Core Insights - Waste Management (WM) reported a 19% non-GAAP operating EBITDA growth in Q2 2025, contributing over half of the year-over-year increase in operating EBITDA [3][14] - The company achieved a total operating EBITDA margin of nearly 30% for Q2 2025, approaching historical best levels despite a negative impact from the expiration of the alternative fuel tax credit [3][27] - Management confirmed an upward revision of non-GAAP free cash flow guidance for 2025 to between $2.8 billion and $2.9 billion, with a total of $1.29 billion in free cash flow delivered in the first half of 2025 [4][31] Financial Performance - Collection and disposal operating EBITDA margin improved by 60 basis points to 37.9% in Q2 2025, supported by strong landfill volumes and targeted asset investments [3][21] - The legacy business achieved a 130 basis point improvement in operating EBITDA margin, reaching 31.3% in Q2 2025 [7][27] - Free cash flow for the first half of 2025 was $1.29 billion, with capital expenditures totaling $1.56 billion [7][30] Operational Efficiency - The operating expense ratio set a record in Q2 2025, remaining below 60% of revenue due to technological integration and process discipline [3][22] - Turnover for drivers and technicians improved by 370 basis points to 18.8% in Q2 2025, indicating progress in workforce stability [3][24] - The company completed a regional solid waste acquisition in the Washington, D.C. area, with full-year acquisition spending expected to exceed $500 million [7][15] Sustainability and Growth - Recycling operating EBITDA grew by 17% in Q2 2025, despite a nearly 15% decline in recycled commodity prices [7][16] - 90% of 2025 renewable gas off-take is locked, with an average RIN price of $2.55 in Q2 2025, exceeding market expectations [7][62] - The integration of WM Healthcare Solutions is on track to achieve the upper end of the $80-$100 million synergy target for 2025, with a 190 basis point improvement in operating EBITDA margin since acquisition [7][18] Market Trends - Collection and disposal volume grew by 1.6% in Q2 2025, influenced by wildfire cleanup efforts, while the loss of a large franchise contract negatively impacted residential and commercial volumes [3][21] - The company maintains annual volume guidance, projecting full-year volume growth between 0.25% and 0.75% [3][32] - The strength of the sustainability platform continues to distinguish WM in the industry, aligning with key secular drivers of circularity and energy demand [7][16]

Core Insights - Waste Management, Inc. is highlighted as a strong compounder, often overlooked due to its unexciting business model [1] Company Analysis - Waste Management, Inc. operates in the waste management sector, which is essential yet often considered mundane [1] - The company exemplifies how solid performance can come from industries that may not be perceived as innovative [1] Investment Perspective - The article suggests that investors should consider companies like Waste Management, Inc. for their potential long-term growth, despite their less glamorous nature [1]

Core Viewpoint - The article discusses the importance of understanding the implications of recent financial performance and market trends for investment decisions [1][2]. Financial Performance - Recent earnings reports indicate a significant increase in revenue for the company, with a year-over-year growth of 15% [1]. - The net profit margin has improved from 10% to 12%, reflecting better cost management and operational efficiency [1]. Market Trends - The industry is experiencing a shift towards digital transformation, with companies investing heavily in technology to enhance customer experience [2]. - Analysts predict that the market will grow at a compound annual growth rate (CAGR) of 8% over the next five years, driven by increased demand for innovative solutions [2]. Investment Opportunities - There are emerging opportunities in sectors such as renewable energy and technology, which are expected to outperform traditional industries [1]. - Companies that adapt to changing consumer preferences and invest in sustainable practices are likely to see enhanced market positions [2].

Core Insights - Waste Management Inc reported better-than-expected earnings for Q2, with earnings of $1.92 per share, surpassing the analyst consensus estimate of $1.89 per share, and quarterly sales of $6.430 billion, exceeding the estimate of $6.369 billion [1][2] Financial Performance - The company achieved robust organic revenue growth and margin expansion in its Collection and Disposal business, reaching the best-ever operating expense margin [2] - Operating EBITDA grew by double digits in both Recycling Processing and Sales and WM Renewable Energy segments, indicating strong earnings contributions from sustainability investments [2] Guidance and Analyst Ratings - Waste Management lowered its FY2025 sales guidance from a range of $25.550 billion-$25.800 billion to $25.275 billion-$25.475 billion [2] - Following the earnings announcement, analysts adjusted their price targets: Oppenheimer raised it from $260 to $265, UBS from $260 to $265, and BMO Capital from $245 to $248, while maintaining their respective ratings [3][5]

Financial Performance - Waste Management delivered a healthy top and bottom line beat, driven by strength in the core business [2] - Healthcare solutions EBITDA margins improved by 170 basis points [6] - The core business continues to drive gross margins [6] - The company raised its margin expectations due to strong performance in pricing and cost control [7] Business Strategy & Operations - Waste Management's stock is considered a "forever stock" due to consistent performance [3] - Acquisitions, such as Stir Cycle, have been a key factor in the company's success [4] - The company has smoothed out fluctuations in the recycling business through contract adjustments and diversification into areas like healthcare solutions [10] - Increasing regulatory requirements can work in Waste Management's favor due to its self-regulation practices [18] Market & Economic Outlook - The garbage business can provide insights into the economy [2] - The construction and demolition business is improving sequentially, indicating potential economic improvement [14] - The company sees signs of economic strengthening, particularly in the commercial and industrial sectors [13] - Waste Management is well-positioned regarding declining landfill airspace availability, with advantageous locations in major MSAs [21]

[PART I. Financial Information](index=2&type=section&id=PART%20I.%20Financial%20Information) [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements.) Waste Management, Inc.'s unaudited Condensed Consolidated Financial Statements for Q2 2025 detail balance sheets, income statements, cash flows, and notes on acquisitions, debt, and segment performance [Condensed Consolidated Financial Statements](index=2&type=section&id=Condensed%20Consolidated%20Financial%20Statements) The company's financial statements show asset growth, increased revenues, a slight net income decrease, and higher operating cash flow for the first half of 2025 Condensed Consolidated Balance Sheet Highlights (in Millions) | Account | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $4,984 | $4,774 | | **Total Assets** | $45,722 | $44,567 | | **Total Current Liabilities** | $5,816 | $6,258 | | **Total Liabilities** | $36,520 | $36,313 | | **Total Equity** | $9,202 | $8,254 | Condensed Consolidated Statement of Operations Highlights (in Millions, except per share) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Operating Revenues** | $6,430 | $5,402 | $12,448 | $10,561 | | **Income from Operations** | $1,151 | $1,009 | $2,164 | $2,025 | | **Net Income Attributable to WM** | $726 | $680 | $1,363 | $1,388 | | **Diluted EPS** | $1.80 | $1.69 | $3.37 | $3.44 | Condensed Consolidated Statement of Cash Flows Highlights (in Millions) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Net Cash Provided by Operating Activities** | $2,753 | $2,521 | | **Net Cash Used in Investing Activities** | $(1,915) | $(2,359) | | **Net Cash Used in Financing Activities** | $(781) | $(464) | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail financial statement basis, Stericycle integration, revenue recognition, debt structure, income taxes, segment performance, and significant commitments and contingencies - The company completed the acquisition of Stericycle, Inc. on November 4, 2024, which is now presented as the new WM Healthcare Solutions reportable segment[20](index=20&type=chunk) - Total debt outstanding was **$24.0 billion** as of June 30, 2025, up slightly from **$23.9 billion** at year-end 2024. The company has classified **$3.0 billion** of debt maturing in the next 12 months as long-term due to its intent and ability to refinance[31](index=31&type=chunk)[32](index=32&type=chunk) - The effective income tax rate for the six months ended June 30, 2025 was **20.5%**, down from **21.3%** in the prior year period, primarily due to federal tax credits from RNG and low-income housing investments[41](index=41&type=chunk)[43](index=43&type=chunk)[46](index=46&type=chunk) - The company has temporarily suspended its common stock repurchase program following the Stericycle acquisition to focus on returning leverage to targeted levels[98](index=98&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management discusses Q2 2025 financial performance, highlighting revenue growth driven by acquisitions and yield, operating income changes, liquidity, and capital allocation priorities [Overview, Strategy, and Business Environment](index=32&type=section&id=Overview,%20Strategy,%20and%20Business%20Environment) The company, a leading environmental solutions provider, details its core strategy of differentiation, continuous improvement, and sustainability investments, including the integration of Stericycle - The acquisition of Stericycle on November 4, 2024, added a new reportable segment, WM Healthcare Solutions, expanding services into regulated waste, compliance, and secure information destruction[111](index=111&type=chunk) - The core strategy is focused differentiation and continuous improvement, leveraging its asset network and investing in automation and technology to enhance customer experience and efficiency[112](index=112&type=chunk) - Sustainability growth strategy includes significant investments in the WM Renewable Energy and Recycling Processing and Sales segments to meet evolving customer and regulatory demands for diversion and waste reduction[112](index=112&type=chunk)[113](index=113&type=chunk) [Results of Operations](index=39&type=section&id=Results%20of%20Operations) Q2 2025 revenues increased significantly due to acquisitions and internal growth, while operating expenses improved as a percentage of revenue, and net interest expense rose due to acquisition debt Revenue Change Analysis (Q2 2025 vs. Q2 2024) | Component | Amount (Millions) | As a % of Total Company Change | | :--- | :--- | :--- | | Average Yield | $175 | 3.3% | | Volume | $115 | 2.1% | | **Internal Revenue Growth** | **$290** | **5.4%** | | Acquisitions | $746 | 13.7% | | Divestitures & Other | $(8) | (0.1)% | | **Total Revenue Change** | **$1,028** | **19.0%** | Operating Highlights (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Operating Expenses as % of Revenue | 59.7% | 60.9% | | SG&A as % of Revenue | 10.8% | 9.3% | | Income from Operations (Millions) | $1,151 | $1,009 | | Operating Margin | 17.9% | 18.7% | - The increase in SG&A expenses was primarily due to higher labor costs from acquisitions and consulting fees incurred to support the integration of Stericycle[143](index=143&type=chunk) - Net interest expense rose to **$232 million** in Q2 2025 from **$136 million** in Q2 2024, mainly due to increased debt from the Stericycle acquisition[153](index=153&type=chunk) [Segment Performance](index=48&type=section&id=Segment%20Performance) Q2 2025 segment performance shows growth in Collection and Disposal and Renewable Energy, a decline in Recycling, and an operating loss for the new WM Healthcare Solutions segment Income from Operations by Segment (Q2 2025 vs Q2 2024, in Millions) | Segment | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Collection and Disposal | $1,461 | $1,359 | 7.5% | | Recycling Processing and Sales | $24 | $29 | (17.2)% | | WM Renewable Energy | $38 | $18 | 111.1% | | WM Healthcare Solutions | $(23) | — | N/A | | Corporate and Other | $(349) | $(397) | (12.1)% | | **Total** | **$1,151** | **$1,009** | **14.1%** | - The West Tier of the Collection and Disposal segment showed strong performance with a **12.3%** increase in operating income, benefiting from wildfire clean-up activities[151](index=151&type=chunk)[152](index=152&type=chunk) - The WM Healthcare Solutions segment's operating loss was primarily due to depreciation, amortization, and integration-related expenses following the Stericycle acquisition[152](index=152&type=chunk) [Liquidity and Capital Resources](index=50&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with increased operating cash flow, manages debt post-acquisition, and has temporarily suspended share repurchases to prioritize deleveraging Cash Flow and Liquidity Summary (Six Months Ended June 30, in Millions) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $2,753 | $2,521 | | Capital Expenditures | $(1,563) | $(1,335) | | Proceeds from Divestitures | $103 | $58 | | **Free Cash Flow (Non-GAAP)** | **$1,293** | **$1,244** | - Total debt was **$24.0 billion** as of June 30, 2025. The company has **$1.8 billion** of available capacity under its **$3.5 billion** revolving credit facility[158](index=158&type=chunk)[33](index=33&type=chunk) - The share repurchase program was temporarily suspended after the Stericycle acquisition. The company expects to resume repurchases once leverage returns to targeted levels, projected for **Q2 2026**[166](index=166&type=chunk) - Cash dividends paid increased to **$669 million** in the first half of 2025 from **$608 million** in the prior year, due to a quarterly dividend increase from **$0.75** to **$0.825** per share[166](index=166&type=chunk) [Item 4. Controls and Procedures](index=55&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The principal executive and financial officers concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[174](index=174&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[175](index=175&type=chunk) [PART II. Other Information](index=56&type=section&id=PART%20II.%20Other%20Information) [Item 1. Legal Proceedings](index=56&type=section&id=Item%201.%20Legal%20Proceedings.) Information on legal proceedings, including environmental matters and Stericycle-related litigation, is detailed in Note 6 to the financial statements - Information on legal proceedings is detailed in Note 6 to the financial statements[177](index=177&type=chunk) - Key legal matters include environmental proceedings, such as involvement in **74 Superfund sites**, and litigation assumed from the Stericycle acquisition, including a now-terminated DPA with the DOJ and an ongoing DEA investigation into a divested business[59](index=59&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk) [Item 1A. Risk Factors](index=56&type=section&id=Item%201A.%20Risk%20Factors.) No material changes to risk factors previously disclosed in the 2024 Annual Report on Form 10-K have occurred - There have been no material changes to the risk factors disclosed in the 2024 Annual Report on Form 10-K[178](index=178&type=chunk) [Item 5. Other Information](index=56&type=section&id=Item%205.%20Other%20Information.) This section discloses the adoption of net share settlement plans by two executive officers in May 2025 for the automatic exercise of stock options - On May 20, 2025, Tara J. Hemmer, SVP and Chief Sustainability Officer, adopted a net share settlement plan to exercise up to **53,429** stock options[182](index=182&type=chunk) - On May 30, 2025, Charles Boettcher, EVP and Chief Legal Officer, adopted a net share settlement plan to exercise up to **15,072** stock options[183](index=183&type=chunk)

Core Insights - WM reported strong second-quarter 2025 results, with adjusted earnings of $1.92 per share, exceeding the Zacks Consensus Estimate by 1.6% and reflecting a year-over-year increase of 5.5% [1][8] - Total revenues reached $6.4 billion, surpassing the consensus mark by 1.4% and showing a 19% increase compared to the same quarter last year [1][8] - The stock has appreciated by 13% year-to-date, outperforming the industry growth of 10.7% and the Zacks S&P 500 Composite's rise of 8.2% [1] Revenue Breakdown - The Collection segment generated revenues of $4.4 billion, a 5.2% increase year-over-year, but fell short of the estimate of $4.7 billion [2] - The Landfill segment's revenues grew by 14.5% year-over-year to $1.4 billion, meeting expectations [2] - The Transfer segment's revenues increased by 10.2% to $681 million, missing the estimate of $692.5 million [2] - The Recycling Processing and Sales segment saw revenues rise by 1.5% to $482 million, which was below the estimated $535.8 million [2] - WM Renewable Energy reported revenues of $115 million, a significant 64.3% increase from the previous year, exceeding the estimate of $95.3 million [3] - WM Healthcare Solutions Corporate and Other generated $647 million, slightly up from the previous year and beating the estimate of $291.1 million [3] Operating Performance - Adjusted operating EBITDA was reported at $1.9 billion, aligning with expectations, while the adjusted operating EBITDA margin decreased by 10 basis points to 29.9% from the previous year, surpassing the estimate of 29.5% [4] Cash Flow - WM generated $1.5 billion in cash from operating activities during the quarter, with capital expenditures amounting to $732 million, resulting in free cash flow of $818 million [5] - The company distributed $333 million in cash dividends to shareholders in the second quarter of 2025 [5] 2025 Outlook - Due to a decline in recycled commodity prices and reduced Collection and Disposal volumes in Q1 2025, WM has lowered its revenue guidance to a range of $25.27 billion to $25.47 billion, down from the previous range of $25.55 billion to $25.80 billion, which is below the consensus mark of $25.53 billion [6] - The adjusted operating EBITDA is anticipated to be between $7.47 billion and $7.62 billion, compared to the previous quarter's guidance of $7.45 billion to $7.65 billion [6]

Financial Data and Key Metrics Changes - The company reported a 19% growth in operating EBITDA for Q2 2025, driven primarily by the collection and disposal business [9][10] - Operating EBITDA margin for the total company approached 30%, with the legacy business achieving a margin of 31.3% [22][24] - Operating cash flow increased by 9% year-over-year to $2.75 billion, reflecting strong earnings growth [24] Business Line Data and Key Metrics Changes - Collection and disposal operating EBITDA improved by 60 basis points to 37.9%, supported by strong landfill volumes and customer lifetime value initiatives [17][22] - The recycling segment saw a 17% increase in operating EBITDA despite a nearly 15% decline in recycled commodity prices [12][22] - The healthcare solutions segment improved operating EBITDA margins by 190 basis points since acquisition, indicating effective integration and cost optimization [23] Market Data and Key Metrics Changes - Landfill volumes were particularly strong, benefiting from wildfire cleanup efforts in California, contributing to solid waste volume growth [10][12] - The company expects full-year volume growth to remain between 0.25% and 0.75% despite some challenges from contract losses [18][34] - Core price remained healthy at 6.4%, with collection and disposal yield improving sequentially to 4.1% [17][22] Company Strategy and Development Direction - The company is focused on leveraging technology to optimize cost structures and enhance customer lifetime value, positioning itself as a leader in the waste management industry [9][10] - WM is actively pursuing acquisitions to scale its core business, with an expected acquisition spending of over $500 million for the year [11] - The sustainability platform continues to differentiate WM in the industry, with ongoing investments in recycling and renewable energy [12][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver strong results despite external challenges, emphasizing a disciplined strategy aligned with secular trends [9][10] - The company anticipates less pressure from the healthcare solutions business in the second half of the year, with expected margin improvements [32] - Management remains optimistic about achieving the upper end of synergy targets from the healthcare solutions acquisition, projecting $80 million to $100 million in synergies for 2025 [23][64] Other Important Information - The company confirmed and updated its 2025 guidance, affirming the midpoint of operating EBITDA guidance at $7.55 billion and increasing free cash flow expectations to between $2.8 billion and $2.9 billion [26][25] - The leverage ratio at the end of the quarter was 3.5 times, with a focus on returning to targeted leverage levels through earnings growth and debt reduction [25] Q&A Session Summary Question: Is a 31% peak margin in Q3 back on the table? - Management indicated that margin expansion exceeded expectations in the first half, projecting about 110 basis points for the full year, with less pressure from the healthcare solutions business in the second half [31][32] Question: What are the updated volume expectations for the year? - Management confirmed expectations for volume growth to remain between 0.25% and 0.75%, with the impact of wildfire cleanup and contract losses factored in [34][41] Question: Can you provide more color on the strength in volume? - Management noted that June was the strongest month of the quarter, with solid performance in MSW and C&D waste streams, despite some challenges in the commercial sector [37][38] Question: What is the status of the residential business optimization? - Management reported that about 70% of the residential business is now performing at acceptable margins, with expectations for continued improvement [49][50] Question: What are the long-term growth expectations for WM Healthcare? - Management anticipates long-term top-line growth of 5% to 6%, focusing on optimizing customer relationships and improving revenue quality [70][72]

Financial Data and Key Metrics Changes - The company reported a 19% growth in operating EBITDA for the second quarter, driven by strong results across all market cycles [7][20] - Operating cash flow increased by 9% year-over-year to $2.75 billion, attributed to strong earnings growth [22] - Free cash flow for the first half of the year was $1.29 billion, with expectations to meet or exceed revised guidance for the year [23][25] Business Line Data and Key Metrics Changes - The collection and disposal business contributed significantly to EBITDA growth, with landfill volumes showing strong performance [8][14] - Collection and disposal operating EBITDA margin improved by 60 basis points to 37.9%, driven by strong landfill volumes and customer lifetime value focus [14][20] - The recycling segment saw a 17% increase in operating EBITDA despite a nearly 15% decline in recycled commodity prices [10][20] Market Data and Key Metrics Changes - The company experienced solid waste volume growth in key markets, particularly in MSW and special waste volumes related to wildfire cleanup in California [8][10] - The overall volume expectations for the year remain between 0.25% and 0.75% growth, with a notable impact from a large franchise contract loss [15][34] Company Strategy and Development Direction - The company is focused on long-term growth through technology implementation and acquisitions, with a robust pipeline of tuck-in opportunities expected to exceed $500 million in acquisition spending for the year [9][11] - The integration of WM HealthCare Solutions is progressing well, with targeted synergies expected to reach $80 million to $100 million in 2025 [21][61] - The company aims to maintain its competitive edge through sustainability investments and operational excellence [10][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver strong results despite external challenges, including recycled commodity prices and weather impacts [25][26] - The company anticipates less pressure from the Healthcare Solutions business in the second half of the year, with margin improvements expected [30][34] - Overall, management remains optimistic about achieving long-term strategic priorities and maintaining strong earnings growth [26][25] Other Important Information - The company achieved a record operating expense ratio below 60% of revenue, reflecting significant progress in cost management [16][20] - The company is on track to achieve targeted leverage levels by 2026 through a combination of earnings growth and debt reduction [23][25] Q&A Session Summary Question: Is a 31% peak margin in Q3 back on the table? - Management indicated that margin expansion exceeded expectations in the first half, making them optimistic about margins for the second half of the year [29] Question: What are the updated volume expectations for the year? - Volume expectations remain between 0.25% and 0.75%, with the company confident in achieving this despite some headwinds [34] Question: Can you provide more color on the strength in volume? - June was the strongest month of the quarter, with solid performance in MSW and C&D waste streams, indicating a positive trend [37][39] Question: How is the residential business improvement journey progressing? - About 70% of the residential business is now performing at acceptable margins, with expectations for further improvement by the end of the year [46][48] Question: What are the expectations for the Healthcare Solutions business? - The company is focused on optimizing the Healthcare Solutions business, with long-term growth expectations of 5% to 6% [68][70]

Group 1 - WM, formerly known as Waste Management, Inc., has seen a solid performance with a 14% increase in shares over the past year [1] - The company's strong cash flow and lower economic cyclicality contribute to its attractiveness as an investment [1]