WM Announces Fourth Quarter and Full-Year 2025 Earnings

Core Insights - WM reported strong financial results for the fourth quarter and full year 2025, achieving record performance in operating expenses as a percentage of revenue and the best full-year adjusted operating EBITDA margin [1][4][5] - The company anticipates nearly 30% growth in free cash flow for 2026, supported by its solid waste network and investments in recycling and renewable energy projects [3][12] - WM plans to return approximately $3.5 billion to shareholders in 2026 through dividends and share repurchases while targeting a leverage ratio between 2.5x and 3.0x [3][12] Financial Performance - Total revenue for Q4 2025 was $6,313 million, a 7.1% increase from Q4 2024, while full-year revenue reached $25,204 million, up 14.2% from the previous year [2][7] - Operating EBITDA for the total company grew 13.3% in 2025, with an adjusted growth of 15.5%, marking the first time the full-year adjusted margin exceeded 30% [5][6] - Net income for Q4 2025 was $742 million, with diluted EPS of $1.83, compared to $598 million and $1.48 in Q4 2024 [2][32] Business Segments - The Legacy Business saw an 8.0% increase in operating EBITDA in 2025, with a margin expansion of 90 basis points [5][6] - The Healthcare Solutions segment improved its operating EBITDA margin to 13.5% in 2025 from 1.0% in 2024, driven by integration and process improvements [5][6] - Revenue from the Healthcare Solutions segment for Q4 2025 was $615 million, reflecting significant growth compared to previous periods [7][37] Cost Management - Operating expenses as a percentage of revenue for the total company improved to 58.5% in Q4 2025, down from 59.5% in Q4 2024 [7][8] - SG&A expenses as a percentage of revenue for the total company improved to 10.7% in Q4 2025, reflecting strong cost management [8][9] - The company achieved a 150 basis point improvement in operating expenses as a percentage of revenue for the Legacy Business in 2025 [7][8] Cash Flow and Investments - WM generated $6.04 billion in net cash from operating activities in 2025, a 12.1% increase from the prior year, leading to free cash flow of $2.94 billion, up 26.8% [11][35] - The company invested approximately $400 million in acquisitions for solid waste and recycling businesses in 2025 [11][35] - For 2026, WM expects capital expenditures to support business growth to be between $2,450 million and $2,550 million [13][14] Sustainability and Growth Outlook - WM is progressing its sustainability growth portfolio, expecting to complete six additional renewable natural gas plants and four recycling projects in 2026 [14][15] - The company anticipates growth in its sustainability businesses, driven by contributions from growth projects, despite lower commodity prices [16][14] - The Healthcare Solutions business is projected to grow revenue by around 3% in 2026, primarily driven by price increases [16][14]