Q1 2025 Waste Management Inc Earnings Call
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Speaker Change: Please note that today's conference is being recorded I will now hand, the conference over to your first speaker today at Eagle Vice President of Investor Relations. Please go ahead.
Speaker Change: Thank you Olivia good morning, everyone and thank you for joining us for our first quarter of 2025 earnings Conference call with me. This morning are Jim Fish, President and Chief Executive Officer, John Morris Executive Vice President and Chief operating Officer, and Davita, Rankin Executive Vice President and Chief Financial Officer, you'll hear prepared comments from each of them today, She will cover high level financials and provide a strategic update.
Speaker Change: John will cover an operating overview and Divina will cover the details of the financials.
Speaker Change: Before we get started please note that we filed a form 8-K that includes the earnings press release. It is available on our website at Www Dot Wm Dot com.
Speaker Change: The form 8-K, the press release and the schedule to the press release include important information.
Speaker Change: During the call you'll hear forward looking statements, which are based on current expectations projections or opinions about future periods.
Speaker Change: All forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially some.
Speaker Change: Some of these risks and uncertainties are discussed in today's press release and in our filings with the SEC, including our most recent Form 10-K and Form 10-Qs.
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 to be able to discuss operating EBITDA, which is income from operations before depreciation and amortization.
Speaker Change: References to Wm legacy business, our total Wm results, excluding the Wm health care solutions segment.
Speaker Change: Any comparisons unless otherwise stated will be with the prior year period.
Speaker Change: EPS income from operations and margin operating EBITDA and margin operating expense and margin it actually and I expect the margin 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: These adjusted measures. In addition to free cash flow are non-GAAP measures. Please refer to the earnings press release and tables, which can be found on the company's website at www Dot W. M Dot com for reconciliations to the most comparable GAAP measures and additional information about or not.
Speaker Change: GAAP measures.
Speaker Change: This call is being recorded and will be available 24 hours a day beginning approximately one P M eastern time today to.
Speaker Change: To hear a replay of the call that'd be on website at www dot investors that Wm Dot com.
Speaker Change: Time sensitive information provided during today's call, which is occurring on April 29, 2025 may no longer be accurate at the time of a replay.
Speaker Change: Redistribution retransmission or rebroadcast of this call in any form without the expressed written consent of WNS is prohibited now I'll turn the call over to WNS, President and CEO, Jim fish, Okay. Thanks, Ed.
Speaker Change: And thank you all for joining us.
Jim Fish: The Wm team again delivered quarterly results that exceeded our expectations. The one thing I'm most proud of over the past few years is that we've truly become a predictable strong performer on a quarter and a quarter out basis.
Jim Fish: So once again I'm pleased to report that we had a strong start to the year with first quarter results exceeding our expectations on several fronts.
Jim Fish: Total company operating EBITDA grew by more than 12% in the first quarter compared to the first quarter of 2024.
Jim Fish: Driven by solid operational performance in our collection and disposal business meaningful contributions from Wf Wm health care solutions.
Jim Fish: And increases in our sustainability businesses largely related to our growth investments.
Jim Fish: Our momentum so far as well as our demonstrated operational execution and the strength and resiliency of our business model gives us confidence in our ability to achieve all of our financial guidance, we outlined last quarter.
Jim Fish: Our focus remains on growing customer lifetime value by leveraging technology to optimize our cost structure delivering on our strategic investments in sustainability.
Jim Fish: And extracting increased value from our acquisition investments.
Jim Fish: At a time when the U S workforce is aging and shrinking moving quickly to deploy technology to supplement our workforce could prove to be a significant differentiator for WNS.
Jim Fish: At the same time, the leadership position, we've taken with our very profitable sustainability investments is positioning the W brand to be synonymous with sustainability.
Jim Fish: Not easily matched by our competitors.
Jim Fish: Of course, we continue to identify opportunities to scale the core business through acquisitions, we have a very robust pipeline of tuck in opportunities and anticipate another outsized year of solid waste him on that.
Jim Fish: Turning to our sustainability businesses in Q1.
Jim Fish: Operating EBITDA EBITDA from recycling and renewable energy grew by over 20% year over year, keeping us on track to meet full year targets.
Jim Fish: Automated facilities.
Jim Fish: Alrighty recycling facilities delivered nearly double the operating EBITA margin compared to our non automated facilities.
Jim Fish: We added two new facilities in California, and Texas with seven more next gen recycling plants scheduled to come in 2025.
Jim Fish: In renewable energy growth was fueled by new RMG plants, we brought online in late 2024, and strong pricing for natural gas and renewable electricity.
Jim Fish: We're currently advancing construction on eight additional R&D facilities that are all on track for completion this year.
Jim Fish: The strategy is working as our investments in sustainability are delivering strong high return growth.
Jim Fish: During the first quarter. We also made significant progress in our integration of Wm health care solutions into the broader Wm organization.
Jim Fish: Our new customers are excited by the expanded level of environmental expertise <unk> brings to their organizations, including an industry, leading reporting and analytics platform and an unmatched asset network that will help the health care industry customers manage and track their waste streams more efficiently.
Jim Fish: We continue to focus on identifying and capturing synergies and are on track to achieve $250 million of annual run rate synergies in 2027.
Jim Fish: We're very pleased with the progress we've made in a short period of time and are excited about the long term value we're creating.
Jim Fish: In closing I want to thank our employees for their dedication and hard work.
Jim Fish: Your efforts drive our success and we're grateful for your commitment looking ahead I'm excited about the opportunity to share more about our strategic priorities and long term vision.
At our upcoming Investor day in June.
Jim Fish: We hope you'll join us in New York or tune in.
So the event via the webcast.
Jim Fish: I will now turn the call over to John to discuss our operational results.
John Morris: Thanks, Jim and good morning.
The first quarter further demonstrates the consistent progress being made in our core collection and disposal business.
John Morris: Through our focus on customer lifetime value and optimization of our cost to serve we again grew both operating EBITDA and margins in the quarter.
John Morris: First quarter operating EBITDA for the collection and disposal business was up almost 5% and margin expanded 10 basis points. We achieved this growth in what we knew would be the most challenging quarter from a comparison standpoint.
John Morris: Access is particularly impressive when you consider the impacts of tough winter weather in our south Eastern Gulf Coast regions during the quarter and the expiration of the alternative fuel tax credits.
John Morris: Revenue was once again grown across all lines of business driven by collection and disposal yield of 4% and core price of six 5% with churn remaining stable at around 9%.
John Morris: We continue to achieve solid pricing across all of our revenue streams commercial collection transfer stations and landfill core price were particularly strong in the quarter as we continue to leverage data driven decision, making to offer pricing that reflects the value of our service the strength of our asset network and our commitment to providing differentiated customer solutions.
John Morris: Regarding volumes, our first quarter collection and disposal results were flat on a workday adjusted basis positive landfill and commercial collection volumes were offset by our strategic exit exit from low margin residential business as well as continued economic pressure on the temporary segment of our industrial business, while the California wildfire cleanup positively.
John Morris: <unk> impacted our special special waste volumes in Q1. These gains were largely offset by impacts of winter weather events I mentioned earlier.
John Morris: Overall, we remain confident in our volume outlook for 2025, because our special waste pipeline remained strong.
John Morris: Service intervals remained positive and we expect by our volumes in southern California to continue through at least the end of the third quarter.
John Morris: Turning to operating costs and margin Q1 marked our sixth consecutive quarter with operating expenses as a percentage of revenue below 61%.
John Morris: We delivered operating expenses at 65% of revenue, which is a 40 basis point improvement from Q1 of 2024 are.
John Morris: Our commitment to the operating fundamentals of the Wm way continues to drive margin improvement.
John Morris: The first quarter's performance was driven by focusing on frontline retention and the use of automation and technology to drive efficiency and operating improvements.
John Morris: <unk>, we have made in our people, including human centered and leadership coaching and facility upgrades continue to deliver improved driver retention with Q1, seeing an 80 basis point improvement compared to the prior year period.
John Morris: When retention improves your benefit safety customer service and efficiency.
John Morris: We also continue to create an optimized cost to serve with the ongoing adoption of automation and technology, including routing and resource planning tools.
John Morris: Cost optimization focus is combined with targeted contract renegotiation renegotiations any intentional shedding of low margin.
John Morris: Customers in the residential line of business continued to deliver strong results. This is evident in our first quarter operating EBITDA margin in the residential line of business, which grew more than 130 basis points, achieving 20% for the first time in six years.
John Morris: We remain confident in our ability to execute our plans and achieve our full year targets, including operating EBITDA of between seven 5% and $7 65 billion.
John Morris: In closing I would like to extend my sincere gratitude to our employees for their unwavering dedication over the last quarter.
John Morris: Their hard work and commitment to excellence have been instrumental in our success.
Divina: I'll now turn the call over to Divina to discuss our 2025 financial results in further detail.
Divina: Thanks, John and good morning.
Divina: We're pleased with our strong start to 2025, which is particularly evident when looking at the drivers of our first quarter operating EBITDA margin result.
Divina: <unk> legacy business achieved 30% margin for the fourth consecutive quarter. This is an increase of 40 basis points compared to the first quarter of 2024.
Divina: <unk> was driven by a 50 basis point contribution from favorable price cost spread in the collection and disposal business, which is due to our success in optimizing of flexing our cost structure.
Divina: We also saw a positive 20 basis point contribution from our recycling automation projects.
Divina: These margin expansion contributions were partially offset by a 30 basis point headwind from the <unk>.
Divina: Exploration of alternative fuel tax credit.
Divina: Benefited the prior year period.
Divina: Total company margin was 25% in the quarter due to the 150 basis point impact and the addition of the Wm healthcare solutions business.
Divina: With our focus on optimizing this business, including through synergy capture we've expanded the margin of Wm healthcare solutions by 20 basis points and only one quarters time.
Divina: There is a clear path to additional cost optimization and we are on track to achieve our full year expectation.
Jim Fish: As Jim mentioned, we're pleased with the progress we have already made as we begin to integrate and optimize the medical waste and secure information destruction businesses within WNS comprehensive set of offerings.
Jim Fish: As in other parts of our business, we're committed to using technology to make processes and people more efficient.
Jim Fish: We've got a cross functional team engaged to optimize the ERP system as a tool to improve all elements of the customer journey.
Jim Fish: Onboarding to service delivery, and then from billing to cash collections.
Jim Fish: <unk> is off to a great start and we're encouraged by the early progress.
Jim Fish: Turning to cash flow results operating cash flow was one point to $1 billion in the first quarter. This is a decrease compared to the first quarter of 2024, but it is in line with expectations as we had a plan to increase in cash interest payments due to additional debt issued last year to fund the acquisition.
Jim Fish: Stericycle.
Jim Fish: We also had a headwind from Morgan capital due in part to a particularly strong customer seats at the end of 2024.
Jim Fish: We remain confident in our outlook for cash flow from operations for the full year.
Jim Fish: Capital expenditures totaled $831 million in the quarter with both capital spending to support the base business and our investments in sustainability growth in line with expectations.
Jim Fish: Given tariff and trade negotiations, it's worth mentioning that we are particularly well positioned.
Jim Fish: To complete our sustainability growth investments and targeted capital investment levels, because we've been deliberate in procuring the equipment needed for these projects ahead of time.
Jim Fish: We're also well positioned for fleet replacement with first quarter of 2025, being a particularly strong quarter for truck deliveries.
Jim Fish: First quarter free cash flow of $475 million is also on plan and we're on track to achieve our full year free cash flow outlook of between $2 675, and $2 77 5 billion.
Jim Fish: In the first quarter, we returned $336 million to our shareholders through dividend.
Jim Fish: Share buybacks currently paused as we focus on getting back to targeted level of leverage through a combination of earnings growth and debt reduction.
Jim Fish: That said, we continue to focus on identifying tuck in acquisitions in our core business.
We expect to close on more than $500 million of solid waste acquisitions and 2025.
Jim Fish: This is a nice step change relative to our typical $100 million to $200 million of tuck in acquisitions, each year, showing our continued confidence in identifying attractive transactions at the right price.
Jim Fish: Our leverage ratio at the end of the quarter was $3 five eight times.
Jim Fish: When considering our earnings outlook disciplined approach to allocating capital and a healthy acquisition pipeline I mentioned, we expect leverage will be approximately $3. One five times at the end of 2025.
Jim Fish: In closing I want to extend my sincere thanks to the entire Wm team for all of their hard work, thus far in 2025.
Jim Fish: Our continued ability to deliver strong operational and financial performance puts us on track to achieve all of our financial guidance and this is a testament to the team's dedication focus and talent.
Jim Fish: With that Libya, let's open the line for questions.
Speaker Change: Certainly ladies and gentlemen ask Amanda to ask a question you will need to press star one one of your telephone and wait for your name to be announced.
Jim Fish: <unk> Your question simply press Star one again.
Speaker Change: Standby, while we compile the Q&A roster.
Speaker Change: Now first question coming from the lineup.
Speaker Change: Brian Birchmeier with Citi. Your line is now open.
Brian Birchmeier: Good morning. Thank you for taking my questions maybe to start a question for David I was wondering if you could shed maybe a little bit more light on your outlook for <unk>.
Speaker Change: Don't normally give kind of quarterly guidance, but just trying to think through as opposed to normal seasonality for healthcare considering this new business and then.
Speaker Change: If you have any detail on maybe the quarter over quarter kind of margin improvement for solid waste relative to normal seasonality that would be helpful.
Speaker Change: Sure.
Speaker Change: Great question. So what I would tell you is there is not anything that we're seeing from a seasonality perspective that is really unusual with the exception of the impacts of the California wildfires.
Speaker Change: In terms of what will drive margin expansion, what I mentioned is that the solid waste business contributed 50 basis points of EBITDA margin expansion in the quarter and when you consider that that's overcoming 30 basis points from the alternative fuel tax credits Youre looking at an 80 basis point year over year.
Speaker Change: Our expansion in margins for traditional solid waste business as you combine that with the strong execution on recycling automation of another 20 basis points and that shows you a 100 basis points of margin expansion from the base business.
Speaker Change: So when we look forward to Q2, we're really optimistic that we'll see another step change in margin on a year over year basis and normal seasonal uptick in the operating margins of the business when I think about the healthcare solutions business, particularly it's not so much seasonal.
Speaker Change: Seasonality in the revenue outlook that we're looking at it really as continued momentum in synergy capture and the realization of incremental value from optimizing the cost structure of that business that will start to accelerate as we approach. The second quarter. We think that Q3 will be our strongest quarter from a margin perspective and that.
Speaker Change: We'll really will show momentum behind the traditional business combined with value capture running at more peak levels for full realization over the course of the year of that $85 million to $90 million in total synergies for the Stericycle business in 2025.
Got it got it. Thank you for that detail and then maybe a question for John.
John Morris: So just curious how kind of yields in the solid waste business in <unk> compared to your expectations.
John Morris: It just seems like the spread between core price and yield is widening a little bit. So if you could shed any light.
John Morris: Kind of what's taking place there maybe it's kind of just a function of like mix or region.
John Morris: But any detail you have would be great. Thank you I'll turn it over yes, Brian I think you dropped down 400 basis points in the quarter, but what I would tell you what I would point to is if you look at our core price performance. It was really strong.
John Morris: Across all lines of business and it translated to margin expansion. There were some anomalies in there on the yield conversion I mentioned some of the California wildfire volume, which is Satan special waste, which runs all through volume and there was a little bit of pressure from some of the industrial business that was a little softer in the quarter, but what I will tell you is even though that trend was.
John Morris: Negative it was better quarter over quarter. So we're seeing some sequential improvement that's part of why we feel confident to meet I made some comments about how we feel going into Q2. So the yield conversion. It's one data point, but I think margin and core price performance is really where we're focused.
Speaker Change: Thank you and our next question coming from the line of Kevin Chiang with CIBC. Your line is now open.
Kevin Chiang: Hi, Good morning, Thanks for taking my question, maybe I'll ask a yield question as well I did notice.
Speaker Change: I guess a year over year increase in your commercial yield was effectively flat from the growth rate you saw you.
Kevin Chiang: You saw in the fourth quarter.
<unk>, though was down about resi and industrial were down a little bit maybe 150 basis points sequentially from the Q4, just wondering if you could call it anything specific into commercial pricing strategy that you.
Kevin Chiang: Yielded relatively better performance on a sequential basis.
Kevin Chiang: So what I would point out I would say that our pricing strategy is strong across all three of those lines of business. It really is a mix.
Kevin Chiang: Difference that John was mentioning that has led to some of the variability and thats about.
Kevin Chiang: Differences, particularly in the industrial business as we've seen some variability in temporary roll off.
Kevin Chiang: And we see that as being largely.
Kevin Chiang: Weather related.
Kevin Chiang: When we think about 2024 and the trends we were seeing we were seeing some softness in industrial hauls in 2024, but had some enthusiasm about the fact that we had cycled through the worst of those trends and we're looking for some moderation in those levels in the current year. When we look at March and April in particular.
Kevin Chiang: We're happy to say that those trends are proving to be more consistent with our expectations coming into the year and the extreme winter weather that we saw in February in particular really is something that had more of an outsized impact on Q1, but we're moving past that and then the other thing that I would mention on commercial.
Kevin Chiang: Conversion of core price to yield that was particularly interesting for us and it did have some impact on industrial as well.
Kevin Chiang: And unexpected losses from large national account customers that experienced bankruptcies and therefore, some store closures that we had anticipated in our guidance.
Kevin Chiang: Okay.
Speaker Change: Super helpful and maybe just my second question it looks like.
Kevin Chiang: Healthcare Stericycle revenue was down year over year.
Kevin Chiang: And I know you don't adjust everything the same way Stericycle did but maybe you can just speak to the volume and pricing trends you saw in the quarter versus <unk>.
Kevin Chiang: Last year appreciating that you didn't own the business there and was there any purposeful shedding as you look to improve the revenue quality within within Stericycle or improved overall margin performance within that within the health care business.
Kevin Chiang: Certainly Brian this is Ralph I'll I'll take that one on I just want to remind the group that over the course of the quarter, We did set our Spain, and Portugal businesses and that actually accounts for the majority of the draw okay.
Kevin Chiang: On a revenue basis actually the revenue story is not a bad one for us actually the regulated medical waste business is actually slightly up. It's we're actually ahead about 1% in regulated medical waste stops for example that churn in the National and hospital channels is actually right at 3% consistent with <unk>.
Ben: It's Ben.
Ben: <unk> some of the ERP challenges that Devine actually reference, we're making good headway in putting forward the plan to resolve we haven't seen an uptick there. So we feel pretty confident on the revenue side on the secure information destruction side, we did see a little bit of a dip there, but again confidence from the fact that it's not structurally really had to do with a little weakness on the event work what we.
Ben: We call the purchase there and we've got a good plan to kind of connect our sales and operating folks a little bit better there to perform better on time on that and recapture those volumes.
Ben: That's great color I appreciate it I'll get back into the queue. Thank you very much.
Ben: Thank you.
Speaker Change: Our next question coming from the line of Tyler Brown with Raymond James Your line is now open.
Speaker Change: Hey, good morning, good morning, Tyler.
Speaker Change: Hey, Rob just on that how much synergy capture was in the $95 million of reported EBITDA in Q1 and I know this is.
Speaker Change: Putting hairs, but I think you guys said the updated synergy third 80 to 100 from up to 100 are you messaging anything with that.
Speaker Change: Not really look we really are feeling very comfortable with achieving that midpoint of the range right now.
We produced about $16 million in value capture in Q1, dropping straight into the P&L, that's going to of course continue to generate benefits and I'll tell you a lot of that came from our first execution on rationalization of SG&A for us, particularly on the sales coverage side I can tell you that.
Speaker Change: The reason for the confidence on delivering is that if we just execute on a little bit more of the planned sales coverage optimization, there and we execute on our internalization goals, which by the way contributed very little in Q1, that's that's probably not probably that's definitely because we are waiting for contracts to.
Speaker Change: Expire we have to put in line equipment, and so forth that's going to start paying dividends towards the latter part of Q2 and on through the back half of the year, we feel very comfortable with achieving the guidance okay.
Speaker Change: Tyler just really quickly what I would tell you is we wanted to be clear with the investor community that are targeted at execution on value capture for the year is $90 million and so our midpoint of our range is always our best estimate of the outcome and so approaching.
Speaker Change: $100 million, we felt like was a little more vague than what would be beneficial. So we wanted to give you clarity that the range of 80 to 100, we think $90 million is the most likely outcome.
Speaker Change: Okay, perfect, we love clarity.
Speaker Change: So davina and I don't know if parents in there as well, but I think you guys were expecting call it $190 million of incremental EBITDA from R&D and recycling.
Speaker Change: This is my view does it feel.
Speaker Change: Like maybe that's a little bit behind schedule in Q1, So I guess a couple of questions. One are you still confident in that number may be might read is wrong.
Speaker Change: And two I think you addressed this upfront but at this point you don't expect any R&D capex related delays or <unk>.
Speaker Change: Increased spend due to tariffs would that be correct, yes, so I am in the room, Tyler I'll I'll take the back half first.
Speaker Change: We are very confident because we had both for our equipment delivered well in advance of even any of these tariff discussions happening so no impact related to project schedules related to tariffs or related to capital costs.
Speaker Change: Related to your question about the performance of the business. We are performing according to plan. If you look at the recycling line of business that contributed about $11 million in EBITDA performance from those growth projects and that was the majority of the benefits that we saw in recycling.
Speaker Change: And we're delivering on what we said we would deliver 30% improvement in labor 2020, plus percent improvement on operating costs and just having visited our Baltimore recycling plan I mean, it means our transformative assets that are delivering volume improvement too.
Speaker Change: Communities that needed on the R&D side.
Speaker Change: We brought a lot of plans honest the back half of 2024, so what youre seeing in our in our results is some.
Speaker Change: Improved performance related to pricing, although a lot of volume coming online and some of that was offset by some operating costs and startup that was planned.
Speaker Change: Okay. Okay. So it sounds like its largely tracking yeah real.
Speaker Change: Real quick yes, okay, perfect and then just real quick.
Speaker Change: The 30 basis point drag in CMG, that's going to be every quarter of the year based on what we know today is that right. That's correct 30 basis points for the full year was included in our guidance for EBITDA margin for 2025, yes. Okay. Alright. Thank you for the clarification. Thank you guys.
Speaker Change: <unk>.
Speaker Change: Thank you.
Speaker Change: And our next question coming from the line of Trevor Romeo with William Blair. Your line is now open.
Trevor Romeo: Hey, good morning, I appreciate you taking the questions.
Trevor Romeo: One I had on M&A I guess, if I heard you right Devine it sounds like Youre now expecting $500 million are so solid waste acquisition, which is up from last quarter.
Trevor Romeo: So one I guess is the full $500 million included in your guidance now and then two we just love kind of a qualitative update on what kind of opportunities you're seeing or you're fine.
Trevor Romeo: And this type of environment with.
Trevor Romeo: Some additional economic uncertainty is there is there more willingness to sell off and some of the smaller companies.
John Morris: Sure. So I'll take the first part of your question then turn it over to John in order to address the second part what I would tell you is when we came into 2025 a lot of this pipeline had developed but we were in.
John Morris: Doj review process as we were in contract negotiation processes and so the pipeline was available to us, but we didn't have it fully.
John Morris: The path to close wasn't as clear to us as it is today and so we're really happy with the progression of the transactions that we have in our pipeline and with the benefit of where those things stand able to say that those.
John Morris: These transactions are in the upside of our guidance relative to midpoint than we had contemplated those in and they stand today. So what I would say is incremental tuck in acquisition revenue dependent on the timing of close could now be in the ballpark of 80 to $80 million to $125 million.
John Morris: And that's up from about $35 million to $80 million in our original guidance midpoint.
Speaker Change: And Trevor I would just add to what Davina said I think a few things one there is some certainly some uncertainty out there.
Speaker Change: And I think the other challenges you see as labor rates the cost of labor and scarcity I think is certainly something thats pressuring somewhat some of the organizations. We're looking at and then lastly, I would say in some of the markets.
Speaker Change: The value of our network, we talk about that a lot of our ability to move material in and out of markets is becoming more and more prevalent and more challenging and I think in some cases.
Speaker Change: Our long term outlook for disposal options is probably pushing some folks to the forefront in terms of.
Speaker Change: Now being ready to sell so it's Davina said the pipeline is strong we did about $800 million last year.
Speaker Change: As we said we've got we've got a good runway between here and the end of the year at closer to more of these deals.
Speaker Change: Great. That's super helpful. Thank you both and then for my follow up maybe one for another one for Bob I guess on the healthcare solutions business.
Speaker Change: It's still early but just wondering if you could share any anecdotes you've had from from conversations with customers about sort of the.
Speaker Change: Combined value proposition any early wins or new opportunities just kind of love to hear what what customers are saying and how that's tracking.
Speaker Change: Absolutely Trevor I actually participated in an entire west coast swing recently and talked with several of the very large hospital networks. There I think Jim referenced it in his script, but a lot of folks excited about the increased ability to help them in their sustainability journey about being able to provide sort of that <unk>.
Speaker Change: <unk> class reporting and analytics tool that platform, that's going to help them manage their waste a lot better.
Speaker Change: Frankly, I've been I've been surprised about how patient pleasantly surprised how patient.
Speaker Change: The customer base and that has a lot to do with the fact that it is W. I havent stepping into the shoes as the owner and having the ability to provide.
Speaker Change: That increased level of confidence I can tell you that a lot of the conversation has also centered around the fixes to the ERP. We've communicated very transparently that this was about analyzing the entire customer journey and having work streams that would facilitate not only the collections on the billing side, but also the ability of the delivery of the service so long.
Speaker Change: Of excitement there we've not framed at the moment, what the cross sell opportunity looks completely we're still working on the playbook.
Speaker Change: And we are waiting to have the right fixes on the ERP.
Speaker Change: But again I'll remind the group if you look at sort of a shared wallet customers that we have right now where we have solid waste.
Speaker Change: That wm hat and regulated medical waste or CIT services that Stericycle, that's only about 17% of the total customer that doesn't even include customers that neither almost half.
Speaker Change: Alright, that's great. Thank you very much.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question coming from the line of <unk> with RBC capital markets. Your line is now open.
Speaker Change: Great. Thanks, and good morning, I, just wanted to get a bit more color on the residential margins in the journey there.
Speaker Change: It sounds like its something <unk> been working on for a while so can you just maybe talk about how those discussions are going how if there's more volume to shed or is it more from a pricing perspective that you want to maybe drive those margins higher maybe where we are in that journey with the margins there now even at around 20%.
Speaker Change: I think.
Speaker Change: Good question, I think us getting back over 20% for the first time in six years.
Speaker Change: It's been it's been a good milestone I give the team a lot of credit there's been a lot of work done to do that both on the revenue quality side and the operating expense side.
Speaker Change: So I would tell you I think for 25, we're going to see probably the same level give or take 50 basis points of volume that will be negative.
Speaker Change: We've always said we want the residential line of business to compete with the others in terms of margin and return on while we've made a lot of progress we still have some some work to do there. So I think for 25 years and probably into early 'twenty six we're going to see.
Speaker Change: Some additional negative volumes, but again, when you're shedding three plus percent volume revenue and EBITDA are both up but still it's still the right path for us to continue down.
Speaker Change: Okay, Great and then just one quick one I think you mentioned earlier that some of the larger lifting on the synergies related to the Stericycle side is going to be in and around Q2, and Q3 and if we think about the EBITDA flow through of that business now should we expect that to be the Q2 or Q3 to be the biggest quarter and then just associated if you can just talk about some of the <unk>.
Speaker Change: <unk> you are planning on taking video that are going to drive that thanks.
Speaker Change: Sure. So when we think about value capture it really is the second half of 2025 ramp for us some of the actions will start in the second quarter that will bring a lot of that to bear.
Speaker Change: Beginning in the third quarter and what I would tell you is it's the things that you.
Speaker Change: You have heard Roger talk about whether it's sales coverage optimization efforts or back office streamlining some of as an example, some of what we're doing in the in the back office includes migration of systems. So that we have one platform for our human capital.
Speaker Change: And and all of those processes and that will unlock some incremental value for us. It starts late in the third quarter. So a lot of it has to do with streamlining our back office processes, and we think that some of the technology steps that we're taking the coming Q3 will really start to create some moment.
Speaker Change: In long term value capture in the SG&A part and I'll remind everyone that.
Speaker Change: We started with this business above 24% SG&A.
Speaker Change: In the fourth quarter of 2024, we got 70 basis points of expansion in that.
Speaker Change: Mark.
Speaker Change: Margin sequentially in a single quarter, which is a great result, and we know that there's more to come on our pathway to getting that into 15% at the end of that three year period that we've got targeted for the $250 million of that value capture and maybe I will add this is rob talks about it I'll add one more point, it's not just about value capture in the back.
Speaker Change: The end of the year. It's also about process discipline and operational discipline. We also just but we're able to put online our mccarran incinerator as of the end of Q1, we are now taking in about 70% of our total incinerator waste generation in the West coast.
Speaker Change: As you can imagine that's saving us an enormous amount of time.
Speaker Change: Inspiration for disposal costs, we expect that by the end of the year will be internalizing, 100% of that waste. The other aspect of that is is the process discipline around fleet management the reduction of spare ratios.
Speaker Change: Those were not optimal in Q1, but that's because we were framing and laying the groundwork to be able to start doing that in Q2 and beyond.
Speaker Change: Great. Thanks, very much for the color.
Speaker Change: Thank you.
Speaker Change: Our next question coming from the line of Toni Kaplan with Morgan Stanley. Your line is now open.
Speaker Change: Thank you so much.
To start out with a broad question.
Speaker Change: Basically looking at the company and how resilient it is versus prior downturns and so wanted to get your updated thoughts on that overall and also maybe specifically how you would expect the sustainability business as well as the.
Speaker Change: New healthcare business to perform in the and a potentially slower macro environment. Thanks.
Jim Fish: Great question, Tony This is Jim.
I would tell you part of the reason, we're so happy with the sustainability investments in the healthcare investments is that they do provide a level of diversification that we may not have had as much with just the solid waste company and wed like to growth trajectory of both.
Jim Fish: It tends to be viewed as a bit higher than solid waste at the same time. This business, whether it's this company or whether it's this industry is very resilient to economic downturn.
Jim Fish: We don't see an economic downturn and maybe ill re emphasize a couple of.
Speaker Change: Davina Johns comments about volume for the quarter.
Speaker Change: We weren't sure how much that we were really impacted in January and February by weather versus are we seeing an economic downturn and I think.
Speaker Change: The answer to that question came in our volumes for March and April which turned back up.
Speaker Change: Nicely that led us to believe that truly was.
Speaker Change: January February truly were just just two very bad weather months I know the other guys have talked about it on their calls as well.
Speaker Change: When you get to six inches of snow in Houston, Texas, and I've lived in Houston for 18 years I've never seen.
Speaker Change: That kind of weather here and it's and it stayed on the ground I mean, its not snowing at 32 degrees. It's snowing in 'twenty one degrees it feels like more like Denver, Colorado than Houston.
Speaker Change: And it's and then it spread all the way over to Louisiana. So those areas in the south that don't normally anticipate weather shutdowns saw quite a bit of that so the encouraging part about that was for the quarter was that we saw our volumes turn back up in.
Speaker Change: In March and then through the first three weeks of April.
Speaker Change: We are to your question, though I think we're we're insulated from we're not we're not recession proof as an industry, but we're certainly recession resistant.
Speaker Change: And again not that we see a recession on the horizon, but to the extent that something does turn down.
Speaker Change: I mentioned in my first statement.
Speaker Change: We seem to.
Speaker Change: To meet the expectations that we provide quarter in and quarter out regardless of what the economic climate is.
Speaker Change: Or the political climate or what have you. So it's part of why this this business. This company in this industry have done as well as they have in there is my sales pitch for the for.
Speaker Change: For the industry.
Speaker Change: Great and then as a follow up wanted to ask Davina you mentioned youre in good shape on the fleet for this year.
Speaker Change: But maybe how shall we think about potential impacts.
Speaker Change: Assuming that tariffs are implemented just maybe it's more of a 'twenty six capex kind of question, but.
Speaker Change: Any stats or or anything you can provide on cost of fleet and Intel and impact of higher tariffs might be on your business. Thanks.
Speaker Change: This is John I think <unk> made the comment early on we're in really good shape from a truck delivery standpoint, we front loaded the schedule and we've got about a third of our trucks early delivered an on the ground and for the balance of 25, we don't see very little.
Speaker Change: Cost pressure there heavy equipment same story, we're in pretty good shape through 2025, we worked with the supply chain group to really put a ring around what we thought that tariff impact could be and its low low single digits in a few buckets just because we got out in front of it and as Tara mentioned most of our recycling and R&D assets are already committed to for 2025.
Speaker Change: So we're in really good shape for 25 to Jim's point earlier and with the Venus.
Speaker Change: If it rolls into 'twenty, six we might have to revisit it but right now as we sit here in 2005, we feel good about our position.
Speaker Change: Thank you.
Speaker Change: Single digits, you mean like in the.
Speaker Change: Millions of $7.
Speaker Change: Yes, yes.
Speaker Change: Okay.
Speaker Change: Thank you and our next question coming from the line of Noah Kaye with Oppenheimer. Your line is now open.
Noah Kaye: Hi, Thanks for taking the questions folks.
Speaker Change: Hopefully you had a chance, though look at the EPA released yesterday around P thought.
Noah Kaye: Like the language was.
Speaker Change: Pretty conciliatory constructive around.
Speaker Change: Turning to protect passive receivers and really adhering to polluter pays I Wonder if you had a chance to review that your thoughts on that.
Speaker Change: What it may mean for.
Speaker Change: In the industry and solid waste landfills.
Speaker Change: Our team is still looking at it Noah.
Speaker Change: Been very clear all along that passive receiver exemption would be positive for the industry.
Speaker Change: Is warranted for a number of different reasons.
Speaker Change: So we still believe that <unk> is more broadly an opportunity for Wm. When you think about special waste and other industrial waste that could come in and we still believe that.
Speaker Change: Thanks.
Speaker Change: A bit of housekeeping just want to make sure I got it on the <unk> synergies number.
Speaker Change: Or per WHS, Robert you said $60 million.
Speaker Change: Our value captures that annualized or are we talking $15 million of synergy capture in the quarter or can you give me the real number.
Speaker Change: Those are $16 million of synergy value, that's actually dropped into the bottom line in Q1.
Speaker Change: Does that help.
Speaker Change: Yes.
Speaker Change: <unk> right.
Speaker Change: Okay, Great and then I assume sorted office paper prices being down modestly.
Speaker Change: <unk>.
Your information destruction line, maybe maybe you can confirm.
Speaker Change: Qualify that but then you just talked us about the game plan for.
Speaker Change: We do think commodity exposure or is it really raising the baseline for profitability on that side. Obviously, it's I think this company has a lot of experience with.
Speaker Change: Absolutely no. So what I can tell you is yes, there was an impact on the commodity side.
Speaker Change: A little bit of an impact as I referred to earlier also on the volume side, primarily from the from the event work of being down a little bit. We've discovered is that that was mostly a bit of a breakdown between the sales and operational channel for delivery of on time service, we've now corrected that and actually we are.
Speaker Change: We're expecting to be at or slightly above budget on that front in the month of April.
Speaker Change: And beyond in terms of what Stericycle had done previously on trying to limit exposure that they had begun to move to a fee for service kind of model, but it had some constrained some limits depending on the.
Speaker Change: The fluctuation of the commodity we of course as you pointed out how the experience.
Speaker Change: Driving a full fee for service model and it's early days, but we're beginning to explore and how we're going to be able to do that obviously as we begin to offer.
Speaker Change: Our services that are part of a broader suite it will enable us to do that more readily.
Speaker Change: Alright, Thank you very much.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: And our next question coming from the line of Kumar Gupta with Scotiabank. Your line is now open.
Speaker Change: Thanks, and good morning.
Speaker Change: Quick question on revenue guidance for the full year.
Speaker Change: The first quarter seasonality was pretty much in line with what you had last year. Despite some of the hesitant to talk about competitors et cetera.
Speaker Change: Look forward from like 360 degree perspective.
How should we think about pricing and volume that should be kind of roughly offsetting each other.
Speaker Change: Decelerating pricing and accelerating volume and some of the other initiatives you have like recycling wrapping up instead, if I can it's Alex.
Speaker Change: Should we followed the seasonal patterns, we saw last year in revenue or we should see some sort of abnormal seasonality in some of the quarters.
Speaker Change: Yes so.
Speaker Change: What I would say is the only item that would cause any unusual seasonality is the impact of the wildfires, which I mentioned earlier, we do think that the second quarter is the peak quarter for that so when you step back and think about normal seasonality, we tend to see more Q3 being peak.
Speaker Change: Level four volumes. So that's the only outlier when we look at it overall revenue guidance for 2025.
Speaker Change: Really we always start with the discipline that we have in executing our core price programs and we talked about those being in the range of five eight to six 2% for 2025, and we remain confident in achieving that guidance.
Speaker Change: On the volume front, we had flat volumes in our collection and disposal business in the first quarter, but we remain confident in our ability to.
Speaker Change: Perhaps the mid point of our volume guidance of two five to <unk>, 75% for the year.
Speaker Change: And when you add to that rollover acquisition contribution combined with the incremental tuck in.
Speaker Change: Spending that I mentioned earlier, we really are optimistic that our revenue guidance in total remains intact. There is some small noise associated with our recycling brokerage.
Speaker Change: Revenue and that is down relative to expectations, but I'll remind everyone that that has.
Speaker Change: <unk> low margin and flow through to EBITDA is something that we do to bolster.
Speaker Change: The strength of our recycling business overall and as Terry has mentioned.
Speaker Change: We're on track for recycling and renewable energy both in terms of getting our.
Speaker Change: New facilities online and seeing the profitability and flow through of those facilities provide the returns that we anticipated. So all in all nothing significant in the recycling business either from a seasonal perspective other than year over year comparisons on commodity prices, which we expect it to be more pronounced in the.
Speaker Change: First half of the year than the second half of the year. So just want to add there and it's on the price side and we've said this since way back.
Speaker Change: In 2022, which was the peak of CPI, but we've been expecting price to come down as CPI was coming down.
Speaker Change: Of course, nine 1% was the peak back in 'twenty, two and now we're down around two 5%. So so thats exactly what we said would happen has happened and what we also said was that we anticipated that that price would come down slower than cost has come down and hence margin growth and thats exactly what <unk> seen over the last two years with this company is.
Speaker Change: We've grown margin some of it has just been what John Morris just talked about which is a lot of technology.
Speaker Change: Brought to bear on the Opex side, but some of it is the fact that that.
Speaker Change: We're maintaining price at a slightly higher levels then.
Speaker Change: Then cost in terms of increases and therefore, you get some margin accretion.
Speaker Change: Sure.
That's great.
Speaker Change: And then quickly follow up on steady cycle. So.
Speaker Change: Congrats.
Speaker Change: Giving some of the synergies early on here, but it seems like SG&A improved by 70 bps sequentially, but steady cycle margin itself was up only 20 bps from Q4 is there any puts and takes behind the gap and why the margin did not expand to the folks at <unk>.
Speaker Change: Sure.
Speaker Change: So really that had to do with two things and it was disposal costs and fleet costs and really this is about our strategic steps that Ralph I mentioned earlier in order to optimize this business and some of the realization of the long term value creation that we know that.
Speaker Change: We'll get as we internalize the fleet use our practices with the Wm way.
Speaker Change: Think about internalizing disposal volumes those things are going to really start to pay dividends as we get more into the second half of the year in 2026.
Speaker Change: But that's one of the things that muted the overall expansion of margin for the business from Q4 to Q1.
Speaker Change: That's great I appreciate the time thank you.
Speaker Change: Yes.
Speaker Change: Thank you.
Next question coming from the line of Tobey Sommer with choice. Your line is now open.
Speaker Change: Many of my questions have been answered already but I wanted to ask you from a.
Speaker Change: A high level.
Speaker Change: What are the learnings that you have stair cycle, we've been you've given us an awful lot of details, but sort of what's the biggest sort of couple of surprises from when you started looking at the transaction a while ago to where you sit today.
Speaker Change: Well, maybe I'll start and maybe Jim can put a button on it or whatnot. This is Ralph giacobbe.
Speaker Change: I don't know that theres been a huge.
Speaker Change: Surprise that we've encountered we anticipated that there was going to be a significant amount of opportunity on the SG&A side, we just didn't know how much.
Speaker Change: <unk> been very pleased with how quickly we've been able to optimize for example, the sales coverage on the secure information destruction.
Speaker Change: Side of the business.
Speaker Change: And how readily our workforce there has moved to use our tools and our processes to actually deliver on that that's been really good also the resiliency of the network of Stericycle.
Speaker Change: Is really really.
Speaker Change: Strong and frankly, the customer base, while they had experienced some issues with the ERP continue to do so that will be much more transparent about the way forward.
Speaker Change: As they just find that having that kind of comprehensive ability to cover all of their waste streams on the regulated medical waste site, including the Rx grow their hazardous waste incinerator waste all of that just provides a tremendous amount of resiliency. So those are things that we expected, but we've been able to confirm the other.
Speaker Change: Aspect I would highlight is that as we move forward with mccarron into the network, providing some capacity there because we're going to be able to expand our Rx pro initiatives, which is that sort of commingled service, where it facilitates for nurses and practitioners co mingling regulated medical waste with <unk>.
Speaker Change: Hazardous waste for incineration that wastes actually provides a better margin and as we increase capacity and earnings and our incinerator network, that's going to be dropped.
Speaker Change: Dropping to the bottom line, Jim anything for me well I think you said it all I. The only thing I would say is that youre always coming into an acquisition like this looking for what are the negatives that we didn't.
Speaker Change: Foresee and to Rob's point, we haven't found any of those which is good but we are seeing that.
Speaker Change: Rob forgive me figure earlier in the week that debt.
Speaker Change: I think Ralph you are talking about you've talked to some hospitals and and what they've talked about is is theyre all talking about adding capacity the ones that he has spoken to.
Speaker Change: So I think what we're seeing is that this is even a bigger affirmation of our kind of strategic our strategic approach to the business. When we came into it which is this has a stronger growth trajectory than does solid waste that's not to take anything away from solid waste, but we were looking for something that had a an even stronger growth trajectory and while you may not see it in the first quarter that we.
Speaker Change: On the business because we are in the process of cleanup you will definitely see this over time and that's that affirmation is very.
Speaker Change: Very important to us.
Speaker Change: I appreciate that.
Speaker Change: Could you guys my follow up could you comment on.
Speaker Change: Whether or not we should anticipate.
Speaker Change: <unk> incremental.
Speaker Change: International divestitures as you look at your portfolio.
Speaker Change: Yes look we are I think I've been asked that question a number of times already we are actually.
Speaker Change: Very happy to observe and see the trajectory of our UK and Ireland business. They are there's plenty of opportunity to improve the performance of that business and it's actually already performing better than it did last year. It gives us a very interesting perch from which to observe what is happening in the solid waste business.
Speaker Change: As well, we have a much smaller piece of business in Western Europe in France, and Germany.
Speaker Change: Frankly, we're looking at what's the best way to optimize the performance of that business and we'll consider how that fits within the overall portfolio later on.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question coming from the line of Jerry Revich with Goldman Sachs. Your line is now open.
Speaker Change: Yeah.
Speaker Change: Yes, hi, good morning, everyone. Good morning, Good morning, I just wanted hi.
Speaker Change: Hi, I just wanted to ask on the legacy business that costs were really impressive in the quarter backing out the alternative fuel tax headwind inflation was in the low threes on what it looks like your toughest cost comp of the year and so.
Speaker Change: Is it fair to think about inflation as the comps get easier actually slowing considering the comments you made about heavier cost locked in as it relates to tariffs and other moving pieces.
Yes, everything we're seeing Jerry I actually think you framed it really well we were very pleased with our first quarter operating expense margin.
Speaker Change: And we knew that Q1 was going to be a particularly tough quarter for us on a year over year basis, and when you have a headwind like we did from the winter weather volumes taking margin.
Speaker Change: Accretive volume out of the equation.
Speaker Change: Even that much more impressed which gives us confidence going into the second quarter. So I agree with you I think that when we look forward to achieving our overall margin objectives for 2025, which are to be at the upper end of our long term range of 50 to 100 basis points in margin expansion in traditional solid waste we're really.
Speaker Change: We feel good about the traction that we made in the first quarter and we think we're well positioned to continue to build on that for the remainder of the year.
Speaker Change: Super and can I ask Tara in terms of what we're seeing on volte.
Speaker Change: The voluntary market pricing for landfill gas looks like that stayed steady in the low twenties even is.
Speaker Change: <unk> RIN prices have come down is that consistent with what youre seeing.
Speaker Change: Your business.
Speaker Change: Any views on the <unk>.
Speaker Change: Biofuel task force and what that could mean.
Speaker Change: Sure we're tracking very closely what's happening with the renewable fuel standard and we do still believe that there is broad bipartisan support for that continuing when we have conversations with Congress.
Speaker Change: On the voluntary market as you can imagine there's a lot of uncertainty in many different markets not just this market. So.
The pricing that we've seen has been in the low twenties.
Speaker Change: A little bit of a holding pattern on buyers right now, but we expect that to pop back one the administration comes out with their new RVO, they're somewhat interrelated.
Speaker Change: And just.
Gerry: The other piece of color Gerry that I think would be helpful for the group.
Gerry: We have for 2025 locked in about 75% of our volume which is up from what we had.
Described in.
Gerry: In our last call.
Gerry: So.
Gerry: Our 25 change in RIN pricing now only represents about $5 million. So I think that should give you some confidence on our ability to pay.
Gerry: Take care of uptake.
Speaker Change: So we're very sorry can I just ask a clarification. So based on the royalty disclosures that you folks made.
Speaker Change: The pricing updates it looks like your volumes were up about 50%.
Speaker Change: In the quarter year over year is that about right.
Speaker Change: We think about relative to the full year targets.
Speaker Change: Yes, yes, when you look at volume that was monetized than even better number when you look at how much R&D, we actually generated in produce which should give you some confidence in the trajectory for the year we generated.
Speaker Change: 75% increase in volume from our R&D plans, so youll start to see that carry through with one of the reasons why we expect more performance really back loaded to the back half from here as we get more momentum on those plants coming online.
Speaker Change: Well done thank you.
Speaker Change: Thank you.
Speaker Change: And our next question coming from the line of David Manthey with R. W. Baird. Your line is now open.
David Manthey: Yes, Thank you and good morning.
David Manthey: Thanks for clarifying on the spot versus forward returns that is the question I just wanted to ask my other question.
David Manthey: Is there anything relative to tariffs that could impact OCC or other materials in your commodity basket, we should be thinking about pricing.
David Manthey: As we go forward.
David Manthey: Sure. This is something that we're obviously tracking closely and we think that depending upon what happens with tariffs that could have a positive impact on some of our non fiber. If you think about aluminum and feel as more of that is domestic.
David Manthey: On the OCC in fiber side, the thing that we're really tracking more closely is what could happen with vitality retaliatory tariffs because we do ship materials to other markets in southeast Asia and India.
David Manthey: But again, our our team our brokerage team does a fantastic job really making sure that we have a wide variety of markets that we can tap into.
Speaker Change: That includes domestic and it includes a whole host of markets across the entire world. So we're in a good spot I am not sure Tara whether it was.
Speaker Change: Precocious or just lock, but the fact that that's not that long ago five years ago, all of our OCC was going on in China, and now versus virtually none of it is going to China.
Speaker Change: Whether it was locker whether it was whether it was.
Speaker Change: We'll take it yes.
Speaker Change: Our brokerage team I can't say enough positive things about them as a true differentiator for Wm.
Speaker Change: We'll chalk it up to good foresight. Thank you.
Speaker Change: I appreciate it.
Speaker Change: Thank you.
Speaker Change: Next question coming from the line of James <unk> with TD Cowen. Your line is now open.
Speaker Change: Hey, Thanks, and good morning, everyone.
Speaker Change: Okay.
Speaker Change: Davina so it's clear on the SG&A opportunity, you're getting down to 15%. After three years, but just is there anything structurally different about stericycle.
Speaker Change: Such that you would not be able to get.
Speaker Change: SG&A down to more of your corporate level of $9 or 10% over.
Speaker Change: Maybe several years or if so what's the ultimate destination here on the timing there.
Speaker Change: Yes, it's a great question.
Speaker Change: The benign 5% call. It for WNS total company that we've talked about would definitely be the ultimate call. Though we've also talked about if you think about stericycle and the Wm health care solutions business at more like one of our geographic areas, where ultimately we should have a corporate back office.
Speaker Change: Yes for Wm Health care solutions, just the same way that we have a back office that serves our Florida area that means that the roadway should be to an even lower SG&A as a percentage of revenue and for context those businesses operate in sub 5% territory.
Speaker Change: Structurally the one thing that is fundamentally going to be different for those two businesses is that they run on their own ERP system and they won't be integrated for some time for the foreseeable future into the Wm ERP system, there will be two distinct systems.
Speaker Change: So that is the one structural difference that I think is important as we have evaluated all other elements.
Speaker Change: I really do think that too.
Speaker Change: Total path to realizing an optimized cost structure should exist and we're working hard to get there.
Speaker Change: Got it. Thank you and then so just on the longer term outlook for the Stericycle or health care really.
Speaker Change: Stericycle businesses I mean, their outlook was longer term revenue growth of 3% to 5% on the topline and EBITDA growth of 13% to 17% annually.
Speaker Change: I know those were their targets, but they were in your slides are those something that that we should look at.
Speaker Change: How are you guys thinking about that.
We don't think.
Speaker Change: We don't think that theres, any anything wrong or different with those targets obviously.
Speaker Change: The first opportunity is that we are taking on is the reduction of the operating expenses and the SG&A. So on the cost side, you're beginning to see that show up a.
Speaker Change: A lot sooner.
Speaker Change: Talked about the fact that we're still framing the cross selling opportunities.
Speaker Change: We think those are going to be vast I kind of framed for you a little bit of what the shared wallet looks like today I think to look at it a little bit differently. If you look at the at that percentage.
Speaker Change: Revenue from our collection and disposal business that comes from the same.
Speaker Change: Customer base, it's about 5% low single digit so a lot of opportunity there.
Speaker Change: I think it's important also to remember that some of what has inhibited sort of the topline growth here has to do with the ERP implementation, what it should be facilitating better delivery of the service.
It actually took them backwards and so now we're kind of unraveling and Salting Foundation Lee for that that's going to unlock a lot of opportunity I'll give you. One interesting example is we kind of develop the contract data Mart.
Speaker Change: For the Wm Health care solutions business. We've now added every single customer with over $50000 in annual revenue.
Speaker Change: And we're seeing a vast opportunity over a thousand contracts almost $200 million in revenue that has lagging pies or overlooked.
Speaker Change: For example.
Speaker Change: One thing that I, just want to clarify really quickly is in terms of confirming or clarifying what our long range outlook, both for topline and EBITDA growth of the business in the next three to five years, we plan to really outline that at the Investor day. So at this point in time.
Speaker Change: We don't want to confirm or adopt the previous stericycle EBITA growth.
Speaker Change: We'll instead give you specifics about what we see that being in the next three to five years when we're together in June.
Okay, great understood.
Speaker Change: Thank you very much.
Speaker Change: Thank you.
Speaker Change: And our next question.
Speaker Change: Coming from the line of Stephanie Miller with Jefferies. Your line is now open.
Stephanie Miller: Hi, Thank you just one for me I wanted to touch on this.
Speaker Change: You are making on the labor fourth I know, it's been a multiyear initiatives all in the backdrop of.
Speaker Change: But a pretty challenging labor for our labor environment. So you can just talk a little bit about where labor turnover today, an update on your journey as kind of optimizing labor I believe through attrition and other and the implementation of technology, So kind of give us an update on the labor journey and then maybe at the same token.
John Morris: What technology or any other technology rolled out to help you achieve your targets. Thanks, Stephanie This is John.
Speaker Change: A question there.
Speaker Change: Specifically to date, we've reduced about 26 100 roles, where they need to refill 2600 roles and that's important because what we've done is done. This is Jimmy said I've said Davina said at different points. We've done this through natural attrition and for 2025, we look to have the same repeat to the tune of about nine.
Speaker Change: 140 roles that we won't replace as we go through 2025 and the majority of that is going to come through the efforts of terrorists team and automating some of the recycling facilities and another large contingent will come from the continued.
Speaker Change: Automation of our residential business those are two of the big buckets.
Speaker Change: But I think when you look further out about what we're doing with technology I won't bore you with all the details, but there's a lot going on for instance in fleet planning and scheduling we're bringing some technology to bear that's going to allow us to more efficiently move our assets in and out of the repair facilities to to improve efficiency reduce labor dependency, we're using technology.
Speaker Change: To help augment some of the skill gaps as we upskill. Some of these employees and using technology for instance to be able to help our technical folks work collectively across the network to be able to make some of the repair. So I would tell you. We're very excited about what's going on on the technology front, that's going to further augment this effort around reducing labor dependency.
Speaker Change: Great. Thank you so much.
Speaker Change: Thank you.
Speaker Change: And I'm showing no further questions from mechanic you at this time I will now turn the call back over to Mr. Jim Fish, President and CEO for any closing remarks.
Speaker Change: Okay. Thank you all for your questions. This morning, the themes, we really wanted to convey.
Speaker Change: Today I think we.
Speaker Change: Did a good job of getting them across we wanted to convey that we were.
Speaker Change: That we were consistent with our performance and have been for quite a long time and that didn't change this quarter and we're certainly on track for our guidance.
Speaker Change: For the year, we were encouraged by what we saw in terms of volume in March and April after a couple of pretty tough months.
Speaker Change: In January February.
Speaker Change: Relatively little impact in 2025.
Speaker Change: Single digits John right.
Speaker Change: Tariffs.
Speaker Change: And then.
Speaker Change: Definitely on track for our sustainability investments and our Wm health care solutions. So hopefully that all came across thank you all for joining US. This morning, and look forward to seeing you in June hopefully at our New York City Investor Day.
Speaker Change: Sure.
Speaker Change: This concludes today's conference call. Thank you for your participation and you may now disconnect.
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