Q2 2025 Waste Connections Inc Earnings Call

Operator: Q2 2025 earnings call. Participants will be in a listen-only mode.

Good morning everyone and welcome to the Waste Connections Inc, Q2 2025 earnings call.

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Ron Mittelstaedt: I'd now like to turn the floor over to Ron Mittelstaedt, President and CEO. Sir, please go ahead. Okay. Thank you, operator, and good morning. I would like to welcome everyone to this conference call to discuss our second quarter results and updated outlook for 2025, along with providing a framework for the back half of the year. I'm joined this morning by Mary Ann Whitney, our CFO, and several other members of our senior management. As noted in our release, we once again delivered results above the high end of our outlook for the quarter, in spite of incremental headwinds in Q2 from lower-than-expected contributions from a higher margin, commodity-related activities, and continued sluggishness in the economy, along with tariff-induced uncertainty.

Please note this event is being recorded.

Speaker Change: I'd now like to turn the floor over to Ron middlestead president and CEO sir. Please go ahead.

Ron Middlestead: Okay, thank you, operator, and good morning.

Ron Middlestead: I would like to welcome everyone to this conference. Call to discuss our second quarter results, and updated outlook for 2025, along with providing a framework for the back half of the year.

Speaker Change: I'm joined this morning by Marianne Whitney. Our CFO and several other members of our Senior Management

Ron Mittelstaedt: As anticipated, we have already completed an outsized year of acquisition activity at approximately $200 million in annualized revenue with a robust pipeline and almost half the year still ahead of us. The strength of our financial profile and free cash flow generation keeps us well-positioned for additional acquisitions while maintaining the flexibility for increased return of capital to shareholders, including through opportunistic share repurchases, which are already underway. Moreover, in spite of incremental and growing headwinds, our full year 2025 outlook remains within the ranges from February, providing for approximately 6% revenue growth and 50 basis points of adjusted EBITDA margin expansion to 33%.

Speaker Change: Has noted in our release. We once again, delivered results above the high-end of our outlook. For the quarter in spite of incremental, headwinds, in Q2 from lower than expected contributions. From higher margin commodity related activities, and continued sluggishness in the economy, along with tariff, induced uncertainties.

Speaker Change: As anticipated, we have already completed an outsized year of acquisition activity at approximately 200 million in annualized Revenue with a robust Pipeline and almost half the year, still ahead of us.

Speaker Change: The strength of our financial profile and free cash. Flow generation keeps us, well positioned for additional Acquisitions while maintaining the flexibility for increased return of capital to shareholders including through opportunistic. Share repurchases, which are already underway.

Ron Mittelstaedt: We remain well positioned for upside from contributions from additional acquisitions, improvements in commodity related activity, and incremental solid waste volume.

Speaker Change: Moreover, in spite of incremental and growing, headwinds, our full year, 2025 Outlook remains within the ranges from February, providing for approximately 6%, Revenue growth and 50 basis points of adjusted e, but down margin expansion to 33%.

Speaker Change: We remain. Well, positioned for upside from contributions, from additional acquisitions.

Mary Ann Whitney: Before we get into much more detail, let me turn the call over to Mary Ann for our forward-looking disclaimer and other housekeeping items. Thank you, Ron, and good morning. The discussion during today's call includes forward-looking statements made pursuant to the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including forward-looking information within the meaning of applicable Canadian securities laws. Actual results could differ materially from those made in such forward-looking statements due to various risks and uncertainty. Factors that could cause the actual results to differ are discussed both in the cautionary statement included in our July 23rd earnings release and in greater detail in Waste Connections filings for the U.S.

Speaker Change: Improvements in commodity related activity and incremental Solid Waste volumes.

Speaker Change: Before we get into much more detail, let me turn the call over to Marianne for our forward-looking disclaimer and other housekeeping items.

Marianne: Thank you, Ron and good morning the discussion during today's call includes forward-looking statements made pursuant to the safe harbor. Provisions of the US private Securities, litigation Reform, Act of 1995 including forward-looking information within the meaning of applicable Canadian Securities Law, actual results could differ materially from those made in such forward-looking statements due to various risks and uncertainties.

Mary Ann Whitney: Securities and Exchange Commission and the Securities Commission's or similar regulatory authorities in Canada. You should not place undue reliance on forward looking statements as there may be additional risks of which we are not presently aware, or that we currently believe are immaterial, which could have an adverse impact on our.

Marianne: Factors that could cause a actual results to differ are discussed both in the cautionary. Statement included in our July, 23rd, earnings release, and in greater detail in Waste Connections, filings for the US Securities and Exchange Commission and the Securities commission's, or similar regulatory authorities in Canada.

Mary Ann Whitney: We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change after today's meeting.

Mary Ann Whitney: On the call, we will discuss non-GAAP measures such as Adjusted EBITDA, Adjusted Net Income Attributable to Waste Connections on both a dollar basis and per diluted share, and Adjusted Free Cash Flow. Please refer to our earnings releases for a reconciliation of such non-GAAP measures to the most comparable GAAP measures. Management uses certain non-GAAP measures to evaluate and monitor the ongoing financial performance of our operations. Other companies may calculate these non-GAAP measures.

Ron Mittelstaedt: I will now turn the call back over to Ron. Okay, thank you, Marianne. We are extremely pleased with our second quarter results, which reflect the enduring strength and consistency of solid waste, regardless of the economic environment. Moreover, our operational execution was augmented by continued improvement in employee retention and safety to support pricing ahead of inflation and effectively manage costs. Most notably, we overcame headwinds from incremental weakness in commodities. RINs and cyclical volumes and still delivered margins of 32.7% consistent with our Q2 guidance. Remember, this also includes 20 basis points year-over-year headwinds from our decision to close Takita Canyon Landfill as of January 1st.

Marianne: Per diluted share and adjusted free cash flow. Please refer to our earnings releases for a Reconciliation of such non-gaap measures to the most comparable. Gaap measures management uses certain non-gaap measures to evaluate and monitor the ongoing financial performance of our operations. Other companies May calculate these non-gaap measures differently.

Ron Middlestead: I will now turn the call back over to Ron.

Marianne: Okay, thank you Marianne.

We're extremely pleased with our second quarter results, which reflect the enduring strength and consistency of solid waste regardless of the economic environment.

Moreover, our operational execution was augmented by continued Improvement in employee, retention and safety to support pricing ahead of inflation and effectively manage costs.

Marianne: Most notably, we overcame headwinds from incremental, weakness and commodities.

Marianne: Rents and cyclical volumes and still delivered margins of 32.7% consistent with our Q2 guidance.

Ron Mittelstaedt: During the quarter, revenue growth of 7.1% was driven by 6.6% core solid waste pricing, comfortably exceeding our cost of inflation to drive 70 basis points of underlying adjusted EBITDA margin expansion in solid waste. Reported volume declines of 2.6% reflected the purposeful price volume trade-off and ongoing shedding of underperforming contracts that we have described in previous periods. Beyond that, they reflect the trends we've noted over the past several quarters. That is underlying flat to negative volumes from continued sluggishness and roll-off pulls and lower disposal volumes, primarily from construction-oriented activity, both of which showed continued moderation during the quarter.

Marianne: remember this also includes 20 basis points year-over-year headwinds from our decision to close to key to Canyon Landfill, as of January 1st,

Marianne: During the quarter Revenue. Growth of 7.1% was driven by 6.6% core Solid, Waste pricing comfortably. Exceeding, our cost of inflation to drive 70 basis. Points of underlying adjusted ibadan margin expansion in solid waste reported volume declines of 2.6% reflected the purposeful price volume trade-off and ongoing shift.

Marianne: Getting of underperforming contracts that we have described in previous periods.

Ron Mittelstaedt: Most importantly, we saw continued improvement in operating trends and the associated benefits. In Q2, voluntary turnover once again stepped down sequentially, marking our 11th consecutive quarter of improvement. On total turnover now below 22%, our voluntary turnover of less than 11% is down almost 60% from mid-22 and has dropped below involuntary turnover for the first time in recent years. And safety results, which are highly correlated to turnover, once again hit new historic lows. Incident rates were down 15% year over year, with momentum for continued improvement. In fact, year-over-year monthly incidents were down over 20% in June on a 5% increase in total employees due largely to acquisitions, which typically come on at higher safety-related incident rates.

Marianne: Beyond that they reflect the trends. We've noted over the past several quarters that is underlying flat to negative volumes from continued, sluggishness and roll-up poles, and lower disposal volumes primarily from construction oriented activity both of which showed continued moderation during the quarter.

Marianne: Most importantly, we saw continued Improvement in operating Trends and the associated benefits in Q2 voluntary turnover. Once again, stepped down, sequentially marking our 11th consecutive quarter of improvement.

Marianne: On total turnover. Now below, 22% our voluntary, turnover of less than 11% is down. Almost 60% from mid- 222 and has dropped below involuntary turnover for the first time in recent years.

Ron Mittelstaedt: As anticipated, these improving trends are translating into outside margin expansion. Simber Loaded Q1, underlying margins expanded by 70 basis points, about two times the more normalized margin expansion we would expect from price-led organic solid waste growth. And this is without the benefit of positive volumes, a reminder that when volumes do recover, especially at landfills, they will be nicely accretive. And given our high market share model and broad footprint, we remain well positioned to benefit from any pickup in activity driven by construction or otherwise. In the meantime, we are focusing on controlling what we can, delivering industry-leading margins, and positioning ourselves for future growth.

Marianne: And safety results which are highly correlated to turnover once again hit new historic lows, an incident rates were down, 15% year-over-year with momentum for continued Improvement. In fact, year-over-year monthly incidents were down over 20% in June, on a 5% increase in total employees, due, largely to Acquisitions, which typically, come on at higher safety related incident rates.

Marianne: As anticipated, these improving Trends are translating into outside margin expansion.

Marianne: Similar to q1, underlying margins expanded by 70 basis points about 2 times. The more normalized margin expansion we would expect from Price. Le organic Solid Waste growth.

Marianne: And this is, without the benefit of positive volumes, a reminder that when volumes do recover especially at landfills, they will be nicely creative.

Marianne: And given our high market share model and Broad footprint. We remain well, positioned to benefit from any pickup in activity, driven by construction or otherwise

Ron Mittelstaedt: We continue to reinvest in the business through CapEx at existing operations and new acquisitions, pursue new organic growth opportunities, and advance our sustainability related projects. We're also focused on leveraging technology to highlight additional avenues for outsized margin expansion using AI-driven applications across multiple platforms from customer retention and pricing to forecasting through data analytics, all of which we will be expanding during 26 and 27 as we look to further digitize. We continue to focus on customer experience and our operations, targeting quality of revenue on the top line and productivity and efficiency gains throughout our cost structure as we position ourselves for growth well beyond our current $10 billion revenue run rate.

Marianne: In the meantime, we are focusing on controlling, what we can delivering industry-leading margins and positioning ourselves for future growth.

Marianne: We continue to reinvest in the business through capex at existing operations and new acquisitions.

Marianne: Pursue new organic growth opportunities and Van and Advance our sustainability related projects.

Marianne: We're focused on leveraging technology to highlight additional avenues for outside margin expansion, using AI driven applications across multiple platforms, from customer retention and pricing to forecasting through data analytics. All of which we will be expanding during 26 and 27 as we look to further digitize,

Ron Mittelstaedt: To that end, acquisition activity is continuing at an above-average pace, resulting in approximately $200 million in annualized revenues already closed today. Our balance sheet strength, along with a robust acquisition pipeline built on long-term relationships and a consistent, disciplined approach to market selection, position us for additional activity. In fact, including signed LOIs, we expect to close another $100 to $200 million in acquisitions later this year or by early 2026, with more to follow. Of course, contributions from any additional deals closing in 2025 would be additive to the outlook we've provided. And finally, as noted, we've been in the market buying back shares.

Marianne: We continue to focus on customer experience and our operations. Targeting quality of Revenue on the top line and productivity and efficiency gains throughout our cost structure as we position ourselves for growth. Well beyond our current 10 billion dollar Revenue run rate

Marianne: To that end acquisition. Activity is continuing at an above average pace resulting in approximately 200 million in annualized revenues already closed today.

Marianne: Our balance sheet strength, along with a robust acquisition pipeline built on long-term relationships and a consistent disciplined approach to Market selection position us for additional activity.

Marianne: Acquisitions later this year or by early 2026 with more to follow.

Marianne: of course, contributions from any additional deals closing in 2025 would be additive to the Outlook, we've provided

Ron Mittelstaedt: As we've consistently maintained, we take an opportunistic approach to share repurchases and look to capitalize when we see compelling dislocations across the market or within our sector. To date, we've bought back 1.3 million shares or about half a percentage point of shares outstanding pursuant to our normal course issuer bid, which we renew annually in August, providing for annual repurchases of up to 5% of shares outstanding. And speaking of which, in June, we announced an additional listing and became a founding member of NYSE Texas, a recognition of our corporate presence here in the woodlands, along with our operations across the state.

Marianne: and finally, as noted, we've been in the market buying back shares,

Marianne: As we've consist consistently maintained, we take an opportunistic approach to share repurchases and look to capitalize when we see compelling dislocations, a cross the market, or within our sector.

Marianne: Today we bought back 1.3 million shares or about half a percentage point of shares outstanding, pursuant to our normal course, issue, or bid, which we renew annually in August providing for annual repurchases of up to 5% of shares outstanding.

Ron Mittelstaedt: We've enjoyed tremendous growth as a company since relocating our headquarters from California to Texas thirteen years ago, and appreciate the business supportive environment Texas provides. We recognize the importance of strong community and appreciate the collaborative can-do spirit that Texas is famous for.

Marianne: And speaking of which in June, we announced an additional listing and became a founding member of NYSC Texas. A recognition of our corporate presence here in the Woodlands along, with our operations across the state.

Ron Mittelstaedt: Shifting next to an update on our remediation efforts at Chiquita Canyon Landfill in Southern California. We continue to make progress managing the Elevated Temperature Landfill, or ETLF, event. At this time, there is no change to expectations regarding the cash flow or other impacts at the site. The most encouraging progress, however, is on the administrative front, with the U.S. EPA taking a more active leadership role in regulatory oversight of the facility. To that end, our team has been engaged in ongoing discussions with Region 9 of the U.S. EPA. In an effort to further streamline ongoing regulatory oversight and approvals at the facility, and in line with President Trump's and Administrator Zeldin's stated goals of focusing efforts on powering the Great American Comeback, Chiquita's requested Region 9's further assistance in minimizing regulatory indecision and inaction by taking a more active role at the site.

Marianne: We've enjoyed tremendous growth as a company. Since relocating, our headquarters from California to Texas, 13 years ago, and appreciate the business support of environments, Texas provides we recognize the importance of strong community and appreciate the collaborative can do spirit. That Texas, is famous for

Marianne: Shifting next to an update on a remediation efforts at Shaquita, Canyon Landfill in Southern California.

Marianne: We continue to make progress managing the elevated temperature, landfill, or ETL event. At this time, there is no change to expectations regarding the cash flow or other impacts at the site.

Marianne: The most encouraging progress. However, is on the administrative front with the US EPA, taking a more active leadership role in regular Toreo oversight of the facility.

Marianne: To that end.

Marianne: Our team has been engaged in ongoing discussions with region 9 of the US EPA.

Marianne: In an effort to further streamline ongoing regulatory oversight and approvals at the facility and in line with President Trump's and administrators zeldins stated goals of focusing efforts on powering the Great American comeback.

Ron Mittelstaedt: To be very clear, this is good news and something we requested, and will drive continued improvements in the management of the reaction and any impacts to the local community. We expect the results will be more, be a more effective and efficient and ultimately less costly process.

Marianne: To requested region, 9's further assistance, in minimizing Regulatory and decision and inaction by taking a more active role at the site to be very clear. This is good news and something we requested and will drive continued improvements in the management of the reaction and any impacts to the local communities.

Mary Ann Whitney: And now I'd like to pass the call to Mary Ann to review more in depth the financial highlights of the second quarter to review the elements of our updated full year 2025 outlook and what that implies for the back half of the year.

Marianne: We expect the results will be more, be a more effective and efficient and ultimately less costly process.

Mary Ann Whitney: I will then wrap up before heading in to Q and A. Thank you, Ron. In the second quarter, revenue of $2.407 billion exceeded the high end of our outlook and was up $159 million, or 7.1% year over year. Acquisitions completed since the year ago period contributed about $113 million net of divestiture. Core pricing of 6.6% was as expected in Q2 and reflected the typical cadence of seasonality. For the full year, core pricing of over 6% is now effectively complete or contractually provided. volumes down 2.6% reflect the following year-over-year results in Q2 on a same-store basis.

Marianne: And now I'd like to pass the call to Marianne to review more in depth the financial highlights of the second quarter to review the elements of our updated full year, 2025 Outlook, and what that implies for the back half of the year, I will then wrap up before heading into Q&A.

Marianne: Thank you, Ron.

Marianne: In the second quarter revenue of 2.407 billion, exceeded the high end of our Outlook and was up 159 million or 7.1%. Year-over-year Acquisitions completed since a year ago, period contributed about 113 million dollars, net of domestic.

Court pricing of 6.6% was as expected in Q2 and reflected the typical Cadence of seasonality.

Marianne: The full year core pricing of over 6% is now effectively complete or contractually provided for

Mary Ann Whitney: roll-off revenue was down about 1% on polls down 3% and rates per poll up 2%. Looking at regional variances, polls range from down high single digits in our southern region to up mid single digits in our western region, with most regions down slightly. Activity levels during the quarter, which would typically reflect a seasonal ramp of as much as 5%, showed only about a 1% sequential improvement between April and June. We would note the constantly changing tariff schedules during this period, which we believe contributed to uncertainty for customers. landfill revenue was up about 4% on tons up 1.5% Looking by waste type, MSW tons were up 3%, special waste was up 7%, and C&D tons were down 9%, slightly below recent quarters and indicative of limited construction activity.

volume down 2.6%. Reflect the following year-over-year resulting in Q2 on a same store basis.

Marianne: Roll off Revenue was down about 1% on pulse down, 3% and rates per pull up 2%.

Marianne: looking at Regional variances, polls range from down high single digits in our southern region to up mid single digits, in our western region with most regions down slightly

Marianne: Activity levels during the quarter, which would typically reflect a seasonal ramp of as much as 5% showed only about a 1% sequential Improvement between April and June.

Marianne: We would note the constantly changing tariff schedules during this period, which we believe contributed to uncertainty for customers.

Marianne: Lethal Revenue was up about 4% on tons up 1.5%.

Mary Ann Whitney: Values for recycled commodities already down year over year coming into the quarter declined another 10 to 15% during Q2. Renewable energy credits or RINs also stepped down by about 15% during Q2.

Marianne: Looking by waist height MSW towns were up 3%. Special waste was up 7% and C and D. Tons were down 9% slightly below, recent quarters and indicative of limited construction activity.

Marianne: Values for recycled Commodities are already down. Year-over-year coming into the quarter declined, another 10 to 15% during Q2,

Mary Ann Whitney: And our U.S. EPA waste activity, which is highly correlated to crude prices and related drilling activity, was down about 10% year-over-year, most notably in June, as crude volatility was magnified by ever-changing policies. By way of contrast, we did not see a corresponding decline in Canada, where our business is more production oriented. In fact, our R360 Canada revenue was up year over year on both price and volume, in line with our expectations. A reinforcing reminder of our rationale for pursuing this business in 2024, with ongoing growth since then to shift the balance of our E&P waste mix from drilling towards production.

Marianne: Renewable, energy. Credits are rims. Also stepped down by about 15% during Q2.

Marianne: CPA waste activity, which is highly correlated to crude prices and related. Drilling activity was down about 10% year-over-year. Most notably in June as crude volatility was magnified by everchanging policies.

Mary Ann Whitney: Adjusted EBITDA for Q2, as reconciled in our earnings release, was $786.4 million, up 7.5% year-over-year, and slightly above the high end of our outlook. At 32.7%, our adjusted EBITDA margin was in line with our outlook and up 10 basis points year-over-year, in spite of an extra 20 basis point drag from commodities, which declined during the quarter. In total, commodity-driven revenues were a drag of about 60 basis points in the quarter, in addition to Chiquita, which was another 20 basis point drag. Underlying solid waste margins were up 70 basis points, similar to last quarter, as Ron described.

Marianne: By way of contrast, we did not see a corresponding decline in Canada where our business is more production-oriented. In fact, our r360 Canada Revenue was up year-over-year on both price and volume in line with our expectations. A reinforcing reminder of our rationale for pursuing this business in 2024 with ongoing growth, since then, to shift the balance of our INTP waste mix from drilling towards production.

Marianne: Adjusted ibida for Q2 as reconciled in our earnings, release with 786.4 million up 7.5% year-over-year and slightly above the high end of our Outlook at 32.7%. Our adjusted Eva down, margin was in line with our Outlook and up 10 basis. Points year-over-year in spite of an extra 20 basis. Point drag from Commodities which declined during the quarter,

Marianne: In total total commodity-driven revenues were a drag of about 60 basis points in the quarter, in addition to chikita, which was another 20 basis point track.

Mary Ann Whitney: Similar to Q1, we saw margin improvement across a range of cost categories related to third-party services, labor, and maintenance, as we are seeing the benefits of improved employee retention and reduced opening. In contrast, risk management cost reductions continue to lag and remain the headwind in the quarter, providing opportunity for continued outsized underlying margin expansion as we look ahead. Net interest in the quarter was $80.4 million, and our effective tax rate for the second quarter was 25.4%, about 100 basis points above our outlook on higher foreign exchange. And finally, year-to-date, we've delivered adjusted free cash flow of $699 million on capital expenditures up over $110 million year-over-year.

Speaker Change: Underlying Solid Waste margins, were up, 70 basis points. Similar to last quarter as Ron described similar to q1. We saw margin Improvement across a range of cost categories related to third-party services, labor and maintenance. As we are, seeing the benefits of improved employee retention and reduced openings. In contrast risk management cost reductions, continue to lag and remain the headwind in the quarter, providing opportunity for continued outsized. Underlying margin expansion as we look ahead.

Speaker Change: Net interest in the quarter was 80.4 Million. An hour effective tax rate. For the second quarter was 25.4% about a 100 basis points above our outlook, on higher foreign exchange rates,

Mary Ann Whitney: As such, we're well on our way to deliver adjusted free cash flow of $1.3 billion as guided.

Speaker Change: And finally, year to date, we've delivered adjusted free cash flow of 699 million on Capital expenditures, up over 110 million year-over-year.

Mary Ann Whitney: During the quarter, we completed a public offering of $500 million in senior notes to further diversify our funding sources and maintain optionality for capital allocation. Our weighted average cost of debt is about 4%, with an average tenor of over 9 years. We ended the quarter with debt outstanding of about $8.35 billion, about 15% of which was floating rate and liquidity of over $1.1 billion. In spite of acquisition outlays of $582 million through Q2, our leverage ratio as defined in our credit facility has increased only nominally since year-end to 2.69 times debt-to-adjusted EBITDA. As Ron noted, we have a lot of optionality in terms of capital outlays, including opportunistic share repurchases, which year-to-date have totaled over $240 million.

Speaker Change: as such we're well on our way to deliver adjusted free cash flow of 1.3 billion dollars as guided

during the quarter, we completed a public offering of 500 million dollars in senior notes to further, diversify our funding sources and maintain optionality for Capital, allocation

Speaker Change: Our weighted average cost of debt is about 4% with an average tenor of over 9 years.

Speaker Change: We ended the quarter with debt outstanding of about 8.35 billion about 15% of, which was floating rate and liquidity of over 1.1 billion.

Speaker Change: In spite of acquisition outlays of 582 million through year through Q2. Our leverage ratio is defined in our credit facility has increased only nominally since year end to 2.6 time, 69 times debt to adjusted debt.

Mary Ann Whitney: In addition, we look forward to another increase to our dividend, which we will consider when we undertake our annual review in October.

Ron Middlestead: As Ron noted, we have a lot of optionality in terms of capital outlays including opportunistic share repurchases which year to date have totaled over 240 million.

Mary Ann Whitney: I will now review our updated outlook for the full year 2025 and provide some thoughts about what that implies for the back half of the year.

Ron Middlestead: In addition, we look forward to another increase to our dividend which we will consider when we undertake our annual review in October.

Mary Ann Whitney: Before I do, we'd like to remind everyone once again that actual results may vary significantly based on risks and uncertainties outlined in our Safe Harbor Statement and filings we've made with the SEC and the Securities Commissions or similar regulatory authorities in Canada. We encourage investors to review these factors carefully. Our Outlook assumes no change in the current economic environment or underlying economic trends. It also excludes any impact from additional acquisitions that may close during the remainder of the year and expensing of transaction-related items during the period. Additionally, Our Outlook does not anticipate material impacts to our effective tax rate or cash flows as a result of the recent tax bill, except as noted.

Ron Middlestead: I will now review our updated outlook for the full year 2025 and provide some thoughts about what that implies for the back half of the year.

Ron Middlestead: Before I do we'd like to remind everyone once again that actual results May Vary significantly based on risks and uncertainties outlined in our Safe, Harbor statement and filings. We've made with the FCC and the Securities. Commissions are similar regulatory authorities in Canada. We encourage investors to review these factors carefully.

Mary Ann Whitney: Looking first at our updated outlook for the full year as provided for and reconciled in our earnings. Given the strength of our performance in the first half of the year and updating for recent commodity values and RINs and acquisitions completed to date, we are maintaining our full year 2025 outlook as provided in February as follows. Revenue is estimated at approximately $9.45 billion. While within the range of our February outlook, this reflects a different mix of revenue. Incremental acquisition contributions are offset by reductions in commodity-related revenues based on recent values, and US E&P waste and solid waste volumes based on recent trends.

Ron Middlestead: Our Outlook assumes. No change in the current economic environment or underlying economic Trends. It also excludes any impact from additional Acquisitions that may close during the remainder of the year and expensing of transaction related items During the period. Additionally, our Outlook does not anticipate material impacts to our effective tax rate or cash flows. As a result of the recent tax bill except as noted

Looking first at our updated outlook for the full year as provided for and reconciled in our earnings release.

Ron Middlestead: Given the strength of our performance in the first half of the year and updating for recent, commodity values and rims and Acquisitions completed to date. We are maintaining our full year 2025 Outlook as provided in February as follows.

Ron Middlestead: Revenue is estimated at approximately 9.45 billion dollars while within the range of our February Outlook. This reflects a different mix of Revenue.

Mary Ann Whitney: Adjusted EBITDA is estimated at approximately $3.12 billion, or 33%. Again, within the range of our February outlook, in spite of that mix shift. This reflects 30 basis points higher underlying solid waste margins, overcoming the margin dilutive impact of acquisitions and lower commodity related revenue and disposal volume. On a year-over-year basis, adjusted EBITDA margin up 50 basis points reflects over 100 basis points underlying margin expansion. And finally, in the case of adjusted free cash flow at approximately $1.3 billion within the range of our February outlook, we expect that incremental bonus depreciation associated with the recent tax bill, which we estimate may increase cash flow from operations by about $25 million, would be put to work to a corresponding increase in capital expenditure.

Ron Middlestead: Incremental acquisition contributions are offset by reductions in commodity related revenues based on recent values and US INTP waste and solid waste volumes based on recent trends

Ron Middlestead: Approximately 3.12 billion or 33% again within the range of our February Outlook in spite of that mixed shift, this reflects 30 basis points, higher underlying Solid Waste margins, overcoming the margin dilutive impact of Acquisitions and lower commodity related, revenue, and Disposal volumes.

Ron Middlestead: On a year-over-year basis. Adjusted ebit down, margin up, 50 basis points reflects over 100 basis points, underlying margin expansion.

Mary Ann Whitney: We are considering opportunistic fleet and equipment purchases to de-risk potential tariff-related increases, as well as CapEx for growth projects, both related to recent acquisitions and at existing operations.

Mary Ann Whitney: The closing of any additional acquisitions would provide upside to our updated 2025 outlook, as would improvement in commodities and related activity, and any pickup in volume.

Ron Middlestead: And finally, in the case of adjusted free cash flow at approximately 1.3 billion dollars within the range of our February Outlook. We expect that incremental bonus, depreciation associated with the recent tax bill, which we estimate may increase cash flow from operations by about 25 million would be put to work to a corresponding increase in capital expenditures, we are considering opportunistic, Fleet and Equipment purchases to de-risk potential. Tariff related increases as well as capex for growth projects, both related to recent acquisitions and at existing operations,

Mary Ann Whitney: Next, looking ahead to Q3 and Q4.

Ron Middlestead: the closing of any additional Acquisitions would provide upside to our updated, 2025 Outlook as would Improvement in Commodities and related activity and any pickup in volumes.

Mary Ann Whitney: As implied by our full year 2025 outlook, the adjusted EBITDA margin is expected to average 33.6% in the back half of the year, up about 60 basis points year over year, driven by outsized margin expansion in Q4 from easing comparisons to the prior year for Chiquita and Commodity. By quarter, adjusted EBITDA margin is expected to be roughly comparable across Q3 and Q4 due to a limited seasonal ramp in Q3.

Ron Middlestead: Next looking ahead to Q3 and Q4.

Ron Middlestead: As implied by our full year 2025 Outlook. The adjusted ebit down margin is expected to average 33.6% in the back, half of the Year up about 60 basis points year-over-year.

Ron Middlestead: By outside margin expansion in Q4, from easing comparisons to the prior year for chikita and commodities.

Ron Mittelstaedt: And now let me turn the call back over to Ron for some final remarks before Q&A. Thank you, Marianne. As we have described, we are extremely pleased with our first half results, which highlight the strength and resilience of our business, and specifically the outperformance of our core solid waste operations in what is arguably a volatile economic backdrop. In fact, in a more normalized environment, our strong first half performance and operating trends would have prompted us to raise our full year guidance.

Ron Middlestead: By quarter, adjusted ebit down margin is expected to be roughly comparable across Q3 and Q4 due to a limited seasonal ramp in Q3.

Ron Middlestead: And now, let me turn the call back over to Ron for some final remarks before Q&A.

Ron Middlestead: Thank you Marianne.

Ron Middlestead: As we have described, we are extremely pleased with our first half results, which highlights the strength and resilience of our business, and specifically, the outperformance of our core Solid Waste operations, and what is arguably a volatile economic backdrop.

Ron Mittelstaedt: However, given the uncertainty of today's environment and the impact of lower commodities, we view maintaining our 2025 guidance as prudent and as a win. And while the macro environment remains dynamic, we are well positioned to navigate that uncertainty as our Q2 results demonstrate. As we have consistently maintained, our greatest differentiator is human capital and a purposeful approach to a culture of accountability. We're most grateful for and extremely proud of the dedication of our over 25,000 employees and the local leadership teams responsible for the consistency of operational execution.

Ron Middlestead: In fact, in a more normalized environment, our strong first half performance and operating Trends would have prompted us to raise our full your guts, however, given the uncertainty of today's environment and the impact of lower Commodities. We view maintaining our 2025 guidance as prudent, and as a win

Ron Middlestead: and while the macro environment remains Dynamic where a well-positioned to navigate that uncertainty as our Q2 results demonstrate,

Ron Middlestead: as we have consistently maintained, our greatest differentiator as human capital and a purposeful approach to a culture of accountability.

Ron Mittelstaedt: We will continue to focus on operational excellence, building on a proven track record and legacy of outsized value creation, while also recognizing the value of innovation and the opportunities from leveraging technology and new ideas.

Ron Middlestead: Where most grateful for for, and extremely proud of the dedication of our over 25,000 employees and the local leadership, teams responsible for the consistency of operational execution.

Ron Mittelstaedt: Before going into Q&A, I'd like to take a moment to thank and acknowledge my Waste Connections co-founder, our Executive Vice President and Chief Operating Officer of nearly 28 years, and one of my closest friends ever, Daryl Chambers. Daryl has announced his retirement from his role as COO, effective August 8, 2025. While we're not making any other announcements at this time, they will be forthcoming over the next few weeks.

Ron Middlestead: We will continue to focus on operational excellence building on a proven track record and Legacy of outsized value creation while also recognizing the value of innovation, and the opportunities from leveraging technology and new ideas.

Speaker Change: Before going into Q&A, I'd like to take a moment to thank and acknowledge my Waste Connections, co-founder our Executive, Vice President, and Chief Operating Officer of nearly 28 years and 1 of my closest friends ever Daryl chamblas.

Speaker Change: Daryl has announced his retirement from his role as Co effective, August, 8th, 2025.

Ron Mittelstaedt: Daryl can never truly be replaced. He's been the heartbeat of Waste Connections for 28 years. Our board of directors, our leadership team at every level, and all of our 25,000 employees owe an enormous debt of gratitude to Daryl. He will be missed every day and will never be forgotten.

Speaker Change: While we're not making any other announcements at this time, they will be forthcoming over the next few weeks.

Speaker Change: Daryl can never truly be replaced. He's been the heartbeat of Waste Connections for 28 years. Our board of directors, our leadership team at every level and all of our 25,000 employees owe an enormous debt of gratitude to Daryl.

Ron Mittelstaedt: There's not enough time on this call for me to adequately express all that Daryl has meant to everyone within the Waste Connections family or across the broader solid waste industry.

Speaker Change: He will be missed every day and will never be forgotten.

Ron Mittelstaedt: I wish Daryl, his beautiful wife Andrea, and their son Nate a wonderful, healthy, fun next chapter that is so richly deserved. We'll all miss you terribly, Daryl, and we all love you.

Speaker Change: There's not enough time on this call for me, to adequately Express all that Daryl has meant to everyone, within the Waste Connections family, or across the broader, Solid Waste industry.

Speaker Change: I wish Daryl his beautiful wife Andrea and their son Nate. A wonderful healthy fun. Next chapter. That is so richly. Deserved

Ron Mittelstaedt: Now getting back to all of you. We appreciate all your time today.

Speaker Change: will all miss you terribly Daryl and we all love you.

Speaker Change: now, getting back to all of you,

Operator: I will now turn this call over to the operator to open up the lines for your questions. Operator. Ladies and gentlemen, at this time, we will begin that question and answer session. To ask a question, you may press star and then one. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Once again, that is star and then one to join the question queue.

Speaker Change: We appreciate all your time today, I will now turn this call over to the operator, to open up the lines for your questions, operator.

Speaker Change: Ladies and gentlemen, at this time, we will be in that question and answer session.

To ask a question, you may press star and then 1.

Speaker Change: Star and 2. If you are using a speaker-phone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality.

Speaker Change: Once again, that is star and then 1 to join the question queue.

Tyler Brown: Our first question today comes from Tyler Brown from Raymond James. Please go ahead with your question. Hey, good morning. Can you guys hear me? Yeah, Tyler, good morning. We can. Yeah. Hey, first, congrats, Daryl. Incredible career. See you on an Arkansas lake one day.

Speaker Change: Our first question today comes from Tyler Brown from Raymond James. Please, go ahead with your question.

Tyler Brown: Hey, good morning. Can you guys hear me?

Speaker Change: Yeah, Tyler. Good morning. We can

Ron Mittelstaedt: But, you know, curious, we could, maybe if we could double click a little bit on capital allocation. Ron, just, it sounds like the M&A pipeline is solid, but you also restarted the buyback. And I just want to make sure that I have the message right here, because I think $235 million and a quarter is maybe the second largest repo in your history, and we're only 24 days in. So just to be clear, is this you being more opportunistic versus a change in the M&A opportunities out there? Yeah, Tyler, I mean, number one, it absolutely is.

Speaker Change: Yeah, hey first. Congrats Daryl. Incredible career. Uh, see you on an Arkansas Lake 1 day. Um, but you know, curious.

Speaker Change: We could uh maybe if we could double-click a little bit on Capital allocation Ron just it sounds like the m&a pipeline is solid. Um but you also restarted to buy back and I just want to make sure that I have the message right here because I think 235 million and a quarter is maybe the second largest repo in your history and we're only 24 days in. So just to be clear is this you being more opportunistic versus a change in the m&a opportunities out there?

Ron Mittelstaedt: As we tried to say in our remarks, you know, we tried to be opportunistic when we think that there are abnormal dislocations in either our or our sector's stock. And we feel that as there's been, you know, recent pullback for a variety of reasons in the sector and in us as well. We have, you know, tremendous firepower, both through free cash flow and available capital. As we've demonstrated, we've done a record amount of acquisitions last year. We're on pace to have an enormous year this year, and we've kept leverage flat to down. So it is not a change in capital allocation strategy whatsoever.

Speaker Change: Yeah, Tyler. I mean, um, number 1, it absolutely is, as we tried to say in our remarks, you know, we tried to be, uh, opportunistic when we think that there are abnormal dislocations in either r or our sectors stock. Uh, and we feel that um, uh as as there's been, you know, recent pullback for a variety of reasons in the sector and in us as well. Uh, we have, you know, tremendous Firepower both through free.

Mary Ann Whitney: It's just that we have the capacity to do both. And we believe the combination creates in this environment, you know, even better performance alternative going forward. Okay, perfect.

Cash flow and available Capital uh as we've demonstrated, we've done record amount of Acquisitions last year. We're on Pace to have a an enormous year this year, and we've kept leveraged flat to down. Uh, so, um, is not a change in capital allocation, uh, strategy whatsoever. It's just that we have the capacity to do both and we believe the combination creates in this environment. Uh, you know, even better, uh, performance alternative uh, going forward.

Mary Ann Whitney: And then just a little clarification. So I think you said that there was something like 100 to 200 million under LOI that could close in the second half, but was that a revenue number or an outlay? That was a revenue number. Okay. Perfect.

Okay perfect and then just a little clarification so I think you said that there was something like a hundred to 200 million under Loi that could close in the second half, but was that a revenue number or an outlay? Number

Mary Ann Whitney: And then just quick modeling, Marianne, just so we have it, but what is the expected M&A impact in 2025, just basically based on what's in the guide? So coming into the year, the original guidance included $300 million. We'd closed about $75 million in deals. And so the acquisition contribution from the previous year's rollover and deals done has been $300 million, and that's stepped up by $75 million, with the incremental closing of $125 million during the course of the first two quarters. Okay, perfect.

Speaker Change: That was a revenue number.

Speaker Change: Okay. Okay. Okay perfect. And then just quick modeling Marianne just so we have it. But what is the expected m&a impact in 25 just basically based on what's in the guide?

Tyler Brown: And my last one, just can we talk a little bit about E&P? I know it doesn't get a ton of airtime, but actually, if I look at the numbers, it did something like, call it $180 million in revenue this quarter, which was really good. It was up something like $50 million year over year, but that is kind of counter to the cautious rig cap. So one, was that secure? Because I thought that we had already lapped that, so I could be wrong. Was there another acquisition? And then just given where the rig count is and your U.S.

So the coming into the original, the year, the original guidance included 300 million there. We'd closed about 75 million in deals and so the acquisition contribution from the previous year's rollover and deals done had been 300 and that stepped up by 75 million with the incremental closing of 125 million during the course of the first 2 quarters,

Tyler Brown: drilling exposure, should we assume that that hangs around this $180 million per quarter, just for a little help on the model?

Ron Mittelstaedt: Yes, so a couple things there, Tyler. Yes, I think that's a fair way to think about the run rate, and it reflects, to your point, not only secure, but the subsequent acquisitions we did last year. We mentioned that we've done a couple in Canada, and we've also done some in the U.S., and so you're seeing the rollover contribution from those deals. And as we said on the call, what stood out in Q2 was the step down in activity in the U.S., but that it had been more than offset by the increases in Canada, where at the legacy secure business, for instance, we saw growth both in price and volume during the quarter on a year-over-year basis.

Speaker Change: Okay. Perfect. Then my last 1 just, can we talk a little bit about EMP? I know it doesn't get a ton of air time, but actually, if I look at the numbers it did something like, call it 180 million in Revenue this quarter, which was, which was really good. Um, it was up something like 50 million year-over-year, but that is kind of counter to the cautious rig count. So, 1 was that secure because I thought that we had already lapped that, so I could be wrong. There was another acquisition. And then 2, just given the rate where the rig count is in your us. Drilling exposure, should we assume that that hangs around this 180 million per quarter just for a little help on the model?

Tyler Brown: Okay, so 180, though, roughly is a good place marker. Yeah, well, you know, I think it's between 160 and 170. I mean, depending on seasonality, I think you've got to meter that a little bit. Okay. All right. Cool.

Um, yes, so so a couple things there, Tyler, yes, I think that's a fair way to think about the Run rate and it reflects to, to your point, not only secure, but the subsequent Acquisitions we did. Last year, we mentioned that we did a, we've done a couple in Canada and we've also done some in the US and so you're seeing in the rollover contribution from those deals. And as we've said on the call what stood out in Q2 was the step down in activity, in the US. But that had it had been more than offset by the increase in Canada where at the Legacy secure business. For instance, we saw growth both in price and volume during the quarter on a year-over-year basis.

Okay. So 180 though, roughly is a good place marker. Yeah, well you know I think it's between 160 and

Speaker Change: that a little bit.

Tyler Brown: Thank you.

Speaker Change: Okay. All right. Cool. Thank you.

Toni Kaplan: Our next question comes from Toni Kaplan from Morgan Stanley. Please go ahead with your question. Thanks so much.

Speaker Change: Our next question comes from.

Kaplan: Kaplan from Morgan Stanley. Please go ahead with your question.

Toni Kaplan: I wanted to drill down a little bit into the volume shedding. So last quarter you had called out a large contract from Progressive that you didn't renew in October. So I was wondering if it's fair to assume a similar drag in volume in 3Q similar to 2Q, but then maybe 4Q just gets back to sort of more normal shedding. And I know Chiquita is also sort of a factor in here, so maybe there's still a little bit below normal volume in 4Q, and then maybe the normal starts in 1Q of 26. I just wanted to understand the dynamics of how you think about the volume.

Toni Kaplan: Thanks. Sure, Toni. So, as you know, we think in terms of we have the shedding, of course, we have Chiquita, which we kind of bucket separately, and that does anniversary at the end of the year. But we started diverting tons in Q4, so the impact is smaller in Q4. But when I think about the ongoing impacts, you're right. Some of the shedding does anniversary. I think the way to think about it is the most negative quarter would therefore be Q3, because you have the combined impact of those ongoing impacts, plus what we talked about, that lower seasonal ramp, you know, impacting the revenue growth Q3 versus Q2.

You but then maybe 4 q just gets back to sort of more normal shedding. And I know Chiquitita is also sort of a factor in here. So like maybe there's still a little bit below normal volume in 4 q and then maybe maybe the normal starts in 1 Q of 26. Like, just wanted to understand the Dynamics of how you think about the volume. Thanks.

Toni Kaplan: So, most negative in Q3, getting back to more like Q2 and Q4, and yes, I agree with your expectation that some of those pieces anniversary as we look ahead to 26. Yeah, and Toni, the one specific contract we did call out last year, former progressive contract, actually in North Texas, it does anniversary on October 1, as you as you pointed out. Great.

Speaker Change: Sure, sure attorney. So, as you know, we think in terms of we have the shedding, of course, we have Jaquita, which we kind of bucket separately. Um, and that does, you know, anniversary, uh, at the end of the year. But we, you know, started diverting tons in Q4, so the impact is smaller in Q4. But when I think about the ongoing impacts, you're right. Some of the shedding does anniversary. I think the way to think about it is the most negative quarter would therefore be Q3 because you have the combined impact of those ongoing impacts plus. What we talked about that lower seasonal ramp you know impacting the the revenue growth Q3 versus Q2 so most negative in Q3 getting back to more like, Q2 and Q4. And yes, I agree with your your expectation, that some of those pieces anniversary. As we look ahead to 26,

Speaker Change: Yeah, and Tony. The 1 specific contract. We did call out last year, uh, former Progressive, uh, contract, uh, actually in north Texas, it does anniversary on October 1, as you as you pointed out.

Ron Mittelstaedt: And I guess maybe just longer term, when you think about volumes, Ron, like, I guess you made the comment that when volumes do recover, like, that will be accretive. Do you expect, like, that volumes recover in 26? Or, like, when does that happen? Or, you know, because of all the M&A, like, maybe it's even pushed out further than that, just wanted to sort of get a longer term picture. Yeah, well, I think you got to break apart the components, Tony, of the negative volume. And again, I'm just rounding here, you know, we've said there's been about 100, if you take a negative two and a half, I'm rounding for the quarter, that was a little more than that.

Speaker Change: great and I guess maybe just longer term when you think about

Speaker Change: Volumes Ron, like, I guess you meant. You made the comment that when volumes do recover, like that will be a creative. Um, do you expect like that volumes recover and and 26 or like when when does that happen? Um, or, you know, because of all the m&a, like maybe it's even pushed out further than that. Just wanted to sort of get a longer term picture.

Ron Mittelstaedt: You've got about 100 point price volume trade off that's been conch So, depending on how the economy is and how hard we want to push that and where inflationary indexes are, you know, that can get better. You have about 100 points from purposeful shedding. We just outlined that a lot of that will get better, specifically Chiquita and a large contract we did not renew purposely in North Texas. However, we have done a lot of M&A in 24 and continue in 25. So, some of that will continue, obviously. And then right now, I'd say you got about 50, 60 basis points of just underlying economic activity that is soft, particularly in construction-linked activities.

Speaker Change: Yeah, well, I think you got a break apart, the components Tony of the negative volume and and again I'm I'm just rounding here. You know, we've said there's been about a hundred if if you take a negative 2 and a half, I I'm rounding uh for the quarter. That was a little more than that. Um, you you've got about uh 100 Point price volume trade-off that's been conscious. Um, so depending on how the economy is and how hard we want to push that and where inflationary indexes are uh, you know that can that can get better. Um, you have about a 100 points from purposeful shedding, we just outlined that a lot of that will get better specifically.

Ron Mittelstaedt: So, it affects roll-off and it affects C&D, which you saw down 9% in the quarter. So, you know, that is tough to say. We would hope now that, you know, the bill has been passed in Congress that, you know, maybe as interest rates potentially decrease some over the second half of the year into next year, these are somewhat fuel for construction activity at all levels. And then that, you know, we see a corresponding real-time benefit from that. But, you know, we're not obviously sitting here trying to predict that. We've been in effectively a flat-to-negative, you know, take-out government spending, take-out federal government spending.

Speaker Change: With Chica and a large contract, we did not renew purposely in north Texas. However, we have done a lot of m&a in 24 and continued in 25 so some of that will continue obviously and then right now I'd say you got about 50, 60 basis points of just underlying economic activity. That is soft. Particularly in construction linked um, activities. So it affects roll off and it affects uh, C and D which you saw down 9% in the quarter. Um, uh, so you know that is, is tough to say, we would, we would hope now that, you know that the the bill has been passed in Congress that um, you know, maybe uh, as in is interest rates potentially decrease some over the second half of the year in the next year. These are uh, somewhat fuel for uh, construction activity at all levels and and then that, you know, we see a a corresponding real-time benefit

Ron Mittelstaedt: We've been in a flat-to-negative GDP environment for approaching three years now. And so, you know, is 26 going to break that? Well, I would hope so. But, you know, we don't know. Super.

Speaker Change: From that but you know we're not obviously sitting here trying to predict that you know, we've been in effectively a flat to negative, you know takeout government spending, take out federal government spending, we've been in a flat to negative uh GDP environment for approaching 3 years now.

Speaker Change: And um, so you know is, is 26 kind of break that. Well, I would hope so, but um, you know, we don't know.

Toni Kaplan: Thank you.

Speaker Change: Super, thank you.

Toni Kaplan: Our next question. and company. Please go ahead with your question. Noah, is it possible that your phone is on mute? Yeah, now we need more of that. All right, thank you. Yeah, we just didn't hear our name called, so I appreciate everyone taking the question. Marion, just maybe trying to bridge from the 9.45... You saw in 4Q on the revenue side too, how you see it now, because you pointed out the mix has changed. You got the 75 million higher M&A revenues. Maybe give us the other kind of moving pieces here, because I think that'll help us and investors kind of understand some of the mix shift a little bit better.

Speaker Change: Our next question.

Speaker Change: And Company. Please go ahead with your question.

Speaker Change: No, is it possible to hear you?

Speaker Change: Yeah.

Speaker Change: All right, thank you. Yeah, we just didn't hear our name called. So appreciate everyone. Taking the question. Um,

Noah Kaye: I mean, how much more is the impact from commodities and potentially kind of underlying volumes versus what you thought. Sure, so as you've pointed out, $75 million incremental in acquisition contribution, a little bit of a good guy from FX because it's, in our view, improved by about a point, which is about $20 million. And then the offsets are primarily those commodity-driven reductions where you've got recycled commodities down about $25 million, RINs down another $5 million, and then we have about half a point less in terms of overall solid waste volume. And so, you know, those are the moving pieces that effectively, you know, net to neutral.

Speaker Change: In 4q uh, on the revenue side to how you see it now because you you pointed out the mix has changed, you got the 75 million higher m&a revenues uh maybe give us the other kind of moving pieces here because I I think that'll, you know, help us and investors kind of understand, uh, some of the mix shift a little bit better. I mean, how, how much more is the impact from Commodities? Uh, and, uh, you know, potentially kind of underlying volumes versus what you thought.

Speaker Change: Sure. So as as you pointed so 7

Speaker Change: Contribution, little bit of a good guy from FX because it's in in our, uh, view improved by about a point, which is about 20 million. And then they offset our primarily those commodity driven reductions, where you've got recycled Commodities down about 25 million rims, down another 5 million and then we have about half a point less in terms of overall Solid Waste volume.

Mary Ann Whitney: But, you know, the really important part of that is the differences in the margin contributions from each of those. And the fact that that what that really requires is that the underlying business improves by 30 basis points in order to offset the fact that there's a little margin dilution, sub-10 basis points, sub-10 basis points from the incremental M&A, but it's primarily the 30 basis points incremental headwinds from those lower recycled commodities and RIMs. And Noah, I would add that you also have about another approximately 20 to 25 million dollars in E&P volumes lower in the second half based on current rig count in the U.S.

Speaker Change: And so, you know, those are the moving pieces that that effectively, you know, net, net to neutral but you know, the really important part of that is the differences in the margin contributions from each of those. And the fact that that what that really requires is that the underlying business improves by 30 basis points in order to offset the fact that there's a little margin dilution sub 10 basis points sub 10 basis points from the incremental m&a but it's primarily the 30 basis points incremental headwinds.

Speaker Change: From those lower recycled, Commodities and rims.

Speaker Change: And and no, I would add that you also uh have about another approximately 20 to 25 million dollars in ENT.

Mary Ann Whitney: versus Canada. Meaning, that's not happening in Canada. It is happening in the Permian and the Louisiana on and offshore.

Mary Ann Whitney: Yes, thanks Ron. to 20 to 25 million lower versus what you thought in February. Just to clarify. Right, 50 million annualized, 25 in the second half. Okay.

Speaker Change: Uh, volumes lower in the second half, uh, based on current rig count in the US, uh, versus Canada. Not meaning not, it's not, that's not happening in Canada. It is happening in the Parian and the Louisiana and on, and off tour. Yeah, thanks. Yep.

Speaker Change: Yeah. 2 2025 million lower versus what you thought in February.

Mary Ann Whitney: And then, again, for our models, appreciate you giving us sort of the margin expectations for 3Q. You did also comment not much of a sort of sequential ramp expected in kind of underlying macro. So just some rough guideposts on how to think about the revenue step-up, because typically it is a seasonally strong quarter, but, you know, between the commodities step down and, you know, some of the other headwinds you mentioned, perhaps we don't see as big of a step-up as usual. Yep, that's the right way to think about it because the typical seasonal ramp could be as much as three to four percent.

Speaker Change: Right. Write 50 million in your Lives. 25 in the second half. Yep.

Speaker Change: Okay. And then, uh, up for again, for our models, appreciate you, uh, giving us sort of the margin expectations, uh, for 3 Q. Um, you did also comment, uh, not much of a sort of sequential ramp expected in kind of underlying macros. So, uh, just some Rough Guide posts on how to think about the, the revenue step out because typically, it is a seasonally strong quarter. But, you know, between the Commodities step down and um, you know, some of the other headwinds you mentioned, perhaps, we don't see as big of a step up as usual.

Mary Ann Whitney: And so this would be muted and there would be that step down in commodities. So you could certainly work your way to more like one and a half percent in terms of the step up Q3 versus Q2. Thank you.

Speaker Change: Yep, that's the right way to think about it because the the typical seasonal ramp could be as much as 3 to 4%. And so this would be muted and there would be that step down in Commodities. So you could certainly work your way to more like 1 and a half percent. Um, in terms of the the Step Up Q3 versus Q2

Noah Kaye: And just one last one. I mean, you know, Tyler, I think, as always, asked a great question earlier around capital allocation. I just want to follow up on the buybacks. You know, should we think about additional buyback activity in any way to dimension that over, you know, the back half of the year? I understand it, you know, you're being opportunistic here, but kind of given where the stock is and, you know, your view on the multi-year growth opportunity, you know, fair to think about additional buyback activity in any way to dimension that. Yeah, we always think in terms of being opportunistic, Noah, rather than being programmatic.

Speaker Change: Thank you. And just 1 last, I mean, you know, Tyler I think as always that's a great question earlier around Capital, allocation I I just want to follow up on the the BuyBacks, um, you know, should we think about, uh, additional buyback activity, in any way to Dimension that over, you know, the back half of the year, I understand it, you know, you're being opportunistic here, uh, but kind of given where the stock is and, you know, your view on the multi-year growth opportunity, you know, fair to think about additional buyback activity. And and, and any way to Dimension it,

Ron Mittelstaedt: And so the way we approach it is that we have tremendous optionality given the magnitude of our free cash flow and where our leverage sits, and we'll continue to evaluate all the alternatives for capital allocation. Yeah, and the only thing I would say, add Noah, is look, you saw us in a very short period of time as we thought there was a disproportionate dislocation spending close to a quarter billion dollars. And so we remain positioned to do that in the same manner. Very helpful. Thank you all.

Speaker Change: Yeah, we always think in terms of being opportunistic now and it's, you know, yeah rather than being programmatic and so um you know what the way we approach it is that we have tremendous optionality given the magnitude of our free cash flow and where our leveraged its and we'll continue to evaluate all the alternatives for Capital allocation. Yeah, and the only thing I would say, uh, add know is look, you saw us in a very short period of time as we thought there was a a disproportionate dislocation, spend close to a quarter billion dollars

Speaker Change: Uh, and so we remain positioned to do that in the same manner.

Speaker Change: Very helpful. Thank you. All.

Kevin Chiang: Our next question comes from Kevin Chiang from CIBC.

Kevin Chiang: Please go ahead with your question. Hi. Thanks for taking my question.

Speaker Change: Our next question comes from Kevin Chang from CIBC please. Go ahead with your question.

Kevin Chiang: Good morning and congratulations, Darrell, echoing what others have said already. Maybe just two quick ones for me. You're obviously making great progress on your voluntary turnover and safety incident metrics and trends. If memory serves me correct, I think that was 100 basis point margin opportunity. I think you've achieved about two-thirds of that. Just given the trends you're seeing, should we expect that additional one-third or let's call it 33, 34 basis points? Does that fully materialize in 2026, just given the trends you're seeing through 2025 here?

Kevin Chang: Hi, thanks for taking my question. Good morning and congratulations. Daryl echoing. Um. Uh, what others have said already. Uh, maybe just 2 quick ones for me. Um, you obviously making great progress on your voluntary, turnover and safety incident, um, metrics and trends.

Kevin Chiang: Sure, so you're right, Kevin, we've talked a lot about, as we described it, there was about 100 basis points of margin that we thought would get unlocked by these improving trends. And then we actually revisited that and said, it's probably a little north of that, given the magnitude of the headwinds we're still absorbing from those lagging improvements associated with risk management costs. And I think last quarter, we said we're about halfway through the 100 basis points. We realized about 50 and the update is now we're north of that, maybe 60 to 70 basis points in terms of good guys that we're seeing.

Kevin Chang: Let's call 33, 34 basis points does that fully materialized in 2026. Just given the trends you're seeing uh through 25 here.

Kevin Chiang: You know, it's interesting, we look across about 10 different cost items every quarter, and I can't remember a time where they'd all been green up until now. Meaning that margin, the cost of the percentage of revenue was improving and so many of them are related to third party costs, whether it's subcontracting, contract labor, whether it's overtime compared to straight time. All the benefits, third party repairs, et cetera, all the benefits that we thought over time should start to accrue to us. So, what we haven't seen yet, as I said, is that risk costs while they're abating, meaning it's been less of a bad guy, less of a headwind on a year over year basis.

Kevin Chang: There's about a 100 basis points of margin that we thought we'd get unlocked by these improving Trends. And then we actually Revisited that and said, it's probably a little north of that. Given that the magnitude of the headwinds were still absorbing from those lagging improvements, associated with risk management costs. And I think last quarter, we said we're about halfway through the 100 basis points. We realized about 50. And the updated is now, we're north of that maybe 60 to 70 basis points. In terms of good guys that we're seeing, you know, it's interesting. We look at across about 10 different cost items, every quarter and I can't remember a time where they'd all been green up. Until now meaning, that, that margin, you know, the cost as a percentage of Revenue was improving. And so many of them are related to third-party costs and whether it's subcontracting contract labor, whether it's overtime compared to Street time, all the benefits, you know, third-party repairs, Etc. All the benefits that we thought over time should start to accrue to us. So what we haven't seen yet is I said, is that risk costs while they're

Kevin Chiang: It hasn't become a tailwind. So, to answer your question, there's still more to come tough to say that we would get it all in twenty six because of the way that the risk costs lag, but we expect to continue to realize the benefits and the trends. We've seen make us bullish about seeing more by the end of the year than we're seeing right now. That's super helpful.

Kevin Chang: Abating meaning, it's it's been less of a bad guy less of a headwind, um, on a year-over-year basis, it hasn't become a Tailwind. So, to answer your question, there's still more to come tough to say that we would get it all in 26 because of the way that the risk costs lag, but we expect to continue to realize the benefits and the trends we've seen. Make us bullish about seeing more by the end of the year than we're seeing right now.

Ron Mittelstaedt: Maybe just my second question here, Ron, you talked about the EPA taking a more active role at Chiquita and you think that's a favorable outcome or development, if you can maybe just provide a little bit of detail in terms of how that benefits your remediation efforts and maybe some of the challenges you have been facing, I suspect, dealing with multiple agencies and trying to deal with the ETLF issue at Chiquita. Sure. Well, you know, we have been dealing with approximately 12 to 13 state and local agencies in California. Each of those have their own staff.

Speaker Change: That's that's super helpful. Um, maybe just uh uh my second question here, you know. Ron you talked about the EPA taking a more active role at chikita and and and you think that's a, you know, a favorable outcome or development. Just if you can, if you can, maybe just provide a little bit of detail in terms of, you know, how that benefits your remediation efforts and and maybe some of the challenges you have been facing. I suspect dealing with multiple agencies and trying to uh deal deal with the the ETF issue at shikita.

Speaker Change: Sure. Well, you know,

Speaker Change: We have been dealing.

Speaker Change: with a

Ron Mittelstaedt: Each of those have their own elected board. And each of those have their own objectives. There is literally no coordination amongst those agencies at any level. And the objectives from them are often at crosscurrents with the other agencies. So, trying to navigate for anyone, that morass is extremely difficult and complex and slow at best. You know, you are talking about agencies who would politically and through the media like to describe things as a crisis but have difficulty responding to an email in an under a 90-day period. I think that indicates to you what real crisis they think it is.

Speaker Change: 13, state and local, uh, agencies, uh, in California. Uh, each of those, uh, have their own staff. Each of those have their own elected, um, boards.

Speaker Change: And, and each of those have their own objectives, uh, there is, uh, literally, no, coordination, amongst those agencies at any level, uh, and the objectives from them, um, are often at crosscurrents with the other agencies.

Speaker Change: Um, so, uh trying to navigate, uh, for anyone, uh, that, uh, morass as is extremely difficult, uh, and complex, uh, and slow at best.

Speaker Change: Um, you know, you are talking about agencies who would politically and through the media, like, to describe things as a crisis, but have difficulty responding to an email in an under, a 90-day period.

Ron Mittelstaedt: So you know, we really sort of need an adult in the room and that's what the EPA will bring. And they have, you know, one of the reasons we wanted their involvement is, you know, an ETLF is not a new phenomenon in the waste industry by any means. And the EPA has quite an advanced depth of knowledge on best practices to mitigate, remediate, and move forward in the ETLF relative to any other government agency out there. And so it was something that we look forward to and request. We believe that it will, as we said, streamline the process and, you know, help determine the prioritization of issues and allow us to make even faster progress that quite honestly, you know, just I don't think I have to explain it, the California bureaucracy just disallows, to be very honest.

Speaker Change: Uh, I think that indicates to you what real crisis they think it is. Uh, so you know, we we really sort of need an adult in the room. Uh and and that's what the EPA will bring. Uh, they have, you know, 1 of the reasons we wanted. Their involvement is, you know, an ETF, is not a new phenomenon in the waste industry, by any means.

Ron Mittelstaedt: I mean, you know, take no look further than the 4,000 homes burned down in Pacific Palisades and 95% of those that have applied for a rebuilding permit are nowhere. And that's a housing situation. So imagine their response to a landfill type crisis. So, yeah, this is something we have been, you know, seeking for quite some time.

Speaker Change: Uh, an EPA has quite an advanced depth of knowledge, uh, on best practices to mitigate remediate and move forward in the elf relative to any other government agency out there. And so, um, it was something that we look forward to and request. Uh, we, we believe, uh, that it will as we said, streamline the process and, um, you know, help determine the prioritization of issues, uh, and and allow us to make even faster progress, that quite honestly. Um, you know, just uh, yeah, I don't think I have to explain the California bureaucracy, just disallows, to be very honest. I mean, you know, take no look further than the 4,000 homes burned down in Pacific, Palisades, uh, and 95% of those that have applied for a rebuilding permit are nowhere.

Ron Mittelstaedt: You know, the California politicians and, you know, tremendous media out there will probably spend that as a negative to bolster their political position, but it is, you know, we can tell you we are strongly encouraged by it. That's great, Coloron. Thank you.

Speaker Change: You know, seeking for quite some time uh you know, the the the the California politicians and um you know, tremendous media out there will will probably spend that as a negative uh to bolster their political position but it is, you know, you know, we can tell you, we are strongly encouraged of it by it.

Kevin Chiang: And that's it for me. Thank you very much.

Ron Middlestead: That, that that's a great caller, Ron. Thank you. And that's it for me. Thank you very much.

Trevor Romeo: Our next question comes from Trevor Romeo from William Blair. Please go ahead with your question. Morning, Ron and Marion. Thanks so much for taking the questions. I wanted to hit on price first for solid waste. So still kind of call it upper sixes range to start the first half. Anything from a regional or line of business perspective that you'd call it as, you know, kind of stronger than you expected. And then any thoughts on the trajectory or the cadence for the second half? Seems like maybe you're trending above 6% for the full year, even if you do see some deceleration, but maybe any specific thoughts on that would be great.

Speaker Change: our next question comes from Trevor Romeo for

Trevor Romeo: William Blair.

Trevor Romeo: Good morning, Ron and Marion. Thanks so much for for taking the questions. Um, I I wanted to hit on on price first for solid waste, so still kind of call it upper sixes range to start the first half. Um, anything from a regional or line of business perspective that you'd call as, you know, kind of stronger than you expected. And then any thoughts on the trajectory or the Cadence, for the second half seems like, maybe you're, you're trending above 6% for the full year, even if you do see some deceleration, but maybe any specific thoughts on that, would be great.

Ron Mittelstaedt: Sure. So Trevor, as we said, coming into the year, we got it to about 6% price. And then following our Q1 results, we talked about the fact that price retention had been a little better than we anticipated, and therefore pricing in Q1 at 6.9 was a little bit higher. We've now since said that pricing effectively done for the year and maintained that it'll be above 6%. So really nothing to point out. Of course, we have our CPI linked markets, and then we've got our competitive markets. But as I said, we're trending to better than we originally anticipated.

Trevor Romeo: Sure. So so Trevor, um as as we said it coming into the year, we got it to about 6% price. And then following our q1 results, we talked about the fact that price retention had been a little better than we had anticipated and therefore pricing in q1 at. 69 was a little bit higher. Um, we've now since said that pricing is effectively,

Ron Mittelstaedt: We attributed that, at least a portion of it, to better pricing retention and the fact that all those trends in employee retention and open positions had all improved so well that we're not surprised that retention was a little better than expected. As we move through the year, in general, the cadence of our pricing and really the math around what the denominator is that we're measuring the dollar amount of price increases on, by math, by definition, that does step down sequentially through the course of the year. And that's why it started 6.9, we did 6.6.

Ron Mittelstaedt: You're right, it implies that it steps down a little bit between now, you know, if you are modeling it and you put it somewhere between the 6.6 and the 6 over the course of the rest of the year, that's probably the right way to think about it. Yes, Trevor.

Trevor Romeo: Done for the year and maintained that it'll be above 6%. So really nothing to to point out. Of course, we have our CPI linked markets and then we've got our our competitive markets, but you know, as I said, we're we're trying to better than we originally anticipated. We attributed that, you know, at least a portion of it to better pricing retention and the fact that all those those Trends in in employee retention and open positions, um, had all improved so well that we're not surprised that retention was a little better than than expected. Uh as we move through the year, you know, in general the the Cadence of our pricing and really the map around what the denominator is that. We're measuring the dollar amount of price increases on by math. You know by definition that does step down sequentially through the course of the year and that's why you started 69 we did 666. You're right. It implies that it steps down a little bit between now you know, if you are modeling it and you put it somewhere between the 66 and the 6 over the

Trevor Romeo: Course of the rest of the year. That's, probably the right way to think about it.

Speaker Change: Okay. Thanks man. That that is helpful and then for my follow-up just wanted to touch on. Yeah, I think you mentioned with the bonus depreciation comments, maybe some opportunistic fleet or equipment purchases to get ahead of you know maybe it's potential changes with the tariffs. Could you maybe just give a little bit more color or detail on your latest thoughts? Maybe on what your suppliers are telling you, what the potential impact could be with with the latest deals and, and guidance in place?

Ron Mittelstaedt: Well, as you know, first off, that's dynamic and could change by the end of this call. But the reality is, is that right now, our suppliers, particularly on the truck and truck body and chassis side, which is obviously the largest part of our capital, they are expecting about a 2% to a 3% price increase related to the tariffs for 26% and an overall increase of 4% to 5%, so meaning just a little bit more in addition to the tariff. So, you know, 4% to 5% total increase in fleet cost is what they're telling us, with about half of that, not quite half, being the tariff impact as they know it today.

Speaker Change: Yes. Um, well as, you know, first off that's Dynamic and could change by the end of this call, but um, the reality is is that right now, um, our suppliers, let's particularly on the, the truck and, and, uh, Truck Body. And Chassis side, which is obviously the largest part of our Capital. Um,

Speaker Change: They are expecting about a 2 to a 3%.

Ron Mittelstaedt: So, that is not by any means, you know, I think we said last quarter we would expect it to be relatively de minimis in 2025. That is the case. But, you know, knowing the uncertainty that still exists or potentially exists with things not yet being finalized in many places, we have looked to accelerate some fleet, as Mary-Anne mentioned, which that will offset some of that bonus depreciation that we otherwise would have seen in the free cash flow line in order to sort of hedge and blend down our 25, 26 overall costs to something hopefully below that 4 to 5% we would have otherwise expect from the manufacturers.

Speaker Change: Price increase related to the tariffs for 26 and an overall increase of 4 to 5. So meaning just a, a little bit more in addition to the Tariff. So, you know, 4 to 5% total increase in in Fleet cost is what they're telling us with about half of that, not quite half being the Tariff impact as they know it today.

Ron Mittelstaedt: So, you know, a number we're very comfortable with. And you have to remember there was also somewhat of there were delays in fleet in 23 and 24 that happened. And so, there's still, you know, not a catch up, but there was a little bit of a backlog that we were still taking delivery of in 25 too. So, it's a combination of those things. Okay, that's all very helpful. I appreciate it.

Speaker Change: Bought a hedge and blend down our 2526 overall cost to something, hopefully below that 4 to 5%. We would have otherwise expect uh, from the manufacturers. So uh, you know, a number we're very calm, we're very comfortable with. Um, and you have to remember, there was also somewhat of um, there were delays in Fleet in 23 and 24, uh, that happened and so there's still, you know, not catch up but um, there was a little bit of a backlog that we were, uh, still taking delivery of in 252. So it's a combination of those things.

Speaker Change: Okay, that's all very helpful. I appreciate it.

Sabahat Khan: Our next question comes from Sabahat Khan from RBC Capital Markets. Please go ahead with your question. Great. Thanks and good morning. Just wanted to revisit that discussion earlier around some of the components around volume. You know, I think before some of the Chiquita volume drag, I think we're talking about the progress or so the historical sort of volume shedding, largely getting to the tail end. Can you just help us think through as we get into 26 and beyond, you know, putting the GDP or the economic growth aside, how's sort of the leftover shedding volumes going to look like in the next couple of years from your vantage point?

Speaker Change: Our next question comes from Sabah hot Khan from RBC Capital markets. Please go ahead with your question.

Ron Mittelstaedt: Well, it's obviously a little bit hard to say, because that to an extent depends on the pace of M&A, you know, as I have said, or as we have said, look, you should want to have a little bit of a higher shedding number, because it means that the implied pace of M&A is higher, right? We have said that when we do private company M&A on the solid waste side, you know, somewhere around 10, maybe up to 15, 20% of that revenue over the first one to three years post M&A, we will look to either re-bid and at a price we make money or walk away, and that is what that shedding is.

Speaker Change: Great, thanks and good morning. Um, just wanted to revisit the discussion earlier around some of the components around volume. And I think before some of the chaquita volume drag, I think we're talking about the progress. Also, the historical sort of volume shedding, largely getting to the tail end. Can you just help us think through as you get into 26 and Beyond, you know, putting the GDP or the economic growth aside house? Sort of the leftover shedding volumes going to look like in the next couple of years from your Vantage Point. Thanks.

Ron Mittelstaedt: So, you know, I would tell you it has been larger, to your exact point, because of legacy progressive contracts, which we do believe we are effectively at the end of as of October of 24, the one we mentioned earlier in this call, that anniversary this year. And so that will, you know, that has been the largest piece to answer the question.

Speaker Change: Well, it's obviously a little bit uh hard to say um because that to an extent depends on the pace of m&a. And, you know, as I have said, or as we have said, look, um, you should want us to have a little bit of a higher shedding number because it it, it means that the implied pace of m&a is higher, right? We have, we have said that when we do private company m&a on the solid waste side, you know, somewhere around 10, maybe up to 15, 20% of that Revenue, over the first 1 to 3 years. Post m&a, we will look to, uh, either rebid and at a price, we make money or or walk away, uh, and, and that is what that shedding is. So, you know, I would tell you it has been larger to your exact point because of Legacy Progressive contracts, which we do believe we are effectively at the end of uh as of October of 24, the 1

Ron Mittelstaedt: So I would tell you, I would expect it to come down some 30 to 50% on a go forward basis, because that was the largest piece that still probably leaves it in that 50 to 75 basis points on a normalized basis, if we're doing quite a bit of M&A.

Speaker Change: we mentioned earlier in this call that will anniversary this year. Um, and so that will, you know, that has been the largest piece to answer the question. So I would tell you, I would expect it to come down some 30 to 50% on a go forward basis. Um, uh, because that was the largest piece. That's still probably leaves it in that 50 to 75 basis points on a normalized basis. If we're doing

Speaker Change: Quite a bit of m&a.

Ron Mittelstaedt: Got it, and then just following up on the EMP side of the business a little bit, you know, as you think about that, sort of the volume trends and things like that there, sort of, maybe just talk us through sort of the flexibility on the cost structure there. Obviously, just a small blip here this year, but just over the long run, you know, how do you think about the cost structure there, how much of that is variable, and just the ability to sort of tweak that, you know, over more of a multi-year basis, not just in reaction to the short-term blip on YCNH2 this year.

Speaker Change: Got it. And then just swung up on the, the, the EMP side of the business a little bit. You know, as you think about that sort of the volume Trends and things like that, their sort of, maybe just talk us through sort of the flexibility on the cost structure there. Obviously, just

Ron Mittelstaedt: Just wanted to understand sort of how you think about that business. We think of it as a very high fixed cost business. The reality is, is that that is a relatively high fixed asset business, low variable business. And it is a volume throughput business in the U.S. certainly, as it is drilling linked, much less so in Canada, where it is 85 plus percent production. So, you know, I wouldn't, it would be misleading to tell you or anyone that in that 6% of our total revenue, which is E&P, that we are expecting margin expansion to come from cost reduction in E&P, that that would be misleading.

Speaker Change: a small blip here this year, but just over the long run. You know, how do you think about the cost structure there? How much of that is variable and just the ability to sort of tweak that and over more of a multi-year basis, not just in reaction to the the, the short template we might see in H2 this year, just want to understand sort of how you think about that business thing.

Ron Mittelstaedt: But as that volume improves, whether it's because of crude price and drilling activity or increased production in Canada, you've obviously, you see the margin contribution in that business. So that's how we do think about the cost in the E&P business. And just to be to be clear, when we think about that business, as I mentioned earlier, that's part of the rationale for de-risking the business more broadly, because only about half of that 6 or 6.5% is drilling oriented. It's the US piece of the business and as we mentioned, the Canadian business is holding up fine and in fact was up year over really, really in line with our expectations.

Speaker Change: We think of it as a very high fixed cost business. Uh, the reality is, is that that is a um, uh, a relatively High fixed asset business, uh, low variable business. Um, and it is a, a volume, throughput business, uh, in, in the US certainly, as it is drilling linked, uh, much less. So, in Canada where it is, 85 Plus percent production length. So, uh, you know, I wouldn't it would be misleading to tell you or anyone that in that 6% of our total revenue which is enp that we are expecting margin expansion to come, from cost reduction in EMP, that that would be misleading. Um, but

Sabahat Khan: We haven't seen an impact there. Okay, thanks very much.

Speaker Change: Is drilling oriented? It's the US piece of the business and as we mentioned the Canadian business is holding up fine. And in fact was up um, year-over-year really, really in line with our expectations. We haven't seen an impact there.

Speaker Change: Okay, thanks very much.

Brian Burgmeier: Our next question comes from Brian Burgmeier from Citi. Please go ahead with your question. Good morning. Thank you for taking the question.

City: Our next question comes from Brian bergmeyer from City. Please go ahead with your question.

Brian Burgmeier: Maybe just on the volume headwinds that are impacting your 25 guidance, you know, is it accurate to say that's sort of really concentrated in a 3-Q event, just kind of focused on construction activity, or did you start to see slow down in 2-Q, and would you say there's any sort of meaningful difference between the activity in US and Canada, or is it just kind of the same everywhere? Well, to give you some context, if you look at C and D tons, so that that piece of our business, year over year, Q2 was the seventh quarter in a row, for those being down year over year, and it's averaged between seven and eight percent.

Brian Bergmeyer: Good morning. Thank you for taking the question. Um, maybe just on the volume. Headwinds that are impacting your, your 25 guests, you know, is it accurate to say that's sort of, uh, really concentrated in a 3Q event, um, just kind of focused on construction activity. Uh, or did you start to see slow down in, in 2 Q?

Brian Bergmeyer: Um, and would you say there's any sort of meaningful difference between the activity and US and Canada? Or is it just kind of the same everywhere?

Ron Mittelstaedt: Q1 to Q2, Q1 was down six percent, Q2 was down eight and a half percent. So, there was some incremental weakness, but the point is, even though the comps are easy, we're not seeing increases year over year. So, we did see what we called out as being a little different in Q2, where for that activity, and also for our roll off activity, which again, if I just look at polls down, this was the sixth quarter in a row, where polls were down, and those have been down on the order of kind of an average of about three percent year over year in each of those quarters.

Brian Bergmeyer: Well, to give you some context if you look at C and D tons. Um so that that piece of our our business year-over-year uh, Q2 was the seventh quarter in a row for those being down year-over-year and it's averaged between 7 and 8%. Q1 to Q2 q1 was down 6%, Q2 was down 8 and a half percent. So there was some incremental weakness, but the point is even though the comps are easy, um, we're not seeing increases year-over-year. So we did see what we, what we called out as being a little different.

Ron Mittelstaedt: So, we wouldn't say this is a new trend, but what we saw during the quarter was some continued moderation, as we would say, some incremental weakness, meaning June was tougher than April was, and we called out the fact that ordinarily between April and June, you would see more of a seasonal ramp, and the fact that that was missing is what informed our expectations for the back half of the year, specifically Q3, which is typically your seasonally strongest quarter. These are the pieces of the business where you see it, because they're more construction driven. Got it, got it.

Brian Bergmeyer: In in Q2, where for that activity, and also for our rolloff activity, which again, if I just look at pulls down, this was the sixth quarter in a row where polls were down and those have been down on the order of kind of an average of about 3% year-over-year in each of those quarters. So we wouldn't say this is a new trend but what we saw during the quarter was some continued, moderation, as we would say, some incremental weakness meaning, uh, June was tougher than April was and we called out the fact that ordinarily between April and June, you would see more of a seasonal ramp. And the fact that that was missing is what informed our expectations for the back half of the Year specifically Q3 which is typically your seasonally strongest quarter. These are the pieces of the business where you see it, because they're more construction driven

Brian Burgmeier: Thank you.

Brian Burgmeier: And just to follow up, would you say there's any sort of difference between activity in between US and Canada or just kind of the same everywhere?

Mary Ann Whitney: And then just as a follow up, just kind of for modeling purposes, are you able to share sort of the recycled commodity price assumption that you started the year with, and then what you're kind of assuming now for the back half given the recent decline? Sure. Yeah, let's take the second part of that first, Brian. We assumed when we started in February, we assumed a basket of about 105 to 110 on OCC, excuse me, which is the largest piece of our basket. And we're now seeing that more in that 85 to 90, you know, closer to 90 as I look down in sort of the second half in real time right now.

Got it, got it. Thank you. Um and and and just to to follow up is is would you say there's any sort of difference between activity and in between US and Canada are just kind of the same everywhere and then it just does a follow-up. Um, just kind of for modeling purposes. Are you able to share um sort of the Recycled commodity price assumptions that you started the year with and then what your kind of assuming now, for the back half, given the recent decline,

Mary Ann Whitney: And shifting to your question about differences across Canada or other regions, I'd say that, you know, if I look across again, these more cyclically exposed pieces that markets that are holding up a little better on a relative basis do include Canada actually being a little better and our West Coast markets and the softest, the greatest weakness we saw in our southern region, which includes like Florida, Texas, Louisiana, and then also our eastern region, which includes the northeast and then some of the southeastern markets. Got it. Thanks a lot for that detail.

Brian Bergmeyer: Yeah, we uh, let's take the second part of that first Brian. Um, we assumed in, when we started in February, we assumed a basket of about 105 to 110 on OCC, excuse me, which is the largest piece of our basket. And we're now seeing that more in that 85 to 90 um Pro, you know, closer to 90 as I look down. Um, in sort of the second half in real, in real time right now,

Brian Bergmeyer: And and shifting to your question about um differences across Canada or or other regions. Um, I'd say that, you know, if I look across again, these more cyclically exposed pieces, that markets that are holding up a little better, on a relative basis. Do include Canada, actually being a little better and our West Coast markets. And the softest, uh, the the greatest weakness we saw in our southern region, which includes like Florida, Texas, Louisiana. And then also our Eastern region, which includes the the Northeast and then some of the Southeastern markets.

Brian Burgmeier: I'll turn it over.

Brian Bergmeyer: Got it. Thanks a lot for that detail. I'll turn it over.

Brian Burgmeier: Our next question comes from Jerry Revich from Goldman Sachs. Please go ahead with your question. Hi, good morning.

Speaker Change: Our next question comes from Jerry revich from Goldman Sachs, please. Go ahead with your question.

Jerry Revich: This is Adam on for Jerry today. I think the 2025 margin guidance implies over 100 basis points underlying margin expansion compared to 70 basis points in the first half of the year. What are some of the moving pieces driving that accelerating underlying margin expansion in the balance of the year? Is that the improvements in voluntary turnover? Any color there? Yes, and thanks for pointing that out. Yes, we are bullish based on the trends we've seen, and as I described, all of those indicators trending positive for us as we move through Q2. We see acceleration there and see the increased margin expansion.

Speaker Change: Hi, good morning. This is Adam on for Jerry today. I think the, uh, 2025 margin guidance implies over 100 basis points. Underlying margin expansion compared to, uh, semi basis points in the first half of the year.

Speaker Change: What are some of the moving pieces driving that accelerating underlying margin expansion in the balance of the year, is at the improvements, in voluntary, turnover. Any, any color there?

Mary Ann Whitney: Then, of course, more broadly, you'll see a bigger increase in Q4 because the comps in other areas get easier, and so the headwinds abate, but looking sequentially, we'd expect margin to continue to improve as we move through the year, primarily because of those improving trends.

Speaker Change: You see, you'll see a bigger increase in Q4 because the comps in other areas, get easier. Um, and so the headwinds of bait, but looking, you know, sequentially, we'd expect margin. It's to continue to improve as we move through the year, primarily because of those improving trends,

Mary Ann Whitney: Great, and then you closed on the $75 million of annualized revenues incremental in the quarter and then expect potential to close on the $100 million to $200 million later this or early next year. Can you just comment on the mix and margin profile of these acquisitions and how we should think about the incremental in-year EBITDA associated with the $75 million in incremental revenues acquired in 2Q? Sure. Let's take the first part of that first, if we could. So the $100 to $200 million that we have, you know, I'm very confident in our closing components of that in Q3 and Q4 is all traditional solid waste.

Speaker Change: great and and then you closed on the 75 million of annualized revenues incremental on the quarter and then expect potential to close on the 1002 million.

Speaker Change: 75 million in incremental revenues acquired in 2 Q.

Mary Ann Whitney: There's no E&P in that or anything else. It is a mix of transactions through several of our geographies, so relatively well dispersed. You have franchises in there on the West Coast. You have competitive markets in the South, the Midwest, and the East. And, you know, typically the margin profile of that comes on, you know, nominally dilutive to our corporate average, obviously. We typically tell people to think of that as about 25% as a guideline as an EBITDA margin. You got a few that will be higher. You have some that based on perhaps if they're on the eastern seaboard with very high tip fees, they are just structurally a little lower on a margin basis.

Speaker Change: Sure, let's take the first part of that. Uh, first if we could so that the 100 to 200 million, uh, that we have, you know, I'm very confident in our closing, uh, components of that in Q3 and Q4, uh, is is all traditional Solid Waste. Uh, there's no INTP in that or anything else. Uh, it is a mix of transactions, uh, through several of our, uh, geographies. So relatively well, dispersed, you know, franchises in there on the west coast, you have competitive markets in the South and Midwest, and the East. Um and you know, typically the margin profile.

Mary Ann Whitney: And we have a mix of all of those in there. So I think that was the first part of your question.

Mary Ann Whitney: I think the second part was the incremental $75 million that has been closed since we reported Q1. And what we would tell you is we, again, same commentary on margin. We had a smaller, although very nice, E&P acquisition in Canada that we did in that $75 million. So that was a little of Creative 2 margins, but it was the smallest component of the $75. So again, I would tell you if you use 25 to 30% for that basket because of that E&P acquisition, that would be a fair assumption on that $75. If you assume some dilution on the order of 10 to 15 basis points from incremental M&A given our size and the relative contribution, that's probably the right way to think about it.

Speaker Change: Of that comes on, you know, nominally dilutive to our corporate average. Uh obviously and we typically tell people to think of that as about 25%, uh, as a guideline, uh, as an Eva Dom margin, you got a few that are be, will be higher. You have some that based on perhaps if they're on the Eastern Seaboard with very high tip fees, they are just structurally a little lower on a margin basis and we have a mix of all of those in there. Um, so I think that was the the first part of your question at least.

Speaker Change: Uh, I think the second part was the incremental uh, 75 million that has been closed since we reported q1. Uh, and what we would tell you is we uh, again, same commentary on margin. Uh, we had, uh, a smaller, uh, although very nice he and P acquisition in Canada, uh, that we did in that 75. So that was a little of creative, uh, 2 margin. Uh, but it was the smallest component of the 75. So, again, I would tell you, if you use 25 to 30% for that basket, uh, because of that Ian P acquisition. That would be a fair assumption on that 75.

Mary Ann Whitney: Great. Thanks so much.

Speaker Change: Now, if you if you assume some delusion on the order of 10 to 15 basis points, from incremental m&a, given our size and the relative contribution, that's probably the right way to think about it.

Speaker Change: Great. Thanks so much.

Chris Murray: Our next question comes from Chris Murray from ATB Markets. Please go ahead with your question. Yeah, thanks, folks. Good morning. Um, you know, maybe I don't know who wants to take this one. But you know, we've had a lot of discussion about volumes. But one of the things that at least we've seen is a bit of a, you know, split between kind of the, the construction manufacturing world of services.

Our next question comes from Chris Murray from ATB markets. Please go ahead with your question.

Ron Mittelstaedt: Just wondering if you have any thoughts about, you know, what you're seeing from some of the end markets, if you're seeing kind of some of the volume decline in the services, like I'm thinking like restaurants, different things that we're seeing, just on consumer behavior, versus what you've been calling out for, like C and D and manufacturing. Yeah, you know, Chris, we actually, it's actually inverse of that question from what we're seeing. We are, we have fairly nicely positive commercial yardage across our system, commercial yardage growth, commercial customer growth on a net basis, and fairly nice revenue growth on the commercial side.

Chris Murray: Yeah, thanks folks. Good morning. Um, you know, maybe I, I don't know who wants to take this 1, but, you know, we probably a lot of discussion about volumes. Um, but 1 of the things that at least we've seen is that a bit of a, you know, split between kind of the, uh, the construction manufacturing, world of services. Just wondering if you have any thoughts about, you know, what you're seeing from some of the end markets. Um, if you're seeing kind of some of the volume decline in in the services, like I'm thinking like restaurants um different things that we're seeing just on consumer behavior. Um versus what you've been calling out for like c and d and Manufacturing.

Ron Mittelstaedt: So, we're not seeing it there. It is the larger manufacturing industry and more cyclical construction activity, both commercially and residentially, that the slowing is happening in. You know, we marked it, we noted that special waste, which is, you know, can be cyclical, was up in the quarter. But again, don't get let that mislead you. That can be one or two big jobs that skew things. We are seeing states that are, you know, trying to get budgets passed that have put holds on projects that had been going. So, some of that's just a temporary thing.

Speaker Change: Yeah, you know, Chris, uh, we actually, it's, it's actually inverse of of that question. From what we're seeing we are, uh, we have fairly nicely positive, commercial yardage, uh, across our system, commercial yardage growth, commercial customer growth on a net basis, uh, and, and fairly nice Revenue growth on the commercial side. Uh, so we're not seeing it. There it is, the larger.

Ron Mittelstaedt: But it's more related to larger projects stalling or not getting released than it is the, what I'd call Main Street America, you know, commercial So I guess, you know, the reason I ask the question is, if I think about, you know, kind of a volume recovery, it feels like we're kind of in a period of, you know, we get by the uncertainty the whole bit, but the underlying majority of the economy still feels like it's doing okay. Is that the right way to approach it? Or how you guys are seeing how this happens? So that the volume recovery could happen maybe faster than we expect?

Budgets passed that have put holds on projects that had been that had been going. So some of that's just a temporary thing. But um, it's more related to larger projects stalling or not getting released uh than it is the what I'd call Main Street America, you know, Commercial Business.

Speaker Change: So you know, kind of a volume recovery. It feels like we're kind of in a period of you know we get by the uncertainty the whole bit but the underlying majority of the economy still feels like it's doing. Okay. Is that the right way?

Speaker Change: To approach it or how you guys are seeing how this happens. So that the volume recovery could happen, maybe faster than we expect.

Ron Mittelstaedt: Yeah, I mean, you know, again, we, we are, we have said for quite some time now, as we pointed out on a few of the comments on the call, you know, it has just been flat, sort of up 1%, down 1% for 10 to 11 consecutive quarters, with really the economy sort of in neutral. And that continues to be. We aren't saying there's any difference than that. You know, maybe it's down one and a half instead of one. But, you know, that can also be, you know, we've had pretty significant weather in the South, as an example.

Speaker Change: yeah, I mean you know again we we are we we have said but for quite some time, now as we pointed out in the field of the comments on the call, um,

Ron Mittelstaedt: We pointed out the South was weaker in an area, I would tell you, which has been very strong. So, you know, we're just, we're hesitant to make a call. Look, we have never guided. We have never guided saying, well, our guidance assumes a dramatic recovery in the economy. that we don't do that, we're sort of telling you what we're seeing in real time and assuming it marches forward and that if it improves, that's all upside. And so I think we're cautious after 11 quarters of flatline. Sounds good. Maybe one more question, if you don't mind.

Speaker Change: You know, it is just been flat sort of up, 1% down 1% for 10 to 11 consecutive quarters. Um, with really the economy sort of in neutral that and and that continues to be. We we we aren't saying there's any difference than that. You know maybe it's down 1 and a half instead of 1. Uh but you know that can also be you know, we've had pretty significant weather in the South uh as an example. We pointed out that the South was weaker in an area. I would tell you which has been very strong um so

Speaker Change: Uh, I, you know, we're we're just, we're hesitant to make a call and what you look. We have never guided.

Speaker Change: Okay, we have never guided saying well our guidance assumes a dramatic recovery in the economy.

Speaker Change: That that we we don't do that. We we sort of telling you what we're seeing in real time and assuming it marches forward and that if it improves that's all upside. Uh and and so I think we're cautious after 11 quarters of Flatline

Ron Mittelstaedt: You know, as I listen to the call, I listen to some of the things you talk about, you know, in terms of turnover, in terms of technology, you know, we really haven't talked on about RNG development and things like that. But we, you know, you go back a few calls, and, you know, we've been talking about, you know, outsized margin expansion, as we went into 26, 27. You know, given where you're sitting, and I appreciate volumes, you know, maybe going to hurt. But, you know, I think, as you pointed out, you know, second half margin expansion is already kind of aiming at 100 basis points, which probably carries into the early part of 26.

Ron Mittelstaedt: How should we be thinking about, you know, that margin cadence as we go into sort of the later years, as you get some of the benefit of some of the investments you made over the last little while and some of the new initiatives that you're implementing? Well, you know, we certainly think about setting ourselves to have tailwinds that would be incremental to the typical 20 to 40 basis points of price led organic growth. You know, and you look at this year delivering 50 basis points, in spite of the fact that there are incremental headwinds from commodities.

Speaker Change: Sounds good. Um, maybe 1 more question if you don't mind. Um, you know, as I as I listened to the call and I listen to some of the things you talked about, um, you know, in terms of turnover, in terms of Technology, um, you know, we really haven't talked on about RNG development and and, and, and things like that, um, but we, you know, you go back a few calls and, you know, we've been talking about, you know, outsized margin expansion as we went into 26/27, um, you know, given where you're sitting and I appreciate volumes, you know, maybe going to hurt but, you know, I think, as you pointed out, you know, second half margin expansion is already. Kind of aiming at 100 basis points, which probably carries you into the early part of 26. How should we be thinking about, you know, that margin Cadence as we go into sort of the later years as you get some of the benefits of some of the Investments you made over over the last little while and some of the new initiatives that you're um that you're that you're implementing.

Ron Mittelstaedt: And so, you know, we, we talked about that opportunity for just one that normalizes for another, in this case, 50 basis points from commodities alone. So, look, we're that, you know, that is certainly the thought behind making the investments we're making now, Chris, and we do look forward to in subsequent periods, continuing to realize those benefits. And so we're, we're certainly bullish about being north of that 20 to 40 basis. Okay, I'll leave it there. Thanks, folks. Thank you.

Well, you know, we certainly think about setting ourselves to have Tailwinds that would be incremental to the typical 20 to 40 basis points of price. Le organic growth. You know, and you look at this year, delivering 50 basis points in spite of the fact that there are incremental headwinds, um, from Commodities. And so, you know, we, we talked about that opportunity for just, when that normalizes for another, in this case, 50 basis points from Commodities alone. So look where that, you know, that is certainly the thought behind making the Investments, we're making now Chris and we do look forward to in subsequent periods, continuing to realize those benefits. Um, and so we're, we're certainly bullish about being north of that 20 to 40 basis points.

Speaker Change: Okay, I'll leave it there. Thanks folks.

Speaker Change: Thank you.

Konark Gupta: Our next question comes from Konark Gupta from Scotiabank. Please go ahead with your question. Aishwarya, good morning, everyone. Maybe on the price cost spread, it seems like you guys are still heading as an industry, you know, maybe near the high end of the typical ranges or maybe above, you know, maybe the 6.5% pricing and whatnot. You know, heading into 26, like exiting 25.

Our next question comes from Conor Gupta from Scotia Bank. Please go ahead with your question.

Conor Gupta: Thanks. Alright, good morning everyone. Um,

Ron Mittelstaedt: Do you feel like the price cost spread, you know, can potentially, you know, come down or normalize to what sort of the normal levels? Or that's still kind of like a far-fetched idea? And if at all this spread, you know, narrows or stays the same, you know, would it be more driven by the price or the cost? Well, I think I think it would be driven by both. To answer the question, I mean, look, if you go back 15 years, so all different types of economic cycles that have happened in that, you know, we've averaged about 150 basis points spread of our price to at least a CPI, if you want to use that as a proxy for cost.

Conor Gupta: Maybe on on the price cost spread. Um, it seems like you guys have still hitting as an industry. Um, you know maybe near the high end of of the typical ranges or maybe above um you know, with the 6 and a half percent pricing and whatnot. Uh, you know, heading into 26, like exiting 25, uh, do you feel like the price costs spread uh, you know, 10 potentially, you know, come down or normalize to a sort of the normal levels or that's still kind of like a far-fetched idea? And if, if if at all this

Conor Gupta: Spread, you know, Narrows or or stays the same, you know, would it be more driven by the price or, or cost?

Conor Gupta: Well, I think

Conor Gupta: Be driven by.

Ron Mittelstaedt: Some years costs have been a little higher than CPI. Some maybe right at, but that's a fair proxy. So, as the CPI continues to step down. which it has been and is projected to continue to do so, or maybe flatten out in the two and a half to three level, coming down from, you know, 9%, 24 months, 24 to 30 months ago, you will see the aggregate price or reported price come down accordingly, as you have been. But I think you will see that spread continue. Because that's what we target as a company and have for long periods.

Ron Mittelstaedt: Now, I think the higher the CPI, that does help a little bit on the margin to increase that spread a bit that you have. So, but I think that's pretty de minimis, to be honest. We are seeing our costs aggregately fall in total each quarter for the last, you know, year and a half. We saw it step down again in aggregate. We saw our labor costs go to the sort of 4, 2, 4, 3 level. And our total costs come in about 3, 4 to 3, 5. So, still a little bit above the CPI, but coming down.

To, uh, at least the CPI, if you want to use that as a proxy for cost, uh, some years costs have been a little higher than CPI some maybe you know right at but that's a fair proxy. Um so as the CPI continues to step down um which it has been and is projected to continue to to do so or maybe flatten out in the 2 and a half to 3 level, uh, coming down from, you know, 9%, 24 months, 24, to 30 months ago. Uh, you will see the aggregate price or reported price come down, uh, accordingly as you have been. But I, I think you will see that spread continue, uh, because that's what we target, uh, as a company and, and have for long periods. Now, I think the higher, the CPI, that does help a little bit on

Conor Gupta: The margin to increase that spread a bit, uh, uh, that you have, so, but I I think that's pretty, um, diminish to be honest. Um, we are seeing our costs, uh, aggregate fall, uh, in total, um, uh, each quarter for the last, you know, year and a half. We saw it step down again. In aggregate, we saw our labor costs. Go to the

Ron Mittelstaedt: So, if you use that as a proxy, you know, 150 to 200 basis points on top of that, would get you sort of 5, 5.5 type percent price to get you the same performance that 6.5 had been getting in 2025.

Sort of 4243 level and our total costs come in about 3, 4 to 3 5. So still a little bit above the CPI but coming down. So if you use that as a proxy, you know, 150 to 200 basis points. On top of that would get you sort of 5 5 and a half type percent price, to get you the same performance that's 6 and a half had been getting in 2025.

Konark Gupta: That's great, Karan. Thanks.

Ron Mittelstaedt: And just to follow up, Chiquita, you know, just kind of like understanding here, you said, you know, having the EPA as the adult in the room should help, obviously. Do you see an opportunity to reduce your cost obligation for the next several years with the EPA involved here? Or that's pretty much a given? Well, look, I think what we said is that we don't have any changes to the cost assumptions and the cash outflow assumptions and closure assumptions that we have provided. You know, we do a multi-year model on that. There are quarters that are higher, there are quarters that are lower, but none of the assumptions have materially changed.

Conor Gupta: That that's a great product, thanks and just to follow up, you know, just kind of like understanding here. You said, you know, having the EPA as the adult in the room should help obviously.

Conor Gupta: Do do you see an opportunity to reduce your cost obligation for the next several years with the EPA and model here? Or that's pretty much a given?

Ron Mittelstaedt: We just believe that, look, a lot of these costs are legal and consulting. And a lot of that is driven by regulatory framework in California. So if that alone is streamlined through the EPA, that'll get better right there, irregardless of remediation costs. So, you know, look, I would tell you we're cautiously optimistic on doing better. But we're going to fulfill whatever our regulatory legal requirements are to whatever agency is over us. And we have been doing that and will continue to do that. So it's a little bit hard to predict, but I would tell you we feel incrementally better.

Conor Gupta: Well look I I I think what we said is that we don't have any changes to the the the cost assumptions and the cash outflow assumptions and closure assumptions that we have have provided. Um you know we do a multi-year model on that. There are quarters that are higher, there are quarters that are lower but none of the assumptions. Uh have in materially changed. We just believe that. Look a lot of these costs are legal and Consulting and a lot of that is driven by regulatory framework in California.

Ron Mittelstaedt: Okay, that's glad to hear. Thanks so much for the time.

Conor Gupta: So, if, if that alone is streamlined through the EPA, uh, that'll get better right there irregardless of remediation cost. Uh, so, um, you know, look, I, I would tell you, we're, we're cautiously optimistic on, uh, on doing better. Um, but we're going to fulfill whatever our regulatory legal uh, requirements are uh, to whatever agency is over us. Uh, and and uh, and and we have been doing that, and we'll continue to do that. So it's a little bit hard to predict. Uh, but I would tell you we feel incrementally better.

Speaker Change: That's uh glad to hear it. Thanks so much for the time.

Michael Dillman: Our next question comes from Michael Dillman from National Bank. Please go ahead with your question. Hey, good morning, guys. So obviously, nice job on the employee retention improvement. I wonder, Ron, if you'd characterize that improvement is largely complete, obviously, understanding the impact to margins is lagged. And if that's the case, you know, what are your thoughts on some of the other, you know, call it buckets of potential efficiencies that you can drive, incremental price costs spread going forward, I think, such as the AI initiative you mentioned. Yeah, well, you know, first, thank you for your comments there.

Our next question comes from Michael dommett from National Bank, please go ahead with your question.

Michael Dommett: Hey, good morning guys. Um, so obviously. Nice job on the employee retention Improvement. I I wonder on if you'd characterize that Improvement is um, largely complete, uh, obviously understanding the impact of margins is lagged. Um, and if that's the case, you know, what are your thoughts on some of the other? You know, call it buckets uh of potential efficiency.

Speaker Change: That you can drive.

Michael Dommett: Incremental price cost spread going forward. I think such as the, uh, AI initiative. You mentioned at the top of the call.

Ron Mittelstaedt: I appreciate it.

Ron Mittelstaedt: Well, first, I tell you that when you talk about the turnover and the employee piece, it's never done. Obviously, you do get to a point of diminishing returns. But our objective is to drive total turnover below 20% by year end and into 26 and total voluntary to well under 10% as we go into 26. So we're not done, but we're getting close. You know, look, I would tell you, that the opportunities that we see that are the largest impact going forward are the use of technology and specifically AI. And I wouldn't say that it's necessarily the ability to increase the price-cost spread.

Ron Mittelstaedt: I think it's the ability to maintain the price-cost spread and reduce churn and therefore impacts to reported volume. That is the opportunity. And that is, we believe, can be fairly significant based on the pilots that we've been doing for the last several quarters.

Speaker Change: Um, or are the use of technology and specifically Ai. And and I wouldn't say that it's necessarily the ability to increase the price cost spread, I think it's the ability to maintain the price cost spread and reduce churn and therefore impacts to to reported volumes.

Ron Mittelstaedt: And so that will start to play out fully in 26, as we will be fully using it by the fourth quarter of this year. So those are the projects like that, projects like, you know, real-time routing. which think of it as sort of ways for garbage trucks, which, you know, we really don't have the ability to do in our system today in the manner that we want to avoid traffic, to avoid construction, to reroute dynamically, to affect productivity and incremental new stops. So those are the type things, you know, complete digitization of our maintenance program and systems, which I think will allow us for greater inventory control, greater projectability and preventative maintenance and scheduled maintenance, and a flexing of costs with projectability.

Speaker Change: That is the opportunity. And and that is, uh, we believe can be fairly significant, uh, based on the the, the pilots that we've been doing for the last several quarters. Um, and so that will start to play out fully in 26. As we will be fully using it by the fourth quarter of this year.

Speaker Change: um so those are the projects like that projects like you know real time uh routing

Speaker Change: Which think of it as sort of ways for garbage trucks, uh, which, you know, we really don't have the ability to do in our system today in the manner that we want, uh, to to avoid traffic, to avoid construction to reroute dynamically, um, to affect productivity and incremental new stops. So, those are the type things, you know, a complete digitization of our maintenance program and systems which

Ron Mittelstaedt: These are all things we are rolling out in real time over 26 and 27 that I think are, you know, may not individually be the margin drivers, 100 basis points that turnover reduction has, but combined they're significant. Really interesting comments on the price optimization. I mean, Ron, just to follow up on that, does that, in your opinion, could that change the calculus for the typical price-cost spread that you guys, you know, historically have? Again, I would want to say, if we could maintain the typical price spread we have had, and we could reduce by 20 to 40 percent the churn impact of that, meaning you have to sell 20 to 50 percent less customers to stay neutral, I'll take that all day long.

Speaker Change: Uh I think who allows for greater inventory control, uh greater project and preventive maintenance and uh scheduled maintenance, uh and uh and a flexing of costs uh with project ability. These are all things we are rolling out in real time over 26 and 27 that I think are you know, may not in may not individually, be the margin drivers. 100 basis points that turn over reduction has but combined their significant

Speaker Change: Really interesting comments on the, uh, on the price optimization. Um,

I mean, Ron just to follow up on that. Does that in your opinion? Could that change the calculus for for the for the typical price cost spread that you guys? You know, historically had

Speaker Change: Uh again I I I would want to say if we could maintain the typical price spread we have had and we could reduce by 20 to 40% the churn impact of that, meaning you have to sell 20 to 50%, less customers to stay neutral.

Speaker Change: I'll take that all day long.

Ron Mittelstaedt: God. Thanks for the comments, Ron.

Got it. Thanks for the comments, Ron.

Stephanie Moore: Our next question comes from Stephanie Moore from Jefferies. Please go ahead with your question. Hi, good morning. Just one question for me.

Speaker Change: Our next question comes from Stephanie Moore from Jeffrey's, please go ahead with your question.

Stephanie Moore: You know, it does appear that this current administration, you know, could potentially be a little bit more lenient in terms of large M&A than at least the prior administration. So I wanted to maybe ask a higher level thought, and if the current... I guess, backdrop would make you a bit more amenable to doing, you know, maybe a larger deals or anything that might be outside of kind of the core average deals that you look at on an annual basis. Thank you.

Stephanie Moore: Hi, good morning, just 1. Question for me, you know?

In this current it does appear that this current Administration, you know, could potentially be a little bit more lenient in terms of large m&a than at least the prior Administration. So wanted to maybe ask a higher level thought and if the current

I guess backdrop would make you a bit more amenable to do it, you know, maybe a larger deal or anything that might be outside of kind of the the core average seals that you look at on an annual basis.

Ron Mittelstaedt: Yeah, no, thank you, Stephanie, for the question. Look, the first thing I would tell you is that In the course of 28 years, we have never been through a second request with the Department of Justice or the Antitrust Division. And I think that's indicative of our market model, number one. There is nothing that we are looking at that, or have been looking at, that we have shied away because of fears of Justice Department clearance, concentration, et cetera. So I wouldn't want to say that I believe for us that a more lenient. Justice Process. is an accelerant to M&A, because it hasn't been an inhibition to M&A.

Thank you. Yeah. No, thank you. Stephanie, for the question, look, I the first thing I would tell you is that, um,

In the course of 28 years. Uh, we have never been through a second request with the Department of Justice or the antitrust division. Um uh and uh I think that's indicative of our Market model number 1. Um, uh, there is nothing that we are looking at that, uh, or have been looking at that. We have shied away because of fears of, uh, justice department, uh, clearance, uh, concentration, Etc. So, uh, I wouldn't want to say that I believe for us, that a, a

Stephanie Moore: More lenient uh, justice process.

Ron Mittelstaedt: Now, I will say that I think, in general, that probably broadens the scope of things in some markets for us. You have to remember that a The filing requirement is about $125 million of purchase price, not revenue. So remember, in our sector, that could be $40 million of revenue, okay, depending on profitability of a deal. So you know, that's what you've got to remember as far as where does this HSR requirement apply to. That's how low it – that's what it goes down to. But I would not tell you that it has been an inhibition for us, but it certainly – we welcome the more, you know, favorable regulatory environment, I would say.

Stephanie Moore: Is an accelerant to m&a uh because it hasn't been an inhibition to m&a. Uh now um I I will say that I think uh in general uh that probably broadens uh the scope of things in some markets for us. Um uh you have to remember that a you the the filing requirement is about 125 million of purchase price. Not Revenue.

Stephanie Moore: So um, you know, that that's what you got to remember, as far as where does this HSR requirement? Apply to. Uh, that's how low, that's, that's what it goes down to. But uh, uh, I I I would not tell you that it has been an inhibition for us, uh but it's certainly we welcome the uh more you know, favorable regulatory environment. I would say.

Ron Mittelstaedt: Great, thank you.

Stephanie Moore: Great. Thank you.

James Schumm: Our next question comes from James Schumm from TD Cowan. Please go ahead with your question. Hey, good morning. Thanks. With respect to free cash flow, you mentioned you're on track to hit your Chiquita Canyon spending guidance, but can you update on your best estimate for next year's spending on Chiquita? Was that $50 million? Was that the last update? And can the EPA give you some relief on leachate disposal, or does that have to come from the state? And maybe just give us a sense of the $100 to $150 that you spend this year.

Speaker Change: Our next question comes from James. Shum from TD Cowen, please go ahead with your question.

Ron Mittelstaedt: Give us a sense, like, how much is leachate, or, you know, if you could bucket some of the costs, that would be super helpful. Sure.

Ron Mittelstaedt: Well, what I would tell you is, you know, I think it's too early to make any changes up or down to our 26-27 estimates because it is a dynamic situation and we are looking at this potential sort of lead coordination change, okay? And so it'd be speculative, I think, to do that. To the part of your question regarding how much is leachate, you know, that's about 70% of the cost, okay? The cost of treatment and disposal and transportation. So obviously, any impacts that we can make operationally or outlet-wise or transit-wise help that. We have made some changes that have recently reduced that in real time that we will begin seeing throughout this third quarter as a somewhat of a step change for us.

James Shum: Hey, good morning, thanks, um, with respect to free cash flow. You mentioned, you're on track to hit your chikita, Canyon spending guidance, but can you update on your best estimate for next year's spending on chikita? Was that, was that 50 million? Where was that? The was that the last update? And can the EPA give you some relief on leech 8 disposal, or does that have to come from the state? And maybe just give us a sense of the 100 to 150 that you spend this year. Give us a sense, like, how much is leech 8 or, you know, if you could bucket some of the costs that would be super helpful.

James Shum: Sure. Well, what I would tell you is, you know, I think it's too early to make any changes up or down, uh, to our 2627 estimates, uh, because it is a dynamic situation and, and we are looking at this potential sort of lead, uh, coordination, uh, uh, change, okay. Uh, and and so it'd be, it'd be speculative. I think to do that, uh, to the part of your question regarding, um, how much is Lee? Uh, you know, that's about 70% of the cost. Okay. The cost of, uh, treatment and Disposal and Transportation. Uh, so obviously, uh, any, uh, any impacts that we can make, um, operationally or Outlet wise, uh, or Transit wise, uh, help help that, uh, we, um, have made some changes that have recently, reduced that, um, uh, in real time that we will begin seeing throughout this third quarter,

Ron Mittelstaedt: And they were contemplated by. And yes, and they were contemplated. And that is not a result of anything new. That's a result of ongoing efforts.

James Shum: as a somewhat of a step change for us, they were contemplated by

Ron Mittelstaedt: So, you know, that is what we can, you know, what we can tell you about that.

And they were contemplated that and that is not a result of anything new, uh, that's the result of ongoing, uh, efforts. So, um,

Ron Mittelstaedt: And then, Ron, just, I mean... As you look for different options to sort of ameliorate those costs, like will you be appealing to the EPA or would that still have to go through the state? I think the answer depends on what that cost is, Jayim. The EPA is not going to come in and direct the state to do things that are against state laws or regulations or objectives. That is not what they are intended to do, okay? So, you know, we will still have to and still are in compliance with all of those things. But there are things that reside under the EPA's purview that I would say it's not clear whether it is a federal, state, or local issue on some decisions.

James Shum: You know, that that, that is what we can. You know what, we can tell you about that James

Ron Middlestead: and then and then Ron, just I mean,

Ron Middlestead: As you look for different options to uh, sort of ameliorate those costs like, will you be appealing to the uh EPA or would that still have to go through the state?

Ron Mittelstaedt: And in those areas, I think the clarity of the EPA can be helpful to us. So, you know, stay tuned for how that plays itself out. Okay, very good.

In terms of getting some, you know, I think it it uh, the answer depends on what that cost is, right? I mean, the the the the EPA is not uh, going to come in and direct to do direct the state to do things that are against state laws or regulations or objectives. That. That is not what they are intended to do, okay. Um, so, um, you, you know, you we are, we will still have to and still are in compliance with all of those things. Um, but there are, uh, there are things that, uh, reside under the epa's, uh, purview that, um, I would say it's not clear, uh, whether it is a federal state or local issue on some decisions and in the

Those areas, I think the clarity, uh, the EPA can be helpful, uh, to us. So, um, you know, uh, stay tuned for for how that at that plays itself out.

Ron Mittelstaedt: And then just lastly, for recycling, what does your overall book of business look like right now? Is it majority for service? Or are you assuming the full commodity price risk? What is what is the book look like currently? Yeah, you know, most of the recycling we do is part of a broader service provision. And so if we have the exposure, which is why we communicate what the sensitivity is on the, you know, the total recycling basket, and you see that move through our numbers every Okay, thank you.

Speaker Change: Okay, very good. And then just lastly, for recycling, what does your overall book of business? Look like right now is it majority for service? Or are you assuming the full commodity price risk? What is what is the book look like currently?

Speaker Change: Yeah. You know most of the recycling we do is part of a broader service provision and so um it we have the exposure which is why we communicate what the sensitivity is on the you know, the total recycling basket and you see that move through our, our numbers, every quarter,

Speaker Change: Okay, thank you.

Ron Mittelstaedt: Our next question comes from Tobey Sommer from Truist.

Tobey Sommer: Please go ahead with your question. Hi, all.

Our next question comes from Toby Somer from truest please. Go ahead with your question.

Henry: It's Henry on for Tobey here. Thanks for squeezing me in. I just have a quick one on M&A. You touched on this briefly before, but what's the typical timeline we should look at for tokens to reach, you know, kind of company average margins? And then has that average timeline, you know, changed here as you've stepped up through acquisitions? Thank you. Yeah. So I would tell you everybody's definition of a token is a little different. So a little bit of, you know, commentary there, but typically a token, we're going to be able to bring up the company margin average within a 12 to 18 month period.

Ron Mittelstaedt: It's a relatively quick timeframe because you are, you know, you're shutting down a facility that exists, you're consolidating routes, you're doing things that happen in relatively quick order. Now, again, those tend to be your very small transactions where you're just densifying a market area. You know, when you're talking about something that is more of a standalone, and that could be something 20, 30 million in revenue, and you're going to build out around, you know, that's a longer timeframe, right? You know, you're probably talking, you know, probably more of like a three to four year type period to move that closer to the company average.

Okay, uh, you touched on this briefly before, but what's the typical timeline we should look at for for tokens to reach? You know, kind of company average margins and it has that average timeline, you know, change here as as you've stepped up these Acquisitions. Thank you? Yeah, yeah, so so, um, I, I would tell you, uh, everybody's definition of a tuck in is a little different. So a little bit of, you know, uh, commentary there. But typically a tuck in, uh, we're going to be able to bring up the company margin and average within a 12 to 18 month period. It's a relatively quick time frame. Uh, because you are, you know, you're you're, you're shutting down a facility that exists or consolidating routes. You're doing things that happen in relatively quick order. Uh, now again, that's that was a 10 to me are very small transactions where you're just densifying a market area. You know, when you're talking about something that is more of a standalone and that could be something.

Ron Mittelstaedt: Now, remember, if we're buying a company that's a 23, 24% EBITDA margin, that's 1,000 basis points below our margin. So even if you're moving at 200 basis points a year, you know, you're mathematically four and a half to five years.

20 30 million in revenue and, and you're going to build out around, you know, that's that's a longer time frame, right? Yeah. You you know, you're probably talking a, you know, a probably more of like a 3 to 4 year, type period, to move that closer to your comp, to the company average. Now, remember if we're buying a company, that's a 232 24%, ebit down margin, uh, that's a thousand basis points below our margin. Uh, so even if you're moving at 200 basis points a year,

Tammy Zakaria: So it somewhat depends on, Henry, on your definition of what a token And our next question comes from Tammy Zakaria from J.P. Morgan. Please go ahead with your question. Hi, good morning. Thank you so much for fitting me in. I just have one quick clarification question about the opportunistic buyback. So if the 100 to 200 million M&A in the pipeline closes this year, could we still expect some opportunistic repo or will it be sort of an either or outcome? We view ourselves as having the optionality to continue to do all aspects of capital allocation, so no, we don't see it as either or.

Speaker Change: You know your mathematically 4 and a half to 5 years. Um so uh so it it it's somewhat depends um uh on Henry on the your definition of what a tuck in is.

Speaker Change: And our next question comes from Tammy, Zakaria from JP Morgan, please go ahead with your question.

Tammy Zakaria: Hi, good morning, thank you so much for feeding me in. I just have 1 quick clarification, question about the opportunistic buyback. Uh, so if the 100 to 200 million MMA, in the pipeline closest this year, could we still expect some opportunistic repo, or will it be sort of an either or outcome?

Tammy Zakaria: Got it. Perfect. Thank you.

Tammy Zakaria: We we do ourselves as having the optionality to continue to do your all aspects of capital, allocation, so, no, we don't see it as either or

Tammy Zakaria: Got it. Perfect. Thank you.

Operator: And ladies and gentlemen, with that, we'll be concluding today's question and answer session. I'd like to turn the floor back over to Ron Mittelstaedt for any closing remarks. If there are no further questions, on behalf of our entire management team, we appreciate your listening to and interest in the call today. Mary Ann and Joe Box are available today to answer any direct questions that we did not cover that we are allowed to answer under Regulation FD, Reg G, and applicable securities laws in Canada. Thank you again. We look forward to connecting with you at upcoming investor conferences or on our next earnings call.

Speaker Change: And ladies and gentlemen, with that we'll be including today's question and answer session. I'd like to turn the floor back over to our middle step or any closing remarks.

Speaker Change: If there are no further questions on behalf of our entire management team, we appreciate your listening to an interest in the call today.

Speaker Change: Marianne and Joe Boxer available today. To answer any direct questions that we did not cover that. We are allowed to answer under regulation FD regg and applicable, Securities laws in Canada.

Thank you again. We look forward to connecting with you at upcoming investor conferences or on our next earnings call.

Ron Mittelstaedt: And ladies and gentlemen with that we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your line.

Yeah, ladies and gentlemen with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.