price between 6% and 6.5% and yield approaching 5%. We remain committed to maximizing customer lifetime value while securing pricing that exceeds our cost inflation. We've seen that spread improve as 2023 progressed, and we are confident that our teams are poised to deliver another successful year ahead. Turning to volumes, our fourth-quarter collection and disposal volume grew by 1.9% on a workday adjusted basis. Growth was primarily driven by MSW Landfill and Commercial Collection, two bellwethers for demand for our services. However, overall growth in landfill volumes was somewhat muted due to the elevated volumes from the Hurricane Ian cleanup in 2022. Similar to recent quarters, residential collection volumes declined modestly due to our intentional shedding of low-margin contracts as we worked to ensure that we achieved acceptable returns for all parts of our business.

John J. Morris: You can see the benefits of this focus because, while residential collection volumes declined, total revenue and earnings in this line of business both improved. This is a winning equation and will continue to execute on this strategy in the year ahead. Organic revenue growth in all collection lines of business remains positive, and operating EBITDA continues to grow. In the fourth quarter, new business grew, and net service increases remain firmly positive, reflecting our quality of service and focused differentiation. Looking ahead to 2024, our guidance anticipates collection and disposal volume approaching 1%, mirroring the performance achieved in 2020. And finally, I want to convey my appreciation to our frontline teams for their unwavering commitment to delivering safe and reliable service to our customers and communities on a daily basis.

Devina A. Rankin: It's their efforts that made 2023 successful and laid the groundwork for growth in the years ahead. I will now turn the call over to Devina to discuss our 2023 financial results and 2024 financial outlook in greater detail. Thanks, John, and good morning. Cost optimization was a significant theme in the fourth quarter and throughout 2023. Our team was pleased that our collective focus delivered WM's best-ever full-year SG&A as a percentage of revenue of 9.4%.

Devina A. Rankin: The 20-basis point improvement from the prior year was realized through investments in customer-facing technology, leveraging enhanced back-office systems to become more efficient, and a continuous focus on optimizing our spend. We're pleased with the progress made to improve this measure, while at the same time investing in our talent, customer engagement channels, and technology capability. SG&A optimization delivered 20 basis points of our 90 basis point expansion and adjusted operating EBITDA margin in 2023. The remaining 70 basis points were from the collection and disposal business, which benefited from a combination of fuel price impacts and operating efficiency.

Devina A. Rankin: We gained meaningful traction in optimizing labor efficiency and repair and maintenance costs in our collection and disposal business in the back half of the year, lifting our full-year adjusted operating EBITDA margin to 28.9%. This result is 30 basis points ahead of the high end of our expectations and positions us to continue to deliver margin expansion in the year ahead. Our operating performance translated into robust cash flow in 2023. Our full-year cash flow from operations grew to $4,719,000,000.

Devina A. Rankin: And our free cash flow before sustainability growth investments was nearly $2.7 billion. Each of these cash flow measures ended the year near the high end of our initial guidance range. This result demonstrates our strong earnings growth, effective management of interest and taxes, and optimizing cash conversion, and our disciplined capital expenditure management process. During 2023, we returned $2.44 billion to shareholders, paying $1.14 billion in dividends, and repurchasing $1.3 billion of our stock. In addition, we spent $173 million on traditional solid waste and recycling acquisitions to grow our business.

Devina A. Rankin: We accomplished all of this while accelerating our sustainability growth investments for future growth and development and maintaining our leveraged target ratio, our targeted leverage ratio of about 2.75 times. Our balance sheet remains strong, and our earnings and cash flow growth are robust, positioning us to continue our commitment to shareholder returns and long-term growth. Moving to our 2024 financial outlook, we're anticipating total company revenue growth between six and 7% driven by organic growth in the collection and disposal business approaching 6%. Operating EBITDA is expected to grow by $450 million at the midpoint of our outlook.

Devina A. Rankin: When we think about the cadence of our growth over the course of the year, we're expecting collection and disposal growth to be weighted more to the front half of the year, given the momentum we've gained from strong operating efficiencies in the back half of 2023. We expect capital spending to support the business for the year to total $2.25 billion as a midpoint, and we expect to invest another $875 million in our high-return sustainability growth project. Free cash flow before these sustainability investments is anticipated to grow almost 7% at the midpoint to $2.85 billion.

Devina A. Rankin: We remain committed to investing in an industry-leading network of renewable energy and recycling assets, including renewable natural gas projects, recycling automation in new markets, and advancements in resource recovery. Our sustainability growth investment strategy is progressing well, though, as you would expect, there have been a number of refinements to the plan since its inception. We've worked our way through customary changes to project schedules and impacts from inflation, all the while delivering completed projects that meet and sometimes exceed the environmental and economic objectives we planned. These successes have positioned us to grow the sustainability project pipeline. In particular, the refreshed outlook includes two new recycling projects in Canada that WM has awarded through a competitive process.

Devina A. Rankin: We now expect growth investments across our recycling and renewable energy platforms to total between $2.8 and $2.9 billion from 2022 through 2026. We expect these projects to contribute run rate adjusted operating EBITDA of about $800 million by the end of 2026. This outlook utilizes the same pricing assumptions we've used consistently, $125 per ton for recycled commodities and $26 per MMBTU for renewable natural gas.

Devina A. Rankin: We have a great deal of confidence in the value of the projects that are underway, and we're enthusiastic about the strong complement they provide to our existing business. In conclusion, 2023 has clearly illustrated that we are driving growth through our diligent focus on optimizing our business, investing in technology and automation, and growing our leadership and sustainability. We take pride in our accomplishments and look forward to what we can achieve together in 2024. A heartfelt thank you to our dedicated team members who have been instrumental to our success.

Operator: With that, Josh, let's open the line for questions. Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.

Operator: One moment for questions. Our first question comes from Noah Kaye with Oppenheimer. You may proceed. Good morning. Thanks for taking the questions. The first one may be for John.

John J. Morris: You talked in some good detail about, you know, some of the cost optimization and productivity efforts and the gains they got this year. Can you step back and kind of remind us, and perhaps Jim as well, where we are at in the kind of broader march towards, you know, automation and productivity investments and some of the key KPIs that we should be thinking about in terms of progress for 2024? Yeah, Noah, good morning.

John J. Morris: It's a good question. You know, originally, we started talking about this in terms of the elimination of some labor dependency in the 5,000 to 7,000 job range, and it was across a handful of pretty broad areas. One was the customer experience group. One was through our routing, which would reduce our dependency on kind of frontline driver labor and, obviously, recycling a little bit on SG&A. And what I would tell you is, if you think about it this way, we're about 75% through what we had planned for on the customer experience side of the resi automation. And this has as much to do with truck deliveries, which did improve in 2023. We're about 40% of the way through there. On the recycling side, as Jim mentioned in his remarks, we've got a number of plants that are going to be automated this year. Senator Parikh can comment more on that.

John J. Morris: We're about 20% of the way through there, so I would tell you we're making great progress. I think it showed up obviously across the board in our margins and specifically in labor in Q4 and as the year progressed. But we still have plenty of opportunity out there.

Devina A. Rankin: We feel like we're on a good pace. Very helpful. I'm just trying to think about the cadence on EBITDA margins for the year. I know we have the typical seasonality, and it sounds like in the front half of the year, growth is really a story of kind of the collection and disposal side. But, you know, Devina, are there any sort of guideposts you can give us in terms of thinking about margin cadence, either for the first quarter or for the first half? Yeah, I think it's a great question, Noah.

Devina A. Rankin: And similar to what we talked about in terms of the EBITDA dollar growth, the cadence story for margin is pretty similar. We expect margin expansion to be more heavily weighted toward the front half of the year, particularly in the collection and disposal business. The SG&A margin expansion will be fairly even over 2024. But then, with regard to the sustainability businesses, you know, the commodity price benefits that we expect to see in 2024 aren't quite significant, right? They're pretty muted on a year-over-year basis.

Devina A. Rankin: But as a reminder, commodity price expansion in the recycling line of business can have some margin compression because of the really high return on invested capital part of our brokerage business. And on the renewable natural gas part of the business, we expect margin expansion there, too, because those are such great margin projects, but those will be heavily weighted toward the back half. So from a margin perspective, while the collection and disposal business is definitely the thing that delivered in Q4, we do expect that to be the thing that lifts margin most significantly in the year ahead, and that will be weighted toward the first half of the year. Okay, great.

Noah Kaye: I've got a lot of other questions to take offline, but I'll yield my time and consideration for it. Thank you. One moment for questions. Our next question comes from Brian Bergmaier with City. You may proceed. Good morning, and thank you for taking the question.

Brian Maguire: You know, guidance seems to imply that the collection and disposal yields growth that you saw in 4Q23 will be essentially flat throughout 24, kind of around 5%. So, can you just help us kind of understand that pricing strength that was a bit better than what we were forecasting? You know, is it about, you know, better restricted pricing starting to float through? Would you attribute that to maybe, you know, underlying strength in the market? Is there anything you'd kind of call out on that really sticky pricing that it looks like we're going to see in 24?

James C. Fish: Yeah, Brian, a couple of standouts really were residential pricing and Disposal Pricing. Those actually showed increases, year-over-year. Not surprisingly, the other collection lines of business were down, but that wasn't unexpected. As we move into 2024, we think that 4.5% to 5% yield number is a good target for us, and pricing continues to be a strength.

James C. Fish: We said at the beginning of 23 that our focus areas for the year would be pricing and then the cost controls that John went through. So pricing is going to continue to at least add a little bit of margin for us, we think, as opposed to 22, where we kind of felt like we were in hand-to-hand combat with our costs. Got it, got it.

James C. Fish: Thanks for that detail, and then I can turn it over to you. You know, I know in 2023, there was a small decline in the event-driven business that kind of prompted a guidance revision mid-year. I'm just wondering, does the 24 guidance assume that that comes back? And then if there's anything else you'd like to flag on the event-driven book, that would be helpful. I'll turn it over to you

Devina A. Rankin: Thank you. Yeah, that's a great question. And your outlook, your recollection of our outlook revision mid-year is spot on with regard to some of the softness we were seeing in the special waste part of the business. And we saw a strong recovery of that in the fourth quarter, which is one of the reasons that we saw revenue exceed our expectations late in the year. We're not necessarily expecting a rebound in special waste volumes in the year ahead, but we are expecting some of this momentum that we saw in Q4 to carry over, but nothing outsized. The one thing that I would call out as a reminder with regard to some of the special project type work is 2023 did have a benefit from Hurricane Ian volumes, particularly in the first quarter. And so that certainly will have an impact on the Q1 comparisons in 2024. Thank you.

Operator: One moment for questions. Our next question comes from Jerry Revich with Goldman Sachs. You may proceed. Yes, hi. Good morning, everyone.

Jerry Revich: Morning. Devina, I wonder if we could just talk about margins, a really outstanding performance by the team in the fourth quarter, you know, if we were to just run the seasonally adjusted annual rate, that's about a, you know, over 30% margin equivalent that you folks put up in the fourth quarter, you know, the full year guidance for 24 is about a point lower than that, sounds like yield is still very much at a good place, so I'm just trying to make sure that there are no items that you would view as one-off in the fourth quarter versus, hey, you know, it's early in the year and we just want to make sure we have room to execute. You know, I definitely think the way that you summarized it there on the last part of your comment is the way that we're thinking about this.

Jerry Revich: In particular, when we were setting our margin expectations for the year ahead, the momentum that we had in the fourth quarter shows that we have tremendous confidence in the cost improvement work that we've been so focused on as an organization through automation technology and importantly, the delivery of trucks as something that we can continue to see benefits from in the year ahead. The caution for us, I would say, that may have us below that seasonally adjusted margin outlook that you've done really relates to a couple of things. It's one, some of the weather impacts that we saw in January, two, you know, last year when we gave an inflation outlook, we tended to see that inflation was sticking around and being more stubborn than we had predicted, and so we're taking a more cautious view on inflationary pressures in the year ahead than we did a year ago.

Devina A. Rankin: But really, what I want to highlight is that there's tremendous confidence in the fundamentals. You know, the cost, the price-cost spread has improved. The accelerated truck deliveries and our optimization efforts, and the discipline in SG&A are all showing strong results.

Devina A. Rankin: I think the best line to look at is actually our repair and maintenance line and the operating expenses as a percentage of revenue category, and over the long term, that had trended below 9% of revenue for us, and through the first nine months of 2023, we were at 9.9%. That measure was down to 9.1% in Q4, so we know that we've got some really strong momentum coming into the year ahead that will continue those cost benefits that you saw us produce in the fourth quarter into 2024. We just think that it's prudent to be on the conservative side when predicting full-year margins.

James C. Fish: So Jerry, real quickly, we did kind of anticipate that there would be some questions on margin. So just a couple of things here. First of all, the margin, obviously, for Q4 was as strong as we could have expected it to be, and that has continued as we look at the month of January. The second point would be around some of the questions that you're asking around conservatism on margin for 24, and Devina did a really good job of explaining that. I think it's really just a, I guess you could argue that it's conservative based on 90 basis points of improvement from 22 to 23. But, uh, you know...

James C. Fish: Every time we come to this point, there seems to be an uncertain year in front of us. We don't know exactly what the economy is going to do. Some days I feel great about the economy; other days, not so great. So you could argue there's a little bit of economic conservatism in there and also a little bit of forecasting conservatism coming off such a strong year that you want to try. We do feel really good about the way we finished the year and, honestly, the way we've started the year so far. I really appreciate the color.

Jerry Revich: And Jim, can I ask you just on a separate topic? You know, landfill gas transactions are coming in at, you know, really attractive levels. The Enbridge transaction was $270 per MMBTU. It's costing you folks $50 per MMBTU to bring your assets online. So just given how apparently deep the market is for those types of assets, can you just update us on how you're thinking about what it would take for you to consider monetizing some of the landfill gas assets? When you bring them online, has the attractive market price impacted how you're thinking about the own versus sell opportunity?

James C. Fish: So I'm going to say one word on that and then I'm going to turn it over to Tara Hemmer to maybe give a little bit more color, but that's always an option for us. You know, we have multiple options, and it's good to be in a place where you have multiple options. But at this point, we're pleased with the progress we're making on building these plants. We have a number of plants that are at various stages of construction.

Tara J. Hemmer: Tara, anything to add to that? I would just say, you know, this aligns really well with our business, and we're making great progress on building out these plans. So the five that we're going to bring online in 2024, we're going to have strong contributions from them by the end of 2024. I appreciate the discussion. Thank you. Thank you. One moment for questions. Our next question comes from Tyler Brown with Raymond James. Please proceed. Hey, good morning.

Tyler Brown: Morning. Hey, Tara, actually, I want to come back to the updated sustainability capex figures of 2.8 to 2.9. I may have missed it. But if I'm not mistaken, that number was closer to 2.2 billion back at analyst day. Now I get that there are 350 million in incremental recycling opportunities, but what makes up the difference? Call it that 300 million?

Tara J. Hemmer: Was that just inflation? Yeah, the difference really is related to inflation primarily in our renewable natural gas build and relates to inflation related to the supply chain, also a little bit on construction increases and inner costs. So that is the difference. Okay, perfect. That's helpful.

Devina A. Rankin: That's very helpful. And then Devina, thank you so much for the WM Renewables segment reporting. But I do just want to make sure that I understand it all.

Devina A. Rankin: So I get the impact in revenues from the change in the price of the commodities that are impacting that WM Renewables and Recycling line. But if you look at the change in that line versus the change in the net revenue for those, they don't exactly line up. So it tells me that there's likely some volume component in there. So just to be clear, maybe this would be helpful, but when you bring on a facility like EcoVista, where does that show up? Does that show up as basically volume in your IRG calc?

Devina A. Rankin: Or can you just help us with how the accounting will work? Sure, and Ed and Heather will be happy to walk you through any details I don't cover here, but I'm glad, first, that the additional clarity is beneficial. The other thing that I would say is that on the IRG measures that we do, the Internal Revenue Growth measures that we do, you'll see commodity price impact on a single line, which is recycling processes and renewable energy, so that's all price. And then you'll see the incremental volume from new projects, whether it be automation projects that have more throughput at the plant or the new EcoVista plant, that will be in the volume line. In terms of the segment reporting line, the only thing that might be a little bit of a complicating factor is the internal revenue between the renewable business and the collection and disposal business. You can think of it as the renewable business paying a royalty to the collection and disposal business associated with landfill gas production. That doesn't show up in the revenue line because it's effectively just a cost for the renewable business. Hopefully, that's helpful.

Tyler Brown: Yes, I definitely think so. We'll parse it out. But I think you mentioned that collection and disposal volume could be up maybe 1%. But again, kind of going back to that total IRG table, could we actually see that number closer to 2?

Tyler Brown: Because I would assume that with $115 million of incremental renewables EBITDA, there's probably at least a couple hundred million dollars of revenue associated with that. Does that make sense? So the way to think about this is that when we gave that volume outlook, that was just the collection and disposal volume. The renewable energy business increases we have on a combined basis are in the range of 30 to 60 basis points in the year ahead. And that's a combination of commodity price impacts and volume. Okay, last one here, Devina.

Tyler Brown: So margins were super strong. We've talked about that. I think there are 230 basis points here at the end of the year in Q4. But can you kind of help us bridge that 230? I think there were fewer days, maybe fuel was a help, maybe commodities helped, just any color there would be appreciated.

Devina A. Rankin: Thanks. Yeah, for Q4 specifically, you know, again, the collection and disposal business and the efficiency that we drove was the lion's share of that improvement at 220 basis points. Fuel was another 50 basis points. So that really does explain almost the entirety of it.

James C. Fish: There are a few other puts and takes, but I would say that my comments earlier about repair and maintenance and then John's comments about the labor line are the two areas that are driving that 220 basis points of margin expense. I think, Tyler, a little bit of an add-on here is that we don't pat ourselves on the back enough, so I'm going to pat ourselves on the back a little bit here. When we started talking about some aspirational metrics, meaning margin, EBITDA margin, SG&A percent of revenue, OPEX's percent of revenue a couple years ago, and then we started talking about technology and Using Attrition to Reduce Our Labor Demand. Those numbers were pretty far out on the horizon.

James C. Fish: And now, in every case, those numbers are literally a stone's throw away for us, whether you talk about 30% EBITDA margin, we're right there for the fourth quarter. SG&A at 9%, we're very close to that. And OPEX at 60%, very close to that. So I'm really proud of the team for executing so well on this and being able to stand up on this call today and last quarter as well and say those things that we put out there, those goals that we set, We are, we're getting close to achieving those. But that doesn't mean we're satisfied.

James C. Fish: We'll continue to set higher goals, but I'm pleased with the fact that we've been able to get to those goals that were pretty far out on the horizon when we initially set them. Yep, no, I love it.

Michael E. Hoffman: I appreciate it so much. Thank you for the time. Thank you. One moment for questions. Our next question comes from Michael U. Hoffman with Stifel. You may proceed. Hey, gang, thanks for the questions.

Michael E. Hoffman: Back to the margin question, John. It seems like looking at this on a two-year stack helped. Because you can't perfectly time when you get some of your self-help.

Michael E. Hoffman: And that sort of accounts for a really strong 23, a little more muted 24, but the two-year stack, sort of 60 basis points a year. So the question underlying that is, recycling is an incremental tailwind because you've got a pretty low estimate there relative to how you finish the year on the basket. GDP I'm assuming you think it's maybe 1, 1.5% and the trend's stronger than that, so that's a tailwind. And then I think your wage growth is probably running closer to 3.5, 4. Therefore, there's a clear spread on price-cost. Am I looking at that correctly? I'll start.

John J. Morris: And Devina, you know, on the cost spread comment that you're into with Michael, I think that's what we've been talking about for the last couple of quarters, whether you look at core price or our yield numbers, we've been talking about being disciplined in the way we approach pricing. And over time, in the last couple quarters, a great example that we've been able to really drive out, drive some operating efficiencies, and drive out some of the labor dependency. And Devina commented on the maintenance repair.

John J. Morris: That's another bucket where we've made a lot of progress. I think in Q4, we were flat to slightly down year over year in terms of whole dollars. So that's part of what was helping us in Q4. And then I'll just add a little bit of color that provides some clarity on a couple of the points that you brought up, Michael.

Devina A. Rankin: One, with higher recycling commodity prices, the brokerage business can actually put downward pressure on margin. And so that's one of the things that we have built into our outlook for 2024. And then, in terms of wage inflation, we start at 4% with our folks. And so wage inflation is still expected to be north of 4% when you take into account the spot increases that we have to provide in certain markets to be responsive to various changes. So 4% is kind of our baseline. And then you add on top of that, and your GDP assumption is pretty muted.

Devina A. Rankin: Yeah, you know, basically, what we've always said is that we believe that our volume is about a 75% flow-through from GDP. And so we did have a fairly muted outlook with regard to GDP when we built our plan. You know, I hope your crystal ball is better than mine, but I would tell you that our expectations for the economic outlook continue to be that we need to be on the cautious side of things just because there's so much left in uncertainty. You saw that with today's print on CPI, for example, which exceeded expectations. Yeah, I get that. But the consumer seems to keep plowing ahead. Switching gears a little bit, Tara.

Tara J. Hemmer: If your renewable natural gas, your landfill gas, is kind of a Swiss Army knife of renewable fuel, when will the federal agencies wake up to this and say, we get a proper interpretation of the ITC or the 45Q or Z credits or go back to E-RINs? What's your view of where that goes? And then the second piece is, what are you assuming happens in the coming years in that billion and a half dollars of RNG you spend? How much do you get back for credit?

Tara J. Hemmer: So starting with the real positive, you know, the one thing that the federal government did was set a three-year RBO and have that for 2023 through 2025. We've seen clear stability in the program, and so that's been a positive. With the ITC, you know, we think when Treasury issued its guidance that there was a misinterpretation of what was in the Inflation Reduction Act, and we don't just share this view.

Tara J. Hemmer: Others do with us that are in the biogas community and generate landfill gas, renewable energy from landfill gas. We've commented on that, and we're anticipating that Treasury will come out with some further guidance later this year. We are cautiously optimistic about that. So there's a whole host of credits that could be stacked. Obviously, the ITC was in our plan, and we remain optimistic about that. And then, of course, looking to 2025 with the production tax credit. On the ITC point, Michael, just so that we're crystal clear in terms of the implications of that on our 2024 guidance, we contemplated $120 million of ITC benefit in our free cash flow outlook for the year. Okay. And then we could do some housekeeping, if we could. I love the segment reporting as well.

Devina A. Rankin: Are we going to get any kind of tons in, tons out so we can actually do a bottom-up forecast on sales for the renewable and processing segments? And then how about megawatts and MMBTUs to be able to do the same thing on sales growth for renewables? So we want to take a breath and celebrate all of the incremental transparency we've provided. We're really proud of the work that the team did, because while it looks easy, it isn't.

Devina A. Rankin: There's a whole lot of work that went into it. With regard to, you know, the more, I would say, operational driver elements of the reporting, we'll continue to evaluate whether or not there's anything that is a strong complement to the financial measures and consider any additions in the years ahead. But right now, we're going to continue to execute on this strong reporting that we've been able to accomplish. And we actually would like to see the industry follow suit in terms of providing additional visibility, because we think it's beneficial. So in K-1, when will it be recent, too?

Devina A. Rankin: Will we get quarterly data for all of 22 and all of 23, and then three years of forecast so we can rebuild our models in this format? So the K will be released early today, and we're in good shape for that, so thank you to the team. With regard to the quarterly data, you'll get that over the course of the year. It'll have the full year data.

Devina A. Rankin: The quarterly recast will come quarter by quarter. Okay. Thank you. Thank you. One moment for questions. Our next question comes from Stephanie Moore with Jeffrey's. You may proceed. Hi, good morning. Thank you. Good morning.

Stephanie Moore: So just kind of looking at the 2024 guidance assumptions, it looks like you're assuming RINs at about $3, which makes sense given where RINs are today. But digging into a little bit more, can you talk about what contracts that you have already signed and kind of where you're able to lock in those prices going into the year? I think you said at Sustainability Day that you were looking to have 70 to 90 percent locked in for any given 12-month period. So any update on where that stands for 2024 to get to that $3 RIN? Sure, so we have about two-thirds of our offtake locked in for 2024, and when we think about what's locked in, it is a mix of long-term contracts and also RINs that we purchased really on the forward side into 2024, which would have been at a higher rate than $3. So on a blended basis, you sort of get a lower average there.

Tara J. Hemmer: And then the third that we would be selling in 2024, that's what's at the $3 RIN guide. The other thing I want to just mention is those longer-term contracts that we have in place. There is a mix anywhere from five to 20 years, so we're really trying to take an approach where we have different tenors that we're locking. Got it. No, that's very helpful.

Tara J. Hemmer: And then maybe sticking on the sustainability front, you talked about some incremental investments included in your updated outlook. And you noticed that that involves two projects in Canada. You talked a little bit about the opportunity. I'm assuming that those are probably related to EPR changes in Canada.

Tara J. Hemmer: If that is the correct assumption, maybe just, you know, how EPR might change the margin or growth opportunity compared to maybe your more traditional U.S. recycling business. So how you're thinking about those incremental opportunities, thanks. You know, the two Canadian projects are related to extended producer responsibility, and I think this is a great example where we were able to really showcase our automation investments and how differentiated our assets are really. We are taking the Pro to some of the facilities that we have across the United States, and so that's a great example where we're able to win more business based on those investments. The extended producer responsibility in Canada and the structure that we have there, it really revolves around us using those assets as manufacturing plants, and really, it's a fee-for-service model. So it's a great example of how we can leverage this technology differentiation for more business. I understand. Thank you so much.

Operator: Thank you. One moment for questions. Our next question comes from John Mazzoni with Wells Fargo. You may proceed.

John J. Morris: Thanks for taking my question. Maybe just a quick one in terms of the sustainability and timing. Is this just really kind of a knock-on impact of some of the 2023 project delays? I think we noticed a change to run rate versus kind of in 26. Any color would be appreciated.

Tara J. Hemmer: Thank you. So there are two key things that I would want everyone to bear in mind as you think about our trajectory. The first is, in 2024, we're going to have roughly 40 projects under construction at any given time. So that really gives you a sense of how we're building, and we have a lot of momentum on the ramp. The second key piece is really exiting 2024.

Tara J. Hemmer: We're going to be approaching roughly $300 million in run rate EBITDA, which gives you a sense of where we're headed on that ramp to $800 million. So what we're really seeing in 2024 is a true build of momentum toward reaching that $800 million. And John, those supply chains... Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com/, the R&G and recycling side, but we definitely had some supply chain problems. The Bulletproof Executive 2013, Over 22, in particular, but also the front half. Thank you.

Tara J. Hemmer: One moment for questions. Our next question comes from Tobey Sommer with Truist Securities. He may proceed, unlike those at the smaller players with whom you have a dialogue for acquisition.

James C. Fish: So, look, we said that our acquisition pipeline was robust, and I think what you're seeing is that. Some of those, and I'm speaking just from, this is somewhat anecdotal in speaking to some of those folks that we have acquired, is that there's kind of a multitude of challenges for them, some of which we face and some of which we don't face. So one that we might not face is a lack of a succession plan for some of these folks. Their kids have just decided they don't want to run the business.

James C. Fish: They'd rather go take the money and live in Italy, and so that's not something we face fortunately. But they're also having challenges with labor. We're addressing that, as you've heard today, through automation. And in some cases, they are as well. But in some cases, they're not able to do that.

James C. Fish: So there are a number of different reasons why there is a growing list of willing sellers. We're going to take advantage of that, but at the same time, we've invested heavily in these organic growth projects. And we want to make sure that we have similar returns before we go. Invest heavily in Toxic Waste. Good to hear. I'm glad you're not going to chase the Tuscan sun. So I appreciate that. With respect to the fleet, after a full allotment last year. Where are you in terms of

Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today at NGO Senior director of Investor Relations.

Thank you Josh good morning, everyone and thank you for joining us for our fourth quarter and full year 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 Divina Rankin Executive Vice President and Chief Financial Officer, you'll hear prepared comments from each of them today Jim.

Okay.

Speaker Change: Good day and thank you for standing by welcome to the Wm fourth 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 this session. Please press star one one on your telephone and wait for your name.

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 and our 2020 for outlook.

Before we get started please note that we have filed a form 8-K that includes the earnings press release and is available on our website at www Dot Wm Dot com the form 8-K, the press release and the schedules to the press release include important information.

Speaker Change: To be announced 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.

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.

Ed: Thank you Josh good morning, everyone and thank you for joining us for our fourth quarter and full year 2023 earnings Conference call with me. This morning are Jim Fish, President and Chief Executive Officer, John Morris Executive Vice President Chief Operating Officer, Davita Reagan Executive Vice President and Chief Financial Officer, you'll hear prepared comments from each of them today.

Some of these risks and uncertainties are discussed in today's press release, and our filings with the SEC, including our most 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.

Ed: Did you also have a high level financials and provide a strategic update John will cover an operating overview Devine will cover the details of the financials and our 2020 for outlook.

During the call, Jim John and <unk> will discuss operating EBITDA, which is income from operations before depreciation and amortization.

Speaker Change: Before we get started please no.

We have filed a form 8-K that includes the earnings press release. It is available on our website at Www Dot Wm Dot com.

Any comparisons unless otherwise stated will be with the prior year period.

Speaker Change: The form 8-K, the press release and the schedules to the press release include important information.

Net income EPS income from operations and margin operating EBITDA and margin SG&A expense and prior period operating 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.

Speaker Change: During the call we have 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.

Speaker Change: These risks and uncertainties are discussed in today's press release, and our filings with the SEC, including our most recent Form 10-K.

These adjusted measures. In addition to free cash flow are non-GAAP measures.

Please refer to our earnings press release, and tables, which can be found on the company's website at www Dot Wm dot com for reconciliations to the most comparable GAAP measures and additional information about our use of non-GAAP measures and non-GAAP projections.

Speaker Change: 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.

Speaker Change: During the call Jim Jonathan Zaffino will discuss operating EBITDA, which is income from operations before depreciation and amortization.

This call is being recorded and will be available 24 hours a day beginning approximately one PM eastern time today to hear a replay of the call access <unk> web site at Www dot investors that Wm Dot com.

Speaker Change: Any comparisons unless otherwise stated will be with the prior year period.

Net income EPS income from operations and margin operating EBITDA and margin SG&A expense and prior period operating 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.

Time sensitive information provided during today's call, which is occurring on February 13, 2024 may no longer be accurate at the time of a replay any.

Any redistribution retransmission or rebroadcast of this call in any form without the express written consent of Wm is prohibited now I'll turn the call over to Wm, as President and CEO Jim fish.

Speaker Change: These adjusted measures. In addition to free cash flow are non-GAAP measures.

Speaker Change: These refer to our earnings press release, and tables, which can be found on the company's website at www Dot Wm dot com for reconciliations to the most comparable GAAP measures and additional information about our use of non-GAAP measures and non-GAAP projections.

Alright, Thanks, Ed and thank you all for joining us.

The <unk> team delivered a remarkably strong finish to 2023 driving fourth quarter operating EBITDA, 15% higher.

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

This accelerated earnings growth led to full year operating EBITDA that exceeded the high end of our most recent guidance range by nearly $25 million.

Speaker Change: To hear a replay of the call accessed at <unk> website at Www dot investors that Wm Dot com.

And achieve the midpoint of our original expectations from the beginning of the year.

Speaker Change: Time sensitive information provided during today's call, which is occurring on February 13, 2024 may no longer be accurate at the time of a replay.

Our strong financial results for both the quarter and the year were powered by our collection and disposal business.

Speaker Change: Redistribution retransmission or rebroadcast of this call in any form without the express written consent of Wm is prohibited now I will turn the call over to WNS, President and CEO Jim fish.

This performance starts with disciplined organic revenue growth that exceeded our expectations.

And once again, our success in managing the middle of the P&L really stands out in our results as our teams continue to make progress on optimizing our cost structure with the help of technology and automation.

James C. Fish: Alright, Thanks, Ed and thank you all for joining us.

The <unk> team delivered a remarkably strong finish to 2023 driving fourth quarter operating EBITDA, 15% higher.

When you combine our revenue performance with the improvement in operating costs, we saw a widening of our price cost spread and increased profitability.

James C. Fish: This accelerated earnings growth led to full year operating EBITDA that exceeded the high end of our most recent guidance range by nearly $25 million.

Operating EBITDA margin reached a record 29, 9% in the fourth quarter.

James C. Fish: The midpoint of our original expectations from the beginning of the year.

In full year margin expanded 90 basis points to 28, 9%.

James C. Fish: Our strong financial results for both the quarter and the year or powered by our collection and disposal business.

At 2024 kicks off we're confident that our continued focus on optimizing our cost structure and executing on sustainability growth projects sets us up for another year of outsized growth.

James C. Fish: This performance starts with disciplined organic revenue growth that exceeded our expectations.

James C. Fish: And once again, our success in managing the middle of the P&L really stands out in our results as our teams continue to make progress in optimizing our cost structure with the help of technology and automation.

We anticipate operating EBITDA growth of seven 7% at the midpoint of our guidance, which.

Which translates to more than $450 million of which $115 million comes directly from our sustainability growth investments.

James C. Fish: When you combine our revenue performance with the improvement in operating costs, we saw a widening of our price cost spread and increased profitability.

We remain excited about the economic and environmental benefits of our expanded.

Of expanding our renewable natural gas and recycling platforms.

James C. Fish: Operating EBITDA margin reached a record 29, 9% in the fourth quarter.

Our execution is tracking well and we expect to commission five new renewable natural gas facilities by the end of the year, reaching 30% of our run rate renewable renewable natural gas volume growth.

James C. Fish: And full year margin expanded 90 basis points to 28, 9%.

James C. Fish: At 224 kicks off our confidence that our continued focus.

James C. Fish: Optimizing our cost structure and executing on sustainability growth projects sets us up.

We're also on track to complete automation upgrades at 10 recycling facilities and add three recycling facilities and new markets in 2024.

James C. Fish: For another year of outsized growth.

James C. Fish: We anticipate operating EBITDA growth of seven 7% at the midpoint of our guidance with.

Turning to capital allocation Youll hear from Devine on this topic in more detail, but I want to stress our confidence in.

Which translates to more than $450 million of which $115 million comes directly from our sustainability growth investments.

And our ability to continue to allocate capital to all of our priorities. This.

James C. Fish: We remain excited about the economic and environmental benefits of our expanded.

This includes investing in our high return sustainability growth projects.

<unk> accretive businesses.

James C. Fish: We are expanding our renewable natural gas and recycling platforms.

And returning cash to shareholders through dividends and share repurchases.

James C. Fish: Our execution is tracking well and we expect to commission five new renewable natural gas facilities by the end of the year, reaching 30% of our run rate renewables renewable natural gas volume growth.

Our tuck in acquisition pipeline is robust.

And there are some indications that 2024 could have heightened activity in this regard.

We're committed to a disciplined approach to acquiring companies.

James C. Fish: We're also on track to complete automation upgrades at tenant recycling facilities and added three recycling facilities and new markets in 2024.

Ensuring that any deals we pursue yield appropriate returns, particularly given the high returns in our sustainability opportunities.

James C. Fish: Turning to capital allocation Youll hear from Devine on this topic in more detail, but I want to stress our confidence.

In closing I want to thank the entire <unk> team for another great year.

We're just at the <unk> Phoenix opened last week and I've said before.

And our ability to continue to allocate capital to all of our priorities. This.

We work hard for this event to create a representation of the bigger company with a central focus on people and the environment.

James C. Fish: This includes investing in our high return sustainability growth projects acquiring accretive businesses.

We've been the title sponsor for 15 years now and the turnover has been recognized as the largest zero waste sporting event in the world for 12 years running.

Devine: And returning cash to shareholders through dividends and share repurchases.

Devine: Our tuck in acquisition pipeline is robust.

It makes me proud to CDW team out there, making waste diversion operations run smoothly and demonstrating our sustainability leadership so well.

Devine: And there are some indications that 2024 could have heightened activity in this regard.

Devine: We're committed to a disciplined approach to acquiring companies.

I look forward to working with this great team in 2024, as we continue to drive growth.

Devine: Ensuring that any deals we pursue yield appropriate returns, particularly given the high returns in our sustainability opportunities.

By executing our operating plans and progressing our investments in technology automation and sustainability I'll now turn the call over to John to discuss our operational results. Thanks, Jim and good morning.

Speaker Change: In closing I want to thank the entire Wm team for another great year.

Speaker Change: We're just at the Wm Phoenix opened last week and I've said before.

We're more than pleased with the strong operational performance our team achieved in 2023, showing continuous improvement throughout the year with standout results in the fourth quarter.

Speaker Change: We worked hard for this event to create a representation of the bigger company with a central focus on people and the environment.

Speaker Change: We have been the title sponsor for 15 years, now and turn them. It's been recognized as the largest zero waste sporting event in the world for 12 years running it.

During this period operating expenses as a percentage of revenue improved 240 basis points year over year landing at 63% and marking our second best quarterly performance ever.

Speaker Change: It makes me proud to see the Wm team out there, making waste diversion operations run smoothly and demonstrating our sustainability leadership so well.

This improvement was primarily fueled by our collection and disposal business benefiting from the robust operating leverage of our strategic cost optimization.

Speaker Change: I look forward to working with this great team in 2024, as we continue to drive growth.

Our proactive measures to accelerate and improve cost efficiency, including leveraging technology to manage labor, managing our repair and maintenance costs and optimizing our overall cost structure. These.

Speaker Change: By executing our operating plans and progressing our investments in technology automation and sustainability I'll now turn the call over to John to discuss our operational results. Thanks, Jim and good morning.

These initiatives led to a substantial improvement in <unk> cost to serve metrics, bringing estimated unit cost inflation to low single digits by the fourth quarter.

John J. Morris: We're more than pleased with the strong operational performance our team achieved in 2023, showing continuous improvement throughout the year with standout results in the fourth quarter.

When combined with solid results from our pricing initiatives, we greatly enhanced overall margins are strong second half performance translated into full year operating expenses as a percentage of revenue of 61, 7%.

John J. Morris: During this period operating expenses as a percentage of revenue improved 240 basis points year over year landing at 63% and marking our second best quarterly performance ever.

John J. Morris: This improvement was primarily fueled by our collection and disposal business benefiting from the robust operating leverage of our strategic cost optimization.

An improvement of 70 basis points.

That momentum has carried into 2024 and is evident in our January results, even as we faced severe winter in some areas we serve.

John J. Morris: Our proactive measures to accelerate and improve cost efficiency included leveraging technology to manage labor, managing our repair and maintenance costs and optimizing our overall cost structure.

Two of the key cost categories, driving our operating improvements are labor and repair and maintenance on the labor front. This begins with our persistent focus on reducing turnover in the fourth quarter. We achieved a noteworthy milestone as driver turnover reached its lowest point at 18, 4% showing improvement as the year progressed.

John J. Morris: These initiatives led to a substantial improvement in wm's cost to serve metrics, bringing estimated unit cost inflation to low single digits by the fourth quarter.

John J. Morris: When combined with solid results from our pricing initiatives, we greatly enhanced overall margins are strong second half performance translated into full year operating expenses as a percentage of revenue of 61, 7%.

Additionally, our strategic automation initiatives are yielding positive results in the collection and collection efficiency with all three lines of business improving meaningfully in the fourth quarter compared to last year.

The results of our technology and automation investments gain traction in the latter part of 2023, leading to significant strides and labor cost management. We expect this to continue into 2024 as we broaden the deployment of our tools across additional sites.

John J. Morris: An improvement of 70 basis points.

John J. Morris: That momentum has carried into 2024 and is evident in our January results, even as we faced severe weather in some areas we serve.

John J. Morris: Two of the key cost categories, driving our operating improvements are labor and repair and maintenance on the labor front. This begins with our persistent focus on reducing turnover in the fourth quarter. We achieved a noteworthy milestone as driver turnover reached its lowest point at 18, 4% showing improvement as the year progressed.

Turning to repair and maintenance with a full lot of trucks received in 2023, we successfully removed over 1000 excess assets from our operation improve the age of our routed fleet and reduce truck rental utilization by nearly 60% since the beginning of 2023.

John J. Morris: Additionally, our strategic automation initiatives are yielding positive results in the collection and collection efficiency with all three lines of business improving meaningfully in the fourth quarter compared to last year.

Throughout 2023, our emphasis remains on streamlining maintenance processes, which has resulted in enhanced technician productivity reduced overtime expenses and diminished reliance on external repair services.

John J. Morris: The results of our technology and automation investments gain traction in the latter part of 2023, leading to significant strides and labor cost management. We expect this to continue into 2024 as we broaden the deployment of our tools across additional sites.

This has paid off in the form of lower repair and maintenance costs.

In both dollars and as a percentage of revenue compared to 2022.

We accomplished all of this with an unwavering commitment to safety and by enhancing the quality of our fleet.

John J. Morris: Turning to repair and maintenance with a full lot of trucks received in 2023, we successfully removed over 1000 excess assets from our operation improve.

We're proud of the strides we made throughout 2023 and look forward to distinct to sustained progress.

Another core element of the equation that fueled our strong financial results is disciplined organic revenue growth growth from price and volume in our collection and disposal business totaled six 3% for the year, which outpaced our expectations our pricing programs continue to be focused on striking the right balance between maximizing customer lifetime value and increasing price to recur.

John J. Morris: Improve the age of our routed fleet and reduce truck rental utilization by nearly 60% since the beginning of 2023.

John J. Morris: Throughout 2023, our emphasis remains on streamlining maintenance processes, which has resulted in enhanced technician productivity reduced overtime expenses and diminished reliance on external repair services. This.

Cover higher costs, our full year churn rates remain at the lower end of our historical range and about 9% in the year over year improvement underscores our consistent delivery of quality service to our customers. Looking ahead to 2024, we anticipate sustained momentum in our disciplined pricing programs to result in core price between 6% and six.

John J. Morris: This has paid off in the form of lower repair and maintenance costs involved.

John J. Morris: In both dollars and as a percentage of revenue compared to 2022.

John J. Morris: We accomplished all of this with an unwavering commitment to safety and by enhancing the quality of our fleet. We're proud of the strides we made throughout 2023 and look forward to two sustained progress.

5% in yield approaching 5%.

John J. Morris: Another core element of the equation that fueled our strong financial results as disciplined organic revenue growth growth from price and volume in our collection and disposal business totaled six 3% for the year, which outpaced our expectations our pricing programs continue to be focused on striking the right balance between maximizing customer lifetime value and increasing price to recur.

We remain committed to maximizing customer lifetime value, while securing pricing that exceeds our cost inflation we.

We have seen that spread improve as 2023 progressed and we are confident that our teams are poised to deliver another successful year ahead.

Turning to volumes, our fourth quarter collection and disposal volume grew by one 9% on a workday adjusted basis.

John J. Morris: Cover higher costs, our full year churn rates remain at the lower end of our historical range at about 9% in the year over year improvement underscores our consistent delivery of quality service to our customers. Looking ahead to 2024, we anticipate sustained momentum in our disciplined pricing programs to result in core price between 6% and six.

Growth was primarily primarily driven by MSW landfill in commercial collection to bellwethers for demand of our services.

Overall growth in landfill volumes was somewhat muted due to the elevated volumes from the hurricane and cleanup in 2022.

Similar to recent quarters residential collection volumes declined modestly due to our intentional shedding of low margin contracts as we work to ensure that we achieve acceptable returns for all parts of our business.

John J. Morris: 5% in yield approaching 5%.

We remain committed to maximizing customer lifetime value, while securing pricing that exceeds our cost inflation.

You can see the benefits of this focus because while our residential collection volumes declined total revenue and earnings in this line of business both improved.

John J. Morris: We've seen that spread improve as 2023 progressed and we are confident that our teams are poised to deliver another successful year ahead.

As a winning equation and we will continue to execute on this strategy in the year ahead.

John J. Morris: Turning to volumes, our fourth quarter collection and disposal volume grew by one 9% on a workday adjusted basis.

Organic revenue growth in all collection lines of business remains positive and operating EBITDA continues to grow in the fourth quarter, New business grew and net service services increases remain firmly positive, reflecting our quality of service and focused differentiation looks.

John J. Morris: Growth was primarily primarily driven by MSW landfill and commercial collection to bellwethers for demand of our services.

John J. Morris: Overall growth in landfill volumes were somewhat muted due to the elevated volumes from the hurricane and cleanup in 2022.

Looking ahead to 2024, our guidance anticipates collection and disposal volume approaching 1% mirroring the performance achieved in 2023.

John J. Morris: Similar to recent quarters residential collection volumes declined modestly due to our intentional shedding of low margin contracts as we work to ensure that we achieve acceptable returns for all parts of our business you.

Finally, I want to convey my appreciation to our frontline teams for their unwavering commitment to delivering safe and reliable service to our customers and communities on a daily basis.

You can see the benefits of this focus because while our residential collection volumes declined total revenue and earnings in this line of business both improved.

Their efforts to meet 2023 successful and laid the groundwork for growth in the years ahead.

John J. Morris: The winning equation and we will continue to execute on this strategy in the year ahead.

I'll now turn the call over to the Divina discuss our 2023 financial results and 2024 financial outlook in greater detail.

John J. Morris: Organic revenue growth in all collection lines of business remains positive and operating EBITDA continues to grow.

Thanks, John and good morning.

John J. Morris: In the fourth quarter, New business grew and that service services increases remain firmly positive, reflecting our quality of service and focused differentiation looks.

Cost optimization was the significant theme in the fourth quarter and throughout 2023.

<unk> was pleased that our collective focus delivered WNS best ever full year SG&A as a percentage of revenue of nine 4%.

John J. Morris: Looking ahead to 2024, our guidance anticipates collection and disposal volume approaching 1% mirroring the performance achieved in 2023.

A 20 basis point improvement from prior year was realized through investments in customer facing technology.

Speaker Change: Finally, I want to convey my appreciation to our frontline teams for their unwavering commitment to delivering safe and reliable service to our customers and communities on a daily basis.

<unk> enhanced back office systems to become more efficient and a continuous focus on optimizing our spend.

Speaker Change: Their efforts to May 2023 successful and laid the groundwork for growth in the years ahead.

We're pleased with the progress made to improve this measure while at the same time investing in our talent customer engagement channel and technology capability.

I'll now turn the call over to the Divina discuss our 2020 through financial results in 2024 financial outlook in greater detail.

SG&A optimization delivered 20 basis points of our 90 basis point expansion in adjusted operating EBITDA margin in 2023.

Thanks, John and good morning.

Divina: Cost optimization with the significant theme in the fourth quarter and throughout 2023.

<unk> 70 basis points from the collection and disposal business, which benefited from a combination of fuel price impact and operating efficiency.

Divina: <unk> was pleased that our collective focus delivered WNS best ever full year SG&A as a percentage of revenue of nine 4%.

Divina: The 20 basis point improvement from prior year was realized through investments in customer facing technology.

We gained meaningful traction in optimizing labor efficiency and repair and maintenance costs in our collection and disposal business in the back half of the year lifting our full year adjusted operating EBITDA margin to 28, 9%.

Divina: <unk> enhanced back office systems to become more efficient and a continuous focus on optimizing our spend.

Divina: We're pleased with the progress made to improve this measure while at the same time investing in our talent customer engagement channel and technology capability.

This result is 30 basis points ahead of the high end of our expectations and positions us to continue to deliver margin expansion in the year ahead.

Divina: SG&A optimization delivered 20 basis points of our 90 basis point expansion in adjusted operating EBITDA margin in 2023.

Our operating performance translated into robust cash flow in 2023, our full year cash flow from operations grew to $4.719 billion and our free cash flow of four sustainability growth investment with nearly $2 7 billion.

Divina: 70 basis points from the collection and disposal business, which benefited from a combination of fuel price impact and operating efficiency.

Each of these cash flow measures finished the year near the high end of our initial guidance range.

Divina: We gained meaningful traction in the optimizing labor efficiency and repair and maintenance costs in our collection and disposal business in the back half of the year lifting our full year adjusted operating EBITDA margin to 28, 9%.

This result demonstrates our strong earnings growth effective management of interest and taxes, and optimizing cash conversion and our disciplined capital expenditure management processes.

Divina: As a result of 30 basis points ahead of the high end of our expectations and positions us to continue to deliver margin expansion on the year ahead.

During 2023, we returned $2 $4 billion to shareholders.

114 billion in dividends and repurchasing $1 3 billion of our stock.

Divina: Our operating performance translated into robust cash flow in 2023, our full year cash flow from operations grew to $4.719 billion and our free cash flow of four sustainability growth investment with nearly $2 $7 billion.

In addition, we spent $173 million on traditional solid waste and recycling acquisitions to grow our business.

Complex all of that fall accelerating our sustainability growth investments for future growth and development and maintaining our leverage target ratio.

Divina: Each of these cash flow measures finished the year near the high end of our initial guidance range.

Divina: This result demonstrates our strong earnings growth effective management of interest and taxes, and optimizing cash conversion and our disciplined capital expenditure management processes.

Our targeted leverage ratio of about 275 times.

Our balance sheet remains strong and our earnings and cash flow growth.

Robots.

Divina: During 2023, we returned $2 four $4 billion to shareholders.

Positioning us to continue our commitment to shareholder returns and long term growth.

Divina: 114 billion in dividends and repurchasing $1 3 billion of our stock.

Moving to our 2024, our financial outlook, we are anticipating total company revenue growth between six and 7% driven by organic growth in our collection and disposal business approaching 6%.

Divina: In addition, we spent $173 million on traditional solid waste and recycling acquisitions to grow our business.

Operating EBITDA is expected to grow by $450 million at the midpoint of our outlook.

Divina: Complex all of this while accelerating our sustainability growth investments for future growth and development and maintaining our leverage target ratio.

When we think about the cadence of our growth over the course of the year, we're expecting collection and disposal growth to be weighted more to the front half of the year given the momentum we've gained from strong operating efficiencies in back half of 2023.

Divina: Our targeted leverage ratio of about 275 times.

Divina: Our balance sheet remains strong and our earnings and cash flow growth.

And we're expecting sustainability business growth to be more significantly weighted to the back half of the year as our new recycling and renewable natural gas projects come online altogether. We expect this to result in a relatively balanced operating EBITDA growth.

Robust.

Divina: Joining us to continue our commitment to shareholder returns and long term growth.

Divina: Moving to our 2024 financial outlook, we are anticipating total company revenue growth between six and 7% driven by organic growth in our collection and disposal business approaching 6%.

Over the course of the year.

We expect capital spending to support the business for the year to total $2 billion to $5 billion mid point.

Divina: Operating EBITDA is expected to grow by $450 million at the midpoint of our outlook.

We expect to invest another $875 million on our high return sustainability growth projects.

Divina: When we think about the cadence of our growth over the course of the year, we're expecting collection and disposal growth to be weighted more to the front half of the year given the momentum we've gained from strong operating efficiencies in back half of 2023.

Free cash flow before the sustainability investments is anticipated to grow almost 7% at the midpoint to $2 $85 billion.

We remain committed to investing in an industry, leading network of renewable energy in recycling assets.

Divina: And we're expecting sustainability business growth to be more significantly weighted to the back half of the year as our new recycling and renewable natural gas projects come online altogether.

Including renewable natural gas projects to recycling automation in new markets and advancements in resource recovery.

Divina: Altogether, we expect this to result in a relatively balanced operating EBITDA growth.

Our sustainability growth investment strategy is progressing well.

Divina: Over the course of the year.

Divina: We expect capital spending to support the business for the year to total $2, two 5 billion midpoint, and we expect to invest another $875 million on our high return sustainability gross projects free.

As you would expect there have been a number of refinements in the plan since its inception.

We've worked our way through customary changes to project schedules and the impact from inflation.

All the while delivering completed projects that meet and sometimes exceed the environmental and economic objectives, we planned.

Divina: Free cash flow before the sustainability investments is anticipated to grow almost 7% at the midpoint to $2 $85 billion.

These successes have positioned us to grow the sustainability project pipeline in particular RF.

Divina: We remain committed to investing in an industry, leading network of renewable energy in recycling assets <unk>.

Our refreshed outlook includes two new recycling projects in Canada that Wm has awarded through a competitive process.

Divina: Including renewable natural gas projects to recycling automation in new markets and advancements in resource recovery.

We now expect growth investments across our recycling and renewable energy platform to total between two eight and $2 9 billion from 2022 through 2026.

Divina: Our sustainability growth investment strategy is progressing well.

Divina: So as you would expect there have been a number of refinements in the plan since its inception.

Divina: We've worked our way through customary changes to project schedules and the impact from inflation.

We expect these projects to contribute run rate adjusted operating EBITDA of about $800 million by the end of 2026.

Divina: All the while delivering completed projects that meet and sometimes exceed the environmental and economic objectives, we planned.

This outlook utilizes the same pricing assumptions, we've used consistently $125 per ton for recycled commodities and $26 per annum btu for our renewable natural gas.

These successes have positioned us to grow the sustainability project pipeline in particular RF.

Divina: Our refreshed outlook includes two new recycling projects in Canada that Wm has awarded through a competitive process.

We have a great deal of confidence in the value of the projects that are underway and we are enthusiastic about the strong complement they provide to our existing business.

Divina: We now expect growth investments across our recycling and renewable energy platform to total between two eight and $2 $9 billion from 2022 through 2026.

In conclusion 2023 has clearly illustrated that we are driving growth through our diligent focus on optimizing our business investing in technology and automation and growing our leadership in sustainability, we take pride in our accomplishments and look forward to what we can achieve together in 2024.

We expect these projects to contribute run rate adjusted operating EBITDA of about $800 million by the end of 2026.

Divina: This outlook utilizes the same pricing assumptions, we've used consistently $125 per ton for recycled commodities and $26 per M. M Btu for our renewable natural gas.

A heartfelt thank you to our dedicated team members, who have been instrumental to our success.

If that Josh let's open the line for questions.

Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Divina: We have a great deal of confidence in the value of the projects that are underway and we are enthusiastic about the strong complement they provide to our existing business.

One moment for questions.

Divina: In conclusion 2023 has clearly illustrated that we are driving growth through our diligent focus on optimizing our business investing in technology and automation and growing our leadership and sustainability.

Our first question comes from Noah Kaye with Oppenheimer You May proceed.

Hi, good morning, Thanks for taking the questions first one maybe for John.

You talked in some good detail about some of the cost optimization and productivity efforts and the gains. They got this year can you step back and remind us and perhaps Jim as well, where we are at in kind of the broader March towards <unk>.

Divina: We take pride in our accomplishments and look forward to what we can achieve together in 2024.

Speaker Change: A heartfelt thank you to our dedicated team members, who have been instrumental to our success.

Speaker Change: With that Josh let's open the line for questions.

Automation and productivity investments and some of the key kpis that we should be thinking about in terms of progress for 2024.

Josh: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Good morning, it's a good question. Originally we started talking about this in terms of the elimination of some labor dependency in the five to 7000 job range and it was across a handful of pretty broad areas. One was the customer experience group one was through our routing which would reduce.

Josh: One moment for questions.

Josh: Our first question comes from Noah Kaye with Oppenheimer You May proceed.

Noah Kaye: Hi, good morning, Thanks for taking the questions first one maybe for John.

You talked in some good detail about some of the cost optimization and productivity efforts in the game. If they got this year can you step back and remind us and perhaps Jim as well, where we are at in kind of the broader March towards <unk>.

Our dependency and kind of frontline driver labor and obviously, then recycling a little bit on SG&A, what I would tell you as you think about it this way we're about 75% through what we had planned for for the customer experience side on the rest of the automation and this is as much to do with truck deliveries, which did improve in 2023, we're about 40% of the way through there.

John J. Morris: Automation and productivity investments and some of the key kpis that we should be thinking about in terms of progress for 2024.

On the recycling side as Jim mentioned in his remarks, we've got a number of plants are going to be automated this year. Its kind of home care can comment more on that were about 20% of the way through there. So I would tell you, we're making great progress I think it showed up obviously across the board in our margins and specifically on labor in Q4, and as the year progressed, but we still got plenty of opportunity out there.

Good morning, it's a good question originally we started talking about.

Just in terms of the elimination of some labor dependency in the five to 7000 job range and it was across a handful of pretty broad.

John J. Morris: Areas, one was the customer experience group, one was through our routing which would reduce.

We feel like we're at a good we're on a good pace.

John J. Morris: Our dependency on kind of frontline driver labor and obviously, then recycling a little bit on SG&A and what I would tell you as you think about it this way we're about 75% through what we had planned for for the customer experience side on the resi automation and this is as much to do with truck deliveries, which did improve in 2023, we're about 40% of the way through there.

Very helpful.

I'm just trying to think about cadence on EBITDA margins for the year I know, we have the typical seasonality and it sounds like the front half of the year. The growth is really a story of kind of the collection and disposal side, but.

Are there any sort of.

John J. Morris: On the recycling side as Jim mentioned in his remarks, we've got a number of plants are going to be automated this year. Its kind of entire can comment more on that were about 20% of the way through there. So I would tell you, we're making great progress I think it showed up obviously across the board in our margins and specifically on labor in Q4.

Guidepost, you can give us in terms of thinking about margin cadence for.

For the first quarter first half.

I think it's a great question, Noah and similar to what we talk about talked about in terms of the EBITDA dollar growth.

Hey, sorry for margin is pretty similar we expect margin expansion to be more heavily weighted toward the front half of the year, particularly in the collection and disposal business. The SG&A margin expansion will be fairly even over 2024.

John J. Morris: As the year progressed, but we still got plenty of opportunity out there we feel like we're on a good pace.

Speaker Change: Very helpful.

Speaker Change: I'm just trying to think about cadence on EBITDA margins for the year I know, we have the typical seasonality and it sounds like the front half of the year. The growth is really a story of kind of the collection and disposal side, but.

And then what.

Hard to the sustainability businesses.

Commodity price benefits that we expect to see in 2024 arent.

Speaker Change: Are there any sort of.

Speaker Change: Guidepost, you can give us in terms of thinking about margin cadence.

Quite significant right.

The new debt on a year over year basis, but as a reminder, commodity price expansion in the recycling line of business can have some margin compression because of a really high return on invested capital part of our brokerage business and.

Speaker Change: For the first quarter first half.

Speaker Change: Yes, I think it's a great question, Noah and similar to what we talk about talked about in terms of the EBITDA dollar growth.

Speaker Change: Sorry for margin is pretty similar we expect margin expansion to be more heavily weighted towards the front half of the year, particularly in our collection and disposal business. The SG&A margin expansion will be fairly even over 2024.

On the renewable natural gas part of the business, we expect margin expansion there too because those are such great margin project. It does will be heavily weighted towards the back half. So from a margin perspective, while the collection and disposal businesses definitely is a thing that delivered in Q4, we do expect that to be the thing that lift Martin.

Speaker Change: And then with regard to the sustainability businesses.

Speaker Change: The commodity price benefits that we expect to see in 2020 for Orange.

Most significantly in the year ahead and that will be weighted toward the first half of the year.

Speaker Change: Quite significant right they are pretty muted on a year over year basis, but as a reminder, commodity price expansion in the recycling line of business can have some margin compression because of a really high return on invested capital part of our brokerage business and on.

Okay grabbed a lot of other questions could take offline, but I'll yield my time and consideration to others.

Thank you.

One moment for questions.

Our next question comes from Brian <unk> with Citi. You May proceed.

Speaker Change: On the renewable natural gas part of the business, we expect margin expansion there too because those are such great margin project. It does will be heavily weighted towards the back half. So from a margin perspective, while the collection and disposal business is definitely the thing that delivered in Q4, we do expect that to be the thing that lift margin.

Good morning, and thank you for taking the question.

Guidance seems to imply collection and disposal yield growth that you saw in <unk> 23.

Be essentially flat throughout 'twenty, four kind of around 5% so.

Can you just help us kind of understand that pricing strength, there was a bit better than what we're forecasting is it about.

Speaker Change: Most significantly in the year ahead and that will be weighted toward the first half of the year.

Better restricted pricing starting to flow through.

Speaker Change: Okay grabbed a lot of other questions would take offline, but all yield my time and consideration to others.

Would you attribute that to maybe mix.

Underlying strength in the market is there anything you'd kind of call out.

Speaker Change: Thank you.

On that really sticky pricing that it looks like we're going to see in 2004.

Speaker Change: One moment for questions.

Speaker Change: Our next question comes from Brian <unk> with Citi. You May proceed.

Yes, Brian a couple of standouts really we're continuing to be residential pricing and.

Brian: Good morning, and thank you for taking the question.

And disposal pricing those those actually showed increases.

Brian: Guidance seems to imply collection and disposal yield growth that you saw in <unk> 23.

Year over year, not surprisingly the other collection lines of business were down, but but that wasn't it wasn't unexpected.

Brian: <unk> essentially flat throughout 'twenty, four kind of around 5% so.

Brian: Can you just help us kind of understand that pricing strength, there was a bit better than what we're forecasting is that about.

As we move into 'twenty four.

That kind of four 5% to 5% yield number is a good target for us.

Brian: Better restricted pricing starting to flow through.

And.

Pricing continues to be a strength, we said at the beginning of 'twenty three that are focus areas for the year would be pricing and then the <unk>.

Brian: Attribute that to maybe mix.

Brian: Underlying strength in the market is there anything you'd kind of call out.

Brian: On that really sticky pricing that it looks like we're going to see in 2004.

Cost controls that John went through.

Speaker Change: Yes, Brian a couple of standouts really we're continue to be residential pricing and.

Pricing pricing is going to continue to at least add a little bit of margin for us. We think as opposed to 22, where we I've said several times, we kind of felt like we were in hand to hand combat with our cost structure.

Speaker Change: And disposal pricing those those actually showed increases.

Speaker Change: Year over year, not surprisingly the other collection lines of business were down, but but but that wasn't wasn't unexpected.

Got it got it thanks for that detail.

Last question for me and then I can turn it over.

In 2023, there was a small decline be event driven business that kind of prompted guidance revision mid year I'm. Just wondering does 24 guidance assume that that comes back.

Speaker Change: As we move into 'twenty four.

Speaker Change: That kind of four 5% to 5% yield number is a good target for us.

Speaker Change: And.

Speaker Change: Pricing continues to be a strength, we said at the beginning of 'twenty three that are focus areas for the year would be pricing and then the <unk>.

And then if there's anything else you'd like to flag on the event driven book.

Book that would be helpful. I'll turn it over thank you, yes, it's a great question.

Speaker Change: Cost controls that John went through.

And your outlook.

Speaker Change: Pricing pricing is going to continue to at least add a little bit of margin for us. We think as opposed to 22, where we I've said several times, we kind of felt like we are in hand to hand combat with our cost structure.

Your recollection of our outlook revision midyear.

Spot on with regard to some of the softness we were seeing in our special waste part of the business and we saw a strong recovery of that in the fourth quarter.

Speaker Change: Got it got it thanks for that detail.

Which is one of the reasons that we saw revenue exceed our expectations later in the year, we're not necessarily expecting a rebound of special waste volumes in the year ahead, but we are expecting some of this momentum that we saw in Q4 to carryover.

Speaker Change: Last question for me and then I can turn it over.

Speaker Change: In 2023, there was a small decline be event driven business that kind of prompted a guidance revision mid year I'm. Just wondering does 24 guidance assume that that comes back.

But nothing outside the one thing that I would call out as a reminder, with regard to some of the special project type work is 2023 did have a benefit from the hurricane and volumes, particularly in the first quarter and so that certainly will have an impact on the Q1 <unk>.

Speaker Change: And if there's anything else you'd like to flag on the event driven.

Speaker Change: But that would be helpful. I'll turn it over thank you, yes, it's a great question.

Speaker Change: And your outlook.

Speaker Change: Your recollection of our outlook revision midyear.

Speaker Change: Spot on with regard to some of the softness we were seeing in our special waste part of the business and we saw a strong recovery of that in the fourth quarter.

Harris ends in 2024.

Thank you.

One moment for questions.

Speaker Change: Which is one of the reasons that we saw revenue exceed our expectations later in the year, we're not necessarily expecting a rebound of special waste volumes in the year ahead, but we are expecting some of this momentum that we saw in Q4 to carryover.

Our next question comes from Jerry Revich with Goldman Sachs. You May proceed.

Yes, hi, good morning, everyone. Good morning.

Can we just talk about margins really outstanding performance by the team in the fourth quarter.

Speaker Change: But nothing outsized the one thing that I would call out as a reminder, with regard to some of the special project type work is 2023 did have a benefit from the hurricane and volumes, particularly in the first quarter and so that certainly will have an impact on the Q1 compare.

To just run the seasonally adjusted annual rate.

Thats about over 30% margin equivalent that you folks put up in the fourth quarter. The full year guidance for 'twenty four is about a point lower than that sounds like yields are still very much at a good place. So I'm just trying to make sure that there are no items that you would view as one off in the fourth quarter versus hey.

Speaker Change: This ends in 2024.

Speaker Change: Thank you.

One moment for questions.

It's early in the year and we just want to make sure we have room to execute.

Speaker Change: Our next question comes from Jerry Revich with Goldman Sachs. You May proceed.

I definitely think the way that you summarized it there on the last part of your comment is the way that we're thinking about this in particular, when we were setting our our margin expectations for the year ahead. The momentum that we had in the fourth quarter shows that we have tremendous confidence in having the <unk>.

Yes, hi, good morning, everyone.

Speaker Change: <unk>.

Jerry Revich: Can we just talk about margins it really outstanding performance by the team in the fourth quarter. If we were to just run the seasonally adjusted annual rate.

Jerry Revich: Thats about over 30% margin equivalent that you folks put up in the fourth quarter. The full year guidance for 'twenty four is about a point lower than that sounds like yield to school very much at a good place. So I'm just trying to make sure that there are no items that you would view as one off in the fourth quarter versus hey.

Cost improvement work that we've been so focused on as an organization through automation and technology and importantly, the delivery of trucks.

Saying that we can continue to see benefits from in the year ahead.

Caution for US I would say that may have us below that seasonally adjusted margin outlook that you've done really relates to a couple of things. It's one some of the weather impacts that we saw in January to last year, when we gave inflation outlook.

Jerry Revich: It's early in the year and we just want to make sure we have room to execute.

Speaker Change: I definitely think the way that you summarized it there on the last part of your comment is the way that we're thinking about this in particular, when we were setting our our margin expectations for the year ahead. The momentum that we have in the fourth quarter shows that we have tremendous confidence in having the <unk>.

We tended to see that inflation was sticking around and being more stubborn than we had predicted and so we're taking a more cautious view on inflationary pressures in the year ahead, then we did a year ago.

Speaker Change: Cost improvement work that we've been so focused on as an organization through automation and technology and importantly, the delivery of trucks.

But really what I want to highlight is that there is tremendous confidence in the fundamentals the costs.

Speaker Change: Saying that we can continue to see benefits from in the year ahead.

The price cost spread has improved the accelerated accelerated truck deliveries and our optimization efforts and the discipline and SG&A are all showing strong results I think the best line to look at is actually our repair and maintenance line and the operating expense as a percentage of revenue category and over the long term that had trended below.

Speaker Change: Caution for US I would say that may have us below that seasonally adjusted margin outlook that you've done it really relates to a couple of things. It's one some of the weather impacts that we saw in January to last year, when we gave inflation outlook.

Speaker Change: We tended to see that inflation was sticking around and being more stubborn than we had predicted and so we're taking a more cautious view on inflationary pressures in the year ahead, then we did a year ago.

9% of revenue for us and through the first nine months of 2023, we were at nine 9% that measure was down to nine 1% in Q4. So we know that we've got some really strong momentum coming into the year ahead that will continue those.

Speaker Change: But really what I want to highlight is that there is tremendous confidence in the fundamentals the costs.

Cost benefits that you saw is produced in the fourth quarter into 2024, we just think that it's prudent to be on the conservative side when predicting full year margin. So Jerry real quickly, we did kind of anticipate that.

Speaker Change: The price cost spread has improved the accelerated accelerated truck deliveries and our optimization efforts and the discipline and SG&A are all showing strong results I think the best line to look at is actually our repair and maintenance line and the operating expense as a percentage of revenue category and over the long term that had trended below.

There'll be some questions on margin.

So just a couple of things here first of all.

Sure.

The margin obviously for Q4 was strong as we could have.

Speaker Change: 9% of revenue for us and through the first nine months of 2023, we were at nine 9% that measure was down to nine 1% in Q4. So we know that we've got some really strong momentum coming into the year ahead that will continue that.

We could have expected it to be in and that has continued as we look at the month of January January came in quite strong for us. So we're pleased with that the second point would be around some of the questions that you're asking around the conservatism on margin for 2004, and Divina did a really good job of explaining that I think it's really just a guess.

Speaker Change: Cost benefits that you saw us produce in the fourth quarter into 2024, we just think that it's prudent to be on the conservative side when predicting full year margin. So Jerry real quickly, we did kind of anticipate that.

I guess you could argue that it is conservative based on 90 basis points of improvement from 'twenty two to 'twenty three.

But.

Sure.

There seems to be an uncertain year in front of US every time, we come to this point, we don't know exactly what the economy is going to do it.

Speaker Change: There'll be some questions on margin.

I feel great about the economy other days not so great. So you could argue there is a little bit of economic conservatism in there.

Jerry Revich: So just a couple of things here first of all.

Jerry Revich: The margin obviously for Q4 was strong as we could have kind.

Jerry Revich: Kind of expected it to be in and that has continued as we look at the month of January January came in quite strong for us. So we're pleased with that the second point would be around some of the questions that you're asking around the conservatism on margin for 2004, and Divina did a really good job of explaining that I think it's really just.

Also a little bit of forecasting conservatism coming off such a strong year that you want to try and say we're going to do the same thing going forward into 'twenty, four, but but we do feel really good about the way we finished the year and honestly the way we started the year so far through January.

Really appreciate the color and Jim can I ask you just on a separate topic.

Jerry Revich: I guess you could argue that it is conservative based on 90 basis points of improvement from 'twenty two to 'twenty three.

Landfill gas transactions are coming in at really attractive levels Enbridge transaction was $270 per btu, it's costing you folks $50 per btu to bring your assets online so just given.

Jerry Revich: But.

Jerry Revich: Sure.

Jerry Revich: There seems to be an uncertain year in front of US every time, we come to this point, we don't know exactly what the economy is going to do it.

Jerry Revich: I feel great about the economy other days not so great. So you could argue there is a little bit of economic conservatism in there.

Apparently deep the market is for those type of assets can you just update us on how youre thinking about what it would take for you to consider monetizing.

Jerry Revich: Also a little bit of forecasting conservatism coming off such a strong year that do you want to try and say we're going to do the same thing going forward into 'twenty, four, but but we do feel really good about the way we finished the year and honestly the way we started the year so far through January.

So on the landfill gas assets would you bring them in line has the attractive market price impacted how you're thinking about.

The owned versus sale opportunity.

I'm going to.

I'll say, one one word on that and then I'm going to turn it over to Tara hemmer to maybe give a little bit more color, but that's always an option for us and.

Speaker Change: Really appreciate the color and Jim can I ask you just on a separate topic.

Speaker Change: Landfill gas transactions are coming in at really attractive levels of Enbridge transaction was $270 per btu, it's costing you folks $50 per btu to bring your assets online. So just given.

We have multiple options and it's good to be in a place where you have multiple options, but but at this point. We're pleased with the progress we're making on building. These plants, we have a number of plants that are.

At various stages of construction.

Speaker Change: Apparently deep the market is for those type of assets can you just update us on how youre thinking about what it would take for you to consider monetizing.

Terry anything to add to that.

Just allow.

Aligns really well with our business and we are making great progress on building out these plans.

Speaker Change: The landfill gas assets would you bring them in line has the attractive market price impacted how you're thinking about.

The five that we're going to bring online in 2024, we're going to have strong contribution from them exiting 2024, and this is going to be something we're going to continue to grow.

Speaker Change: The owned versus cell opportunity.

Speaker Change: I'm going to add.

Speaker Change: I'll say, one one word on that and then I'm going to turn it over to Tara Hemmer.

I appreciate the discussion thank you.

Give a little bit more color, but that's always an option for us and.

Thank you.

One moment for questions.

Tara J. Hemmer: We have multiple options and it's good to be in a place where you have multiple options, but but at this point. We're pleased with the progress we're making on building. These plants, we have a number of plants that are.

Our next question comes from Tyler Brown with Raymond James You May proceed.

Hey, good morning.

Hey, Tara actually I want to come back to the updated sustainability capex figures and $2 eight to $2 nine so I may have missed it but if I'm not mistaken that number was closer to $2 2 billion back at the analyst day.

Tara J. Hemmer: At various stages of construction.

Tara J. Hemmer: Terry anything to add to that I would just say this.

Terry: Aligns really well with our business and we are making great progress on building out these plans.

Terry: The five that we're going to bring online in 2024, we're going to have a strong contribution from them exiting 2024, and this is going to be something we're going to continue to grow.

I get that there are $350 million in incremental cyclin opportunities, but what makes up the difference call it that $300 million, what's that just inflation yes.

Yes, the difference really is related to inflation, primarily in our renewable natural gas build.

Speaker Change: I appreciate the discussion thank you.

Speaker Change: Thank you.

And related to inflation related to supply chain also a little bit on construction increases and interconnect so that is.

Speaker Change: One moment for questions.

Speaker Change: Our next question comes from Tyler Brown with Raymond James You May proceed.

Tyler Brown: Hey, good morning.

Okay perfect. That's helpful. That's very helpful.

Tyler Brown: Morning.

Tyler Brown: Hey, Tara actually I want to come back to the updated sustainability capex figures in two eight to $2 nine so I may have missed it but if I'm not mistaken that number was closer to $2 2 billion back at the analyst day.

And then divina. Thank you so much for the Wm renewable segment reporting, but I do just want to make sure that I got it.

Understand at all so I get the impact in revenues from the change in the price of the commodities that are impacting that there'll be in renewables.

Tyler Brown: I get that there are $350 million in incremental cyclin opportunities, but what makes up the difference call it that $300 million with that just inflation yes.

<unk>.

But if you look at the change in that line versus the change in the net revenue for those they don't exactly line up. So it tells me that there's likely some volume component in there. So just to be clear maybe it'll be helpful. But when you bring on a facility like eco Mr where does that show up does that show up in space.

Tyler Brown: The difference really is related to inflation, primarily in our renewable natural gas build and relates to inflation related to supply chain also a little bit on construction increases and interconnect so that is.

The volume in your IRG Calicle can you just help us with how the accounting will work.

Speaker Change: Okay perfect. That's helpful. That's very helpful.

Speaker Change: And then divina. Thank you so much for the Wm renewable segment reporting, but I do just want to make sure that I got I understand at all so I get the impact in revenues from the change in the price of the commodities that are impacting that there'll be in renewables and recycling line, but if you look at the chain.

Sure.

Evan Heather we'll be happy to walk you through any details I don't cover here, but.

I am glad one that the additional clarity is beneficial the other that I would say is that on the IRG measures that we do the internal revenue growth measures that we do youll see commodity price impact in a single line, which is recycling processes and renewable energy. So that's all price and then youll.

Speaker Change: And that line versus the change in the net revenue for those they don't exactly line up. So it tells me that there is likely some volume component in there. So just to be clear maybe this would be helpful. But when you bring added facility like Eco Vista, where does that show up does that show up as basically volume in your IRR.

See the incremental volume from new projects.

Whether it be automation projects that have more throughput.

At the plant or the new Eco Vista plant that will be in the volume line in terms of the segment reporting line. The only thing that might be a little bit of a complicating factor is the internal revenue between.

Speaker Change: <unk> can you just help us with how the accounting will work.

Speaker Change: Sure.

Speaker Change: Heather will be happy to walk you through any details I don't cover here, but.

Heather: Im glad one that the additional clarity is beneficial the other that I would say is that on the IRG measures that we do the internal revenue growth measures that we do youll see commodity price impact in a single line, which is recycling processes and renewable energy. So that's all price and then Youll see.

The renewable business in the collection and disposal business you can think of it as the renewable business paying the royalty to the collection and disposal business associated with the landfill gas production that doesn't show up in the revenue line because it's effectively just a cost for the renewable business.

Heather: The incremental volume from new projects.

Helpful.

I, yes, I definitely think so we will parse it out but.

Heather: Whether it be automation projects that have more throughput.

You mentioned the collection and disposal volume can be up maybe 1%, but again kind of going back to that total IRG table.

Heather: At the plant or the new Eco Vista plant that will be in the volume line in terms of the segment reporting line. The only thing that might be a little bit of a complicating factor is the internal revenue between.

We actually see that number closer to two.

I would assume that with $150 million of incremental renewables EBITDA, there's probably at least a couple of hundred million dollars of revenue associated with that does that does that make sense.

Heather: The renewable business in the collection and disposal business, you can think of it as the renewable business pain.

No.

To think about this is that when we gave that that volume outlook that was just the collection and disposal volume the renewable energy business increases we have on a combined basis being in the range of 30 to 60 basis points in the year ahead.

Heather: <unk>, a royalty to the collection and disposal business.

If you did with the landfill gas production that doesn't show up in the revenue line because it's effectively just the cost for the renewable business hopefully.

Heather: Helpful.

Speaker Change: Yes, I definitely think so we will parse it out but.

And that's a combination of commodity price impacts and volume.

Speaker Change: I think you mentioned in the collection and disposal volume can be up maybe 1%, but again kind of going back to that total IRG table could we actually see that number closer to two.

Excellent Okay last one here so.

So margins were 2% and we talked about that let me go up 330 basis points year over year in Q4, but can you kind of help us bridge that $2 30, I think there was one fewer day, maybe fuel was a hull maybe commodities help you with any color there would be appreciated. Thanks.

Speaker Change: Because I would assume that with $150 million of incremental renewables EBITDA, there's probably at least a couple of hundred million dollars of revenue associated with that does that does that makes sense.

Speaker Change: The way to think about this is that when we gave that that volume outlook that was just the collection and disposal volume the renewable energy business increases we have on a combined basis being in the range of 30 to 60 basis points in the year ahead.

Yes for Q4, specifically.

Again, the collection and disposal business and the efficiency that we drove was the lion's share of that improvement at 220 basis points fuel was another 50 basis points. So that really does explain almost the entirety of it there are a few other puts and takes but I would say that my comments earlier about repair and.

Speaker Change: And that's a combination of commodity price impacts on volume.

Speaker Change: Excellent. Okay last one here Davita. So margins were 2% we've talked about that I think there are 230 basis points year over year in Q4, but can you kind of help us bridge that $2 30, I think there was a fewer day, maybe fjords of Hull, maybe commodities help you with any color there would be appreciated. Thanks.

And then John's comments about the labor line. Those are the two places that are driving that 220 basis points of margin expansion I think Tyler I'll add on here.

Got it.

I've been told we don't Pat ourselves on the back end up somewhat Pat ourselves on the back a little bit here. When we started talking about some aspirational metrics, meaning margin EBITDA margin SG&A percent of revenue Opex as a percent of revenue a couple of years ago and I'm talking about technology.

Devina A. Rankin: For Q4, specifically again, the collection and disposal business and the efficiency that we drove was the lion's share of that improvement at 220 basis points fuel was another 50 basis points. So that really does explain almost the entirety of it there are a few other puts and takes but I would say.

And using attrition to reduce our labor dependents.

Those numbers were pretty far out on the horizon.

And now in every case those numbers are literally a stone's throw away for us whether you're talking about 30%.

Devina A. Rankin: That my comments earlier about repair and maintenance and then John's comments about the labor line. Those are the two places that are driving that 220 basis points of margin expansion I think Tyler this is driving add on add on here.

EBITDA margin, we're right there for the fourth quarter SG&A at 9%, we're very close to that in Opex at 60% very close to that so I'm really proud of the team for executing so well on this and being able to stand up on this call today and last quarter as well and say those things that we put out there those go.

Speaker Change: Got it.

Speaker Change: I've been told we don't Pat ourselves on the back end up somewhat Pat ourselves on the back of it here.

Speaker Change: When we started talking about some aspirational metrics, meaning margin EBITDA margin SG&A percent of revenue Opex as a percent of revenue a couple of years ago, and then talking about technology and using attrition to reduce our labor dependents those numbers, we're pretty far out on the horizon.

Rules that we set we are we're getting close to achieving those doesn't mean, we're satisfied we will continue to set higher goals, but I'm pleased the fact that we've been able to get to those those goals that were pretty far.

Out on the Horizon, we initially set them.

Speaker Change: And now in every case those numbers are literally a stone's throw away for us whether you're talking about 30%.

Yes no.

Appreciate it so much thank you for the time.

Thank you.

Speaker Change: EBITDA margin, we're right there for the fourth quarter SG&A at 9%, we're very close to that in Opex at 60% very close to that so I'm really proud of the team for executing so well on this and being able to stand up on this call today and last quarter as well and say those things that we put out there those goals.

One moment for questions.

Our next question comes from Michael Hoffman with Stifel. You May proceed.

Hey gang, thanks for the questions back to the margin question John.

It seems like looking at this on a two year stack helps.

Cause you can't perfectly time, when you get some of your self help.

Speaker Change: We set we.

We're getting close to achieving those doesn't mean, we're satisfied we will continue to set higher goals, but I'm pleased the fact that we've been able to get to those those goals that were pretty far.

And that sort of accounts for really strong 23, a little more muted 24, but the two year stack.

It's sort of 60 basis points a year. So we're the question underlying that is recycling as an incremental tailwind because you've got a pretty low estimate there relative to how you finished the year on the basket.

Out on the Horizon, we initially set them.

Speaker Change: Yes.

Speaker Change: I appreciate it so much thank you for the time.

Speaker Change: Great.

Speaker Change: Thank you.

GDP I'm, assuming you think it's maybe 115% and the trend stronger than that so that's a tailwind.

Speaker Change: One moment for questions.

Speaker Change: Our next question comes from Michael Hoffman with Stifel. You May proceed.

And then I think your wage growth is probably running closer to three and a half four therefore, there's clear spread on price cost am I looking at that correctly.

Michael E. Hoffman: Hey gang, thanks for the questions back to the margin question John.

Michael E. Hoffman: It seems like looking at this on a two year stack helps.

Well I'll start and Divina I think on the cost spread comment to you under what Michael I think that's what we've been talking about for the last couple of quarters, whether you look at core price.

Michael E. Hoffman: Because you can't perfectly time, when you get some of your self help.

Michael E. Hoffman: And that sort of accounts for really strong 23, a little more muted 24, but the two year stack. It's.

Our yield numbers, we've been talking about being disciplined in the way we approach pricing and over time in the last couple of quarters are a great example, that we've been able to really drive out.

Michael E. Hoffman: It's sort of 60 basis points a year. So we're the question underlying that is recycling as an incremental tailwind because you've got a pretty low estimate there relative to how you finished the year on the basket.

Give some operating efficiencies and drive out some of the labor dependency and Divina commented on the maintenance repair that's another bucket, where we've made a lot of progress I think in Q4, we were flat to slightly down year over year in terms of whole dollars. So thats part of what was helping us in Q4, and then I'll just add a little bit of color that provide some <unk>.

Speaker Change: <unk> I'm, assuming you think it's maybe 115% and the trend stronger than that so that's a tailwind.

Speaker Change: And then I think your wage growth is probably running closer to three and a half four therefore, there's clear spread on price costs am I looking at that correctly.

<unk> on a couple of other points that you brought up Michael one with higher recycling commodity prices the brokerage business can actually put downward pressure on margin and so that's one of the things that we have built into our outlook for 2024, and then in terms of wage inflation, we start at 4% with our folks.

Speaker Change: Well I'll start and Divina I think on the cost spread comment the under what Michael I think that's what we've been talking about for the last couple of quarters, whether you look at core price or our.

Speaker Change: Our yield numbers, we've been talking about being disciplined in the way we approach pricing and over time in the last couple of quarters are a great example, that we've been able to really drive out drive some operating efficiencies and drive out some of the labor dependency and Divina commented on the maintenance repair that's another bucket, where we've made a lot of progress I think in Q4, we were flat to.

And so.

Wage inflation is still expected to be north of 4% when you take into account.

Bob increases that we have to provide in certain markets to be responsive to various changes. So 4% is kind of our baseline and then you add on top of that.

Lately down year over year in terms of a whole dollar. So thats part of what was helping us in Q4, and then I'll just add a little bit of color, but provide some clarity on a couple of other points that you brought up Michael one with higher recycling commodity prices the brokerage business can actually put downward pressure on.

And your GDP assumption is pretty muted.

Yes.

Basically what we've always said is that we believe that our volume is about 75% flow through from GDP and so we did have a fairly muted outlook with regard to GDP when we built our plan.

Speaker Change: Margin and so that's one of the things that we have built into our outlook for 2024, and then in terms of wage inflation, we start at 4% with our folks and so.

Yeah.

I hope your Crystal ball is better than mine, but I would tell you that our expectations for economic outlook continue to be that we need to be on the cautious side of things just because there is so much less uncertainty you saw that with today's print on CPI as an example, which exceeded expectations.

Speaker Change: Wage inflation is still expected to be north of 4% when you take into account.

Speaker Change: Spot increases that we have to provide in certain markets to be responsive to various changes. So 4% is kind of our baseline and then you add on top of that.

I guess, just the consumer seems to keep plowing ahead.

Speaker Change: And your GDP assumption is pretty muted.

Speaker Change: Yeah.

Switching gears, a little bit of terror.

Speaker Change: Basically what we've always said is that we believe that our volume is about 75% flow through from GDP and so we did have a fairly muted outlook with regard to GDP when we built our plan.

If if your renewable natural gas you are landfill gas is kind of a Swiss army knife of renewable fuel wonder the federal agencies wake up to this and so you.

We get a proper interpretation of the ITC or the 45, <unk> Z credits or come back to <unk>. What's your view of where that goes and then the second piece is what are you assuming happens out in the out years and that $1 billion of R&D spend how much do you get back for credits.

Yeah.

Speaker Change: I hope your Crystal ball is better than mine, but I would tell you that our expectations for economic outlook continue to be that we need to be on the cautious side of things just because theres. So much left in uncertainty you saw that with today's print on CPI as an example, which exceeded expectations.

So starting with the real positive the one thing that the federal government is set a three year RVO and having that for 2023 through 2025.

Speaker Change: Yes, I guess, just the consumer seems to keep plowing ahead.

Speaker Change: Switching gears, a little bit of terror.

Speaker Change: If if your renewable natural gas your landfill gas is kind of a Swiss army knife of renewable fuel wonder the federal agencies wake up to this and so you.

<unk> clear stability in the program and so that's been a positive with the ITC.

Think when treasury issued their guidance.

Speaker Change: Get a proper interpretation of the ITC or the 45, <unk> Z credits or come back to <unk>. What's your view of where that goes and then the second piece is what are you assuming happens out in the out years and that $1 billion of R&D spend how much do you get back for credits.

There was a misinterpretation over what was in the inflation reduction Act and we don't just share. This view others do with us that are in the biogas community in January landfill gas renewable energy from landfill gas.

Commented on that and we are anticipating that treasury will come out with some further guidance later this year and so cautiously optimistic there.

Speaker Change: So starting with the real positive the one thing that the federal government is set a three year RVO and having that for 2023 through 2025, you've seen clear stability in the program and so that's been a positive with the ITC.

So there is a whole host of credits that could be stacked obviously, the ITC was within our plan and we remain optimistic related to that.

Looking to 2025 with the production tax credit too.

Speaker Change: We think when treasury issued their guidance that there was a misinterpretation.

ITC point, Michael just so that we're crystal clear in terms of the implications of that on our 2024 guidance, we contemplated $120 million of ITC benefit in our free cash flow outlook for the year.

Speaker Change: Over what was in the inflation reduction Act and.

Speaker Change: Just share this view others do with us that are in the biogas community in January landfill gas renewable energy from landfill gas. We've commented on that and we are anticipating that treasury will come out with some further guidance later this year and so.

Okay and then.

Then sort of housekeeping if we could.

I Love the segment reporting as well are we going to get any kind of tons and tons out. So we can actually do a bottoms up forecast on sales for the renewable and processing segment and then how 'bout megawatts in F&B to use to do be able to do the same thing on our sales growth for renewables.

Speaker Change: Consciously optimistic there so.

Speaker Change: There's a whole host of credits that could be stacked obviously the ITC was was in our plan and we remain optimistic related to that.

Speaker Change: Of course looking to 2025 with the production tax credit to you on that.

We wanted to take a breath and celebrate all of the incremental transparency. We've provided we're really proud of the work that the team did because.

Speaker Change: ITC point, Michael just so that we're crystal clear in terms of the implications of that on our 2024 guidance, we contemplated $120 million of ITC benefit in our free cash flow outlook for the year.

While it looks easy it is and there's a whole lot of work that went into it with regard to the more I would say operational driver elements of the reporting will continue to evaluate whether or not there is anything that is a strong complement to the financial measures and consider any additions in the year.

Speaker Change: Okay.

Speaker Change: And then sort of housekeeping if we could.

Speaker Change: I Love the segment reporting as well are we going to get any kind of tons and tons out. So we can actually do a bottoms up forecast on sales for the renewable and processing segment and then how about megawatts in F&B to use to do be able to do the same thing on our sales growth for renewables.

It had but right now we're going to continue to execute on the strong reporting that we've been able to accomplish and we actually would like to see the industry.

<unk> in terms of providing additional visibility because we think it's beneficial.

Speaker Change: So we wanted to take a breath and celebrate all of the incremental transparency. We've provided we're really proud of the work that the team did because.

So in the K, one when will it be a recent two well we get quarterly data for all of 'twenty, two and all of 'twenty three and then three years a forecast. So we can rebuild our models in this format.

Speaker Change: While it looks easy it is and there's a whole lot of work that went into it with regard to the more I would say operational driver elements of the reporting will continue to evaluate whether or not there is anything that is a strong complement to the financial measures and consider any additions in the year.

The K will be released early today and we're in good shape for that so thank you to the team with regard to the quarterly data Youll get that over the course of the year. It will have the full year data quarterly recast will come quarter by quarter.

Speaker Change: It had but right now we're going to continue to execute on the strong reporting that we've been able to accomplish and we actually would like to see the industry fall.

Okay. Thank you.

Uh-huh.

Thank you.

One moment for questions.

Speaker Change: <unk> in terms of providing additional visibility because we think it's beneficial.

Speaker Change: So in the K one when will it be reason to where we get quarterly data for all of 'twenty, two and all of 'twenty three and then three years a forecast. So we can rebuild our models in this format.

Our next question comes from Stephanie more with Jefferies. You May proceed.

Hi, good morning, Thank you.

Good morning.

So just kind of just looking at the 2024 guidance assumption it looks like you are.

Speaker Change: The K will be released early today and we're in good shape for that so thank you to the team with regard to the quarterly data Youll get that over the course of the year. It will have the full year data quarterly recast will come quarter by quarter.

Rooming rent at about $3.

It makes sense, given where rents are today, but digging into a little bit more can you talk about in terms of what contracts that you have already signed and kind of where you were able to lock in.

Speaker Change: Okay. Thank you.

Those prices going into the year I think you'd said at sustainability day that you were looking to have 70% to 90% locked in.

Speaker Change: Uh-huh.

Speaker Change: Thank you.

Speaker Change: One moment for questions.

In any given 12 month period, so any update on where that stands for 2024 to get to that $3 red. Thank you.

Our next question comes from Stephanie more with Jefferies. You May proceed.

Sure. So we have about two thirds of our offtake locked in for 2024, and when we think about what's locked in it is a mix of long term contracts and also.

Stephanie: Hi, good morning, Thank you.

Stephanie: Good morning.

Stephanie: So just kind of just looking at the 2024 guidance assumption it looks like you're assuming rent at about $3.

When we purchased really on.

Stephanie: It makes sense, given where rents are today, but digging into a little bit more can you maybe talk about in terms of what contracts that you have already signed and kind of where you were able to walk in.

Sold on the forward side into 2024, which would have been.

At a higher rate than $3, so on a blended basis.

Stephanie: Those prices going into the year I think you'd said at sustainability day that you were looking at 70% to 90% locked in.

Get a lower average there and then the third that we would be selling in 2024, that's what's at the $3 RIN Guide.

Stephanie: In any given 12 month period, so any update on where that stands for 2024 to get to that $3 red. Thank you.

The other thing I wanted to just mention is those longer term contracts that we have in place. There is a mixed anywhere from five to 20 years. So we're really trying to take a approach where we have different tenors.

Speaker Change: Sure. So we have about two thirds of our offtake locked in for 2024, and when we think about what's locked in it is a mix of long term contracts and also.

That were locked in.

Speaker Change: Rents that we purchased really on.

Got it no that's very helpful. And then maybe sticking on the sustainability front you talked about some incremental investments included in your updated outlook and noted that involve two projects in Canada can you talk a little bit about the opportunity I am assuming that those are probably related to EPR changes in Canada is that.

Speaker Change: Sold on the forward side into 2024, which would have been.

Speaker Change: At a higher rate than $3. So on a blended basis, you sort of get a lower average there and then the third that we would be selling in 2024, that's what's at the $3 RIN Guide.

Is the correct assumption, maybe just what how EPR might change the margin or growth opportunity compared to maybe your more traditional U S recycling business know, how youre thinking about those incremental opportunities.

The other thing I wanted to just mentioned is those longer term contracts that we have in place. There is a mixed anywhere from five to 20 years. So we're really trying to take a approach where we have different tenors.

The two Canadian projects are related to extended producer responsibility and I think this is a great example, where we were able to really showcase our automation investments and how differentiated our assets are really.

Speaker Change: We're locked into.

Speaker Change: Got it that's very helpful. And then maybe sticking on the sustainability front you talked about some incremental investments included in your updated outlook and noted that involve two projects in Canada can you talk a little bit about the opportunity I'm, assuming that those are probably related to the EPR changes in Canada is that.

The pro to some of the facilities that we have across the United States and so that's a great example, where we were able to win more business.

Based on those investments.

Speaker Change: Is the correct assumption, maybe just what how EPR might change the margin or growth opportunity compared to maybe a more traditional you asked your recycling business. So how youre thinking about those incremental opportunities.

<unk> producer responsibility in Canada, and the structure that we have there it really is around us using those assets as manufacturing plan.

And really it's a fee for service model. So it is a great example of how we can leverage this technology differentiation for more business in the future.

Speaker Change: The two Canadian projects are related to extended producer responsibility and I think this is a great example, where we were able to really showcase our automation investments and how differentiated our assets are really taking the pro to some of the facilities that we have across the United.

Understood. Thank you so much.

Thank you.

One moment for questions.

Our next question comes from John <unk> with Wells Fargo. You May proceed.

Speaker Change: Steve and so that's a great example, where we were able to win more business.

Thanks for taking my question, maybe just a quick one in terms of the sustainability EBITDA timing is this just really kind of a knock on impact of some of the 2023 project delays I think we noticed change to run rate versus kind of in 'twenty six any color would be appreciated. Thank you.

Speaker Change: Based on those investments.

Speaker Change: <unk> producer responsibility in Canada, and the structure that we have there it really is around us using those assets as manufacturing plant.

Speaker Change: And really it's a fee for service model. So it is a great example of how we can leverage this technology differentiation for more business in the future.

So there is two key things that I would want everyone to bear in mind as you think about our trajectory. The first is in 2024, we're going to have roughly 40 projects under construction at any given time.

Speaker Change: Understood. Thank you so much.

Speaker Change: Thank you.

Speaker Change: One moment for questions.

So that really gives you a sense of how we are building and we have a lot of momentum in the ramp the second key piece is really exiting 2024.

Speaker Change: Our next question comes from John <unk> with Wells Fargo. You May proceed.

John J. Morris: Thanks for taking my question, maybe just a quick one in terms of the sustainability EBITDA timing is this just really kind of a knock on impact of some of the 2023 project delays I think we noticed change to run rate versus kind of in 'twenty six any color would be appreciated. Thank you.

We're going to be approaching roughly $300 million in run rate EBITDA, which gives you a sense of where we're headed on that ramp to the $800 million. So what we're really seeing in 2024 is a true build of momentum on reaching that $800 million target Jonathan those supply chain.

Speaker Change: So there is two key things that I would want everyone to bear in mind as you think about our trajectory. The first is in 2024, we're going to have roughly 40 projects under construction at any given time.

Constraints are not that different from what we've seen on the fleet side of our business either the good news is that as you heard John Morris talk about it.

We've started to see that free up a bit and so terra is seeing the same thing on the RMG in recycling side, but we definitely had some supply chain.

Speaker Change: So that really gives you a sense of how we're building and we have a lot of momentum and the ramp there.

Speaker Change: Second key piece is really exiting 2024.

Constraints that contributed to this bit of a slowdown.

Speaker Change: You're going to be approaching roughly $300 million in run rate EBITDA, which gives you a sense of where we're headed on that ramp to the $800 million. So what we're really seeing in 2024 is a true build of momentum on reaching that $800 million target Jonathan those supply chain.

Over 2002 in particular, but also the front half of 'twenty three.

Great color. Thank you.

Thank you.

One moment for questions.

Our next question comes from Tobey Sommer with two Securities you May proceed.

Speaker Change: Constraints are not that different from what we've seen on the fleet side of our business either the good news is that as you heard John Morris talk about it.

Thanks wanted to get your sense for acquisition expectations.

So how are the favorable trends in your business, which is a pretty long list price cost yield new investment production et cetera different than those at the smaller players with whom you have a dialogue for acquisitions.

Speaker Change: We started to see that free up a bit and so terra is seeing the same thing on the RMG in recycling side, but we definitely had some supply chain.

Speaker Change: Constraints that contributed to this bit of a slowdown.

So.

Speaker Change: Over 2002 in particular, but also the front half of 'twenty three.

We said that our acquisition pipeline was robust I think what you're seeing is that.

Speaker Change: Great color. Thank you.

Some of those and I'm speaking just from this is somewhat anecdotal in speaking to some of those folks that we have acquired.

Speaker Change: Thank you.

Speaker Change: One moment for questions.

Speaker Change: Our next question comes from Tobey Sommer with two Securities you May proceed.

There is.

Kind of a multitude of of challenges for them some of which we face and some of which we don't face. So one that we might not faces is a lack of a succession plan for some of these folks their kids have just decided they don't want to run the business.

Tobey O'Brien Sommer: Thanks wanted to get your sense for acquisition expectations.

Tobey O'Brien Sommer: So how are the favorable trends in your business, which is a pretty long list price cost yield new investment production et cetera different than those at the smaller players with whom you have a dialogue for acquisitions.

They'd rather go take the money and live in Italy, and so that's not something we face Fortunately.

But they're also having challenges with labor, we're addressing that as you've heard today through automation.

Tobey O'Brien Sommer: So.

Tobey O'Brien Sommer: We said that our acquisition pipeline was robust I think what you're seeing is that.

And in some cases, they are as well in some cases, they are not able to do that so there's a number of different reasons why there is a growing list of willing sellers.

Tobey O'Brien Sommer: Some of those and I'm speaking just from this is somewhat anecdotal in speaking to some of those folks that we have acquired.

We're going to take advantage of that but at the same time, we have invested heavily in these organic growth projects and we want to make sure that we have similar returns before we go.

Tobey O'Brien Sommer: If there is.

Tobey O'Brien Sommer: Kind of a multitude of of challenges for them some of which we face and some of which we don't face. So one that we might not faces.

Invest heavily in tuck ins.

Tobey O'Brien Sommer: The lack of a succession plan for some of these folks their kids have just decided they don't want to run the business.

Good to hear I'm glad you're not going to go Chase trust concerns so.

That.

Tobey O'Brien Sommer: Rather go take the money and living in Italy, and so that's not something we face Fortunately.

With respect to the fleet after a full.

Tobey O'Brien Sommer: But they're also having challenges with labor, we're addressing that as you've heard today through automation.

A lot last year.

Are you in terms of being able to just renew the fleet.

It might be considered a normal cadence do you still have some catch up to do.

Tobey O'Brien Sommer: And in some cases, they are as well in some cases, they are not able to do that so there's a number of different reasons why there is.

So we got about we have we've delivered about 1700 units this year, which was a little light of what we had planned for but that would be really consider it a whole lot more we probably have another 300 units on top of that to deliver so I would say that by the end of 2004 were fully caught up what I would tell you. His team has done a really good job of not compromising the quality of our.

Tobey O'Brien Sommer: <unk> list of willing sellers.

Tobey O'Brien Sommer: We're going to take advantage of that but at the same time, we've invested heavily in these organic growth projects.

Tobey O'Brien Sommer: We want to make sure that we have similar returns before we go.

Invest heavily in tuck ins.

Speaker Change: Good to hear I'm glad you're not going to chase the Tuscan Sun. So I appreciate that.

Fleet its shown up in our service and it's really starting to show up in the back half of the year in terms of our operating performance and we see that continuing into <unk> and into 'twenty, four and certainly as we get the benefit of <unk>.

Speaker Change: With respect to the fleet after a full.

Speaker Change: A lot last year.

Some additional vehicles.

Speaker Change: Or are you in terms of being able to just renew the fleet and what might be considered a normal cadence do you still have some catch up to do.

Thank you very much.

Thank you.

One moment for questions.

Speaker Change: So we got about we have we've delivered about 1700 units this year, which was a little light of what we had planned for but that would be really consider it a whole lot more we probably have another 300 units on top of that to deliver so I would say that by the end of 'twenty four we're fully caught up what I would tell you. His team has done a really good job of not compromising the quality of our.

Our next question comes from Kevin Chiang with CIBC you May proceed.

Good morning, Thanks for taking my question.

Just a clarification on the update is sustainability.

Investments in EBITDA profile as we look out to 2026 I think if I.

If memory serves me correct. When you had the sustainability of Investor Day, I think you had about a 90% free cash flow conversion in 2026 from from EBITDA to free cash flow is that still the the rule of thumb, we should be thinking about on the $800 million of EBITDA in 2026 in terms of the free cash flow potential from these investments.

Fleet its shown up in our service and it's really starting to show up in the back half of the year in terms of our operating performance and we see that continuing into 2004 and certainly as we get the benefit of <unk>.

Speaker Change: Some additional vehicles.

Speaker Change: Thank you very much.

We can specifically confirm that number for you, we didnt refresh that but.

Speaker Change: Thank you.

Speaker Change: One moment for questions.

The key takeaway for us there.

Speaker Change: Our next question comes from Kevin Chiang with CIBC you May proceed.

Whether it's 70% or 90% and that kind of the ZIP code, but I think we should be thinking about the free cash flow conversion in these businesses is stronger because the maintenance capital is lower and so it.

Good morning, Thanks for taking my question, maybe just a clarification on the update is sustainability.

Kevin Chiang: Investments in EBITDA profile as we look out to 2026 I think if I.

It is right to think about that being a really strong fundamental contributing factor to the long term yield of this business.

Kevin Chiang: If memory serves me correct. When you had the sustainability of Investor Day, I think you had about a 90% free cash flow conversion in 2026 from from EBITDA to free cash flow is that still the goal.

That makes a ton of sense.

Just on the on the I guess on the two facilities in Canada.

Kevin Chiang: And we should be thinking about on the $800 million of EBITDA in 2026 in terms of the free cash flow potential from these investments.

Related to EPS or are these in Ontario in gist.

Speaker Change: We can specifically confirm that number for you, we didnt refresh that but the.

As you think of just EPR throughout throughout the country as multiple provinces look to.

Implement this just what that pipeline of opportunity looks like from an EPS perspective, and investing in more recycling facilities.

Speaker Change: The key takeaway for us there.

Speaker Change: Whether it's 70% or 90% and that kind of the ZIP code, but I think we should be thinking about the free cash flow conversion in these businesses is stronger because the maintenance capital is lower and so it.

I guess a coast to coast in Canada.

You're exactly right. Those two are in Ontario, and this is something that we're actively tracking throughout Canada and then of course looking at.

Speaker Change: It is right to think about that being a really strong fundamental contributing factor to the long term yield of this business.

Where there is pending legislation in the United States as well, there's obviously, Colorado as an example, which is.

Speaker Change: That makes a ton of sense.

Our front end, making sure that we're well positioned to respond to the pros when they eventually implement.

And just on the on the I guess on the two facilities in Canada.

Speaker Change: Related to EPS or are these in Ontario and <unk>.

Excellent thanks for taking my questions.

Speaker Change: As you think of just EPR throughout throughout the country as multiple provinces look to.

Thank you.

One moment for questions.

Speaker Change: Implement this just what that pipeline.

Speaker Change: Pipeline of opportunity looks like from an EPS perspective, and investing in more recycling facilities.

Our next question comes from James Schumm with TD Cowen You May proceed.

Speaker Change: Coast to coast in Canada.

Hey, good morning.

Can you help me understand the monetization of the <unk> credits.

Speaker Change: Yes.

Speaker Change: You're exactly right. Those two are in Ontario, and this is something that we're actively tracking throughout Canada and then of course looking at.

Is there a meaningful difference in price if you internalize or use the RMG in your own fleet versus selling it as a transportation fuel to someone else.

Speaker Change: There is pending legislation in the United States as well, there's obviously, Colorado as an example, which is.

And I know you will reduce your fuel costs and emissions. If you internalize RMG, but just curious if there is a monetization benefit as well.

Speaker Change: And making sure that we're well positioned to respond to the pros when they eventually implement.

The way to think about it and what is really unique about <unk> is because we have our own fleet of compressed natural gas vehicles.

Speaker Change: Excellent thanks for taking my questions.

Speaker Change: Thank you.

Speaker Change: One moment for questions.

Speaker Change: Our next question comes from James Schumm with TD Cowen You May proceed.

We're in a very unique spot where we are.

We are able to close the loop, we produce renewable natural gas, we can allocate that renewable natural gas to our fleet to generate the RIN. So we don't have to give up any of our RIN value. That's probably the most significant advantage with wm as compared to others in the space.

James C. Fish: Hey, good morning.

James C. Fish: Can you help me understand the monetization of the <unk> credits is there a meaningful difference in price if you internalize or use the RMG in your own fleet versus selling it as a transportation fuel to someone else.

James C. Fish: And I know, you'll reduce your fuel costs and emissions if you internalize RMG, but just curious if there is a monetization benefit as well.

And Thats, how we monetize and create rens ourselves versus others, having to really tie it to someone else's fleet.

James C. Fish: The way to think about it and what is really unique about <unk> is because we have our own fleet of compressed natural gas vehicles. We're in a very unique spot where we are.

So Terry just to clarify that so that when we see the <unk> prices I mean, I think some people have talked about well the actual monetization is a little bit lower than the price that I, maybe see on the screen is that the case for you guys as well or no no.

We are able to close the loop, we produce renewable natural gas, we can allocate that renewable natural gas to our fleet to generate the RIN. So we don't have to give up any of our RIN value.

I think we get the full value and the other thing to bear in mind as Youre looking at spot prices.

It's probably the most significant advantage with wm as compared to others in the space.

And while we do play in the spot market. We also have been very actively looking at how we can forward sell and and and really look at selling our rooms.

James C. Fish: And that's how we monetize and create rens ourselves versus others, having to really tie it to someone else's fleet.

Six months out a year out.

So there's a balance there.

Speaker Change: So Terry just to clarify that so that when we see the <unk> prices I mean, I think some people have talked about well the actual monetization is a little bit lower than the price that I, maybe see on the screen is that the case for you guys as well or.

Okay, great. Thank you and then just lastly for me I know that hazardous waste is a relatively.

A relatively small business for you, but I think you guys have a substantial market share of the hazardous landfills.

The industry seems to be more profitable now and I was just hoping maybe you could help us quantify.

Terry: No no.

Terry: I think we get the full value and the other thing to bear in mind as Youre looking at spot prices.

Your business here and what's the outlook.

Yes, I mean, we've been in hazardous waste space for.

Terry: And while we do play in the spot market. We also have been very actively looking at how we can forward sell and and and really look at selling our rooms.

Quite some time and it continues to be a valuable component of our portfolio and we've got coverage nationally got assets on the East Coast and then obviously through the south eastern on the West Coast as.

Terry: Six months out a year out so there's a balance there.

As well.

And I would tell you we continue to look for opportunities to grow that business I think one of the benefits. We have is we've got a tremendous network.

Speaker Change: Okay, great. Thank you and then just lastly for me I know that hazardous waste is.

Transportation assets that allows us to access.

Speaker Change: A relatively small business for you, but I think you guys have a substantial market share of the hazardous landfills.

A lot of the.

A lot of the prominent markets I think the southeast the Gulf Coast is one where we are very very well positioned.

Speaker Change: The industry seems to be more profitable now and I was just hoping maybe you could help us quantify.

In terms of our hazardous waste presence.

Speaker Change: Your business here and whats the outlook yes.

Great. Thank you very much.

Speaker Change: Yes, I mean, we've been in hazardous waste space for.

Thank you.

One moment for questions.

Quite some time and it continues to be a valuable component of our portfolio and we've got coverage nationally we've got assets on the East Coast and then obviously through the south eastern on the West Coast as.

Yes.

Our next question comes from Walter <unk> with RBC capital markets. You May proceed yes, thanks very much good morning, everyone.

So I guess I'll start just on the price price cost spread that you kind of alluded to in your opening remarks, you indicated that it improved and certainly.

Speaker Change: As well.

Speaker Change: And I would tell you we continue to look for opportunities to grow that business I think one of the benefits. We have is we've got a tremendous network of.

That spread when when costs were rising dramatically in 2022.

Speaker Change: Transportation assets that allows us to access.

Speaker Change: A lot of the.

Speaker Change: A lot of the prominent markets I think the southeast the Gulf Coast is one where we're very very well positioned.

Contracted in and then as costs moderated somewhat.

And your pricing held in.

Speaker Change: In terms of our hazardous waste presence.

Presumably it's been it's been widening here in 2023 or back in 2023. My question for you is what your view is on the.

Speaker Change: Great. Thank you very much.

Speaker Change: Thank you.

Speaker Change: One moment for questions.

Speaker Change: Yeah.

The go forward of that spread is that something that you believe you can maintain at a higher level than it's been historically or is 23, just bringing it back to where it was historically and thats likely where it's going to be going forward.

Speaker Change: Our next question comes from Walter <unk> with RBC capital markets. You May proceed yes, thanks very much good morning, everyone.

Walter: So I guess I'll start just on the price price cost spread that you kind of alluded to in your opening remarks, you indicated that it improved and certainly.

Well I think you've hit on the rights focal point for us, which is that price cost spread as opposed to just looking at price because obviously in 'twenty two prices higher.

Walter: That spread when when costs were rising dramatically in 2022 kind of contracted and then as cost moderated somewhat.

But as I said, we were we were really just combating.

Walter: And your pricing held in.

This real high inflation in 'twenty two 'twenty three was as you said back to a point, where the price cost spread starts to widen a bit and.

Walter: Presumably it's been it's been widening here in 2023 or back in 2023. My question for you is what your view is on the.

And so how much that widens as a little bit of a question Mark we don't know exactly where inflation goes this morning's numbers were maybe a little disappointing to the market.

Walter: The go forward of that spread is that something that you believe you can maintain at a higher level than it's been historically or is 23, just bringing it back to where it was historically and thats likely where it's going to be going forward.

But we feel good about the.

The wage inflation.

We feel like that is much more kind.

Speaker Change: Well I think you've hit on the right focal point for us, which is that price cost spread as opposed to just looking at price because obviously in 'twenty two prices higher but as I said, we were we were really just combating.

Kind of something we have control of now, whereas two years ago, we really had less control over it.

Youll see the price cost spread stay.

Close to where it's been in 2023 2024, it won't be a big change from that standpoint, okay perfect.

Speaker Change: This real high inflation in 'twenty two 'twenty three was as you said back to a point, where the price cost spread starts to widen a bit.

I know.

Your sustainability initiatives it does introduce a little bit of of of.

Speaker Change: And so how much that widens as a little bit of a question Mark we don't know exactly where inflation goes this morning's numbers were maybe a little disappointing to the market.

<unk> price variability in there when.

When you look at the mid point of your EBIT.

For 2004, and you look at the growth in the dollar value of that.

Speaker Change: But we feel good about the.

The wage inflation.

About a quarter of that I think is from sustainability initiatives of that growth.

Speaker Change: We feel like that is much more kind.

Speaker Change: Kind of something we have control of now, whereas two years ago, we really had less control over it.

And some of those as you mentioned, our backend weighted can you talk to us from a risk standpoint.

As it relates to two.

Speaker Change: Thank you will see the price cost spread stay.

First.

When an investor asks you.

Speaker Change: Pretty close to where it's been in 2023 2024, it won't be a big change from that standpoint, okay perfect.

What about the volatility that commodity prices brings in can you can you remind us about the.

Speaker Change: I know.

How you lock in price and give us some assurances there and then the second part of the risk profile.

Speaker Change: Your sustainability initiatives it does introduce a little bit of of.

Speaker Change: <unk> price variability in there when.

How much of it is related to permitting or completion of construction projects that might get delayed through the course of the year. How do you feel about that that risk component to the.

Speaker Change: When you look at the mid point of your EBIT.

Speaker Change: Guidance for 2004, and you look at the growth in the dollar value of that.

Speaker Change: About a quarter of that I think is from sustainability initiatives of that growth.

Two its contribution in 2024.

No I haven't taken in two parts and I'll speak to the commodity price piece first and then the timeline. The second one the commodity price piece for recycling I think one of the things that we've done really well is really changed our model to be a fee for service model and we are.

Speaker Change: And some of those as you mentioned, our backend weighted can you talk to us from a risk standpoint.

Speaker Change: As it relates to two.

Speaker Change: First.

Speaker Change: When an investor asks you.

What about the volatility that commodity prices brings you and can you can you remind us about the.

Speaker Change: How you lock in price and give us some assurances there and then the second part of the risk profile.

95% of our contracts through that which is really insulated us a bit on the commodity side and then on top of that recall that.

Speaker Change: How much of it is related to permitting or completion of construction projects that might get delayed through the course of the year. How do you feel about that that risk component to the.

Significant piece of the benefit is coming independent of commodity prices really those labor cost improvements and also some price premiums that we get related to the automation benefit on.

Speaker Change: Two its contribution in 2024.

Speaker Change: Thank you haven't taken in two parts and I'll speak to the commodity price piece first and then the timeline the second one.

On the renewable energy side, one of the things that we've been clear on is that we're going to work towards.

Speaker Change: One the commodity price piece for recycling I think one of the things that we've done really well is really changed our model to be a fee for service model.

$840 20 framework, where 80% of our volume would be locked up within one year and that would be something that we would be working towards in 2026, you heard me mention roughly a third of our offtake is already locked up so that gives us some confidence.

We have 95% of our contracts through that which is really insulated us a bit on the commodity side and then on top of that recall that.

On the commodity price side related to projects, we've really been kicking this around looking at our project timelines and making sure that we're within a strong and confident range for 2024, we have two large projects that are coming online.

Speaker Change: A significant piece of the benefit is coming independent of commodity prices really those labor cost improvements and.

Speaker Change: Also some price premiums that we get related to the automation benefit on.

Speaker Change: On the renewable energy side, one of the things that we've been clear on is that we're going to work towards.

Dine in.

Speaker Change: 840, <unk> framework, where 80% of our volume would be locked up within one year and that would be something that we would be working towards in 2026, you heard me mention roughly a third of our offtake is already locked up so that gives us some confidence.

Q3.

So feel confident in our ability to hit the project timelines on both the recycling and renewable energy side.

Okay. That's great I really appreciate that color. Thank you.

Thank you.

One moment for questions.

Our next question comes from Toni Kaplan with Morgan Stanley You May proceed.

Speaker Change: On the commodity price side related to projects, we've really been kicking this around looking at our project timelines and making sure that we're within a strong and confident range for 2024, we have two large projects that are coming online.

Hi, This is Hilary Lee on for Toni Kaplan just wanted to ask on the sustainability EBITDA apart. So if I recall correctly during the.

Any ability at analyst day, we were expecting around 600 million from.

R&D, including the third party year end by.

Speaker Change: Dine in.

Speaker Change: Q3.

Speaker Change: So feel confident in our ability to hit the project timelines on both the recycling and renewable energy side.

1026, so just wondering what is kind of that delta between $5 10 versus the 600.

Speaker Change: Okay. That's great I really appreciate that color. Thank you.

I think you have to compare the 510 to the 500, because the $500 million number was without the rins in the third party R&D projects.

Speaker Change: Thank you.

Speaker Change: One moment for questions.

Speaker Change #100: Our next.

Speaker Change #100: Comes from Toni Kaplan with Morgan Stanley You May proceed.

The best way to think about it is we've we've increased our target by $10 million for the renewable natural gas business.

Speaker Change #100: Hi, This is Hilary Lee on for Toni Kaplan.

Hilary Lee: Want to ask on the sustainability EBITDA apart so if I recall correctly during the.

Got it I appreciate it.

Just on for the recycling of the increases.

Hilary Lee: Is there any ability at analyst day, we were expecting around 600 million from.

For essentially the two new projects in Canada.

Hilary Lee: R&D, including the third party year end by.

It's a portion of it is from the two new projects in Canada, and then a mix of other benefits from our portfolio of projects.

Hilary Lee: 1026, so just wondering what is kind of that delta between $5 10 versus the 600.

Speaker Change #102: I think you have to compare the 510 to the 500, because the $500 million number was without the hearings in the third party R&D projects.

Alright, thank you.

Thank you I would now like to turn the call back over to Jim fish for any closing remarks.

Okay, well. Thank you all for joining us we're very proud of the quarter. We had very proud of the year excited about what 2024 holds for us.

Speaker Change #102: The best way to think about it is we've we've increased our target by $10 million for the renewable natural gas business.

And we look forward to talking to you next quarter. Thank you very much.

Speaker Change #103: Got it I appreciate that.

Thank you for your participation you may now disconnect.

Speaker Change #103: And just for the recycling of the increase.

For essentially the two new projects in Canada.

Speaker Change #103: It's a portion of it is from the two new projects in Canada, and then a mix of other benefits from our portfolio of projects.

Speaker Change #104: Alright, thank you.

Speaker Change #104: Thank you I would now like to turn the call back over to Jim fish for any closing remarks.

James C. Fish: Okay, well. Thank you all for joining us we're very proud of the quarter. We had very proud of the year excited about what 2024 holds for us.

James C. Fish: And we look forward to talking to you next quarter. Thank you very much.

Thank you for your participation you may now disconnect.

James C. Fish: Okay.

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