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DATE

April 29, 2026 10 a.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — James C. Fish
  • President and Chief Operating Officer — John J. Morris
  • Executive Vice President and Chief Financial Officer — David Reed
  • Senior Vice President and Chief Sustainability Officer — Tara J. Hemmer
  • Vice President, Investor Relations — Edward A. Egl

TAKEAWAYS

  • Operating EBITDA -- Grew nearly 6%, with the collection and disposal segment achieving 6.4% growth and margin expanding by 110 basis points, reflecting pricing and efficiency initiatives.
  • Free cash flow -- Nearly doubled to $920 million, enabling $730 million of cash returned to shareholders through dividends and share repurchases.
  • Recycling segment -- Operating EBITDA increased 18% despite a 27% decline in single-stream commodity pricing, with automation driving costs lower and processing volume up 9%.
  • Renewable energy segment -- Operating EBITDA more than doubled, driven by completion of seven new renewable natural gas facilities since 2025 and benefit from higher commodity prices.
  • Health care solutions -- Operating EBITDA rose nearly 12%, SG&A costs decreased approximately 20%, and margin improved by 200 basis points, with only one hospital lost versus an expected three.
  • MSW volumes -- Rose 2.7%, while special waste volumes were up 6.7% excluding wildfire-related volume from last year; industrial collection volumes turned modestly positive.
  • Core price and yield -- Collection and disposal core price grew 6.3%; yield came in at 3.9%; MSW yield reached 6.9%, and residential yield climbed by 110 basis points, reflecting both cost recovery and airspace preservation.
  • Operating expenses -- Improved by 70 basis points as a percentage of revenue, maintaining a level below 60% for the fifth consecutive quarter, aided by repair and maintenance cost reduction of about 30 basis points.
  • Driver and technician turnover -- Reached a multi-year low at 17.2%, improving 130 basis points, contributing to record-low Q1 safety incidents.
  • Capital expenditures -- Totaled $650 million and were 22% lower year over year; $61 million was committed to sustainability growth investments.
  • Leverage ratio -- Ended the quarter at 2.94x, within the long-term target range of 2.5-3x.
  • Tax credits and effective rate -- IRS clarified renewable natural gas credits eligibility, generating $27 million for 2025 and $30 million–$35 million per year through 2029; full-year 2026 tax rate is expected at 23%.
  • Technology and automation -- Initiatives have reduced risk management costs to 1.5% of sales and improved EBITDA and margins, with AI and embedded tech delivering safety and pricing benefits.
  • Buyback program -- $344 million in shares repurchased in the quarter, with a full-year target of $2 billion, and most buybacks expected in the second half.
  • Sustainability capex -- Substantial completion of the program outlined in 2023 remains on track for 2026, with sustainability EBITDA contribution guided at $240 million–$250 million for the year.

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RISKS

  • Weather and wildfire impacts -- Severe winter storms led to facility shutdowns up to 10 days and negatively affected volumes approximately 0.75 percentage points, with further margin headwinds expected in Q2 due to the absence of last year’s wildfire-related special waste revenue.
  • Increased technology and compensation costs -- Operating margins faced headwinds from 40 basis points of higher technology spending and 70 basis points from incentive compensation and benefits, as clarified by Reed.
  • Corporate expense -- Q1 saw a step-up in corporate costs from annual incentive compensation and normalization of health and welfare expenses; management depicted Q1 levels as indicative for the remainder of the year, suggesting limited near-term SG&A leverage.
  • Residential volume declines -- Residential volumes declined approximately 5%, with management noting ongoing softening, though EBITDA was up 211% from 2023 levels as the business traded volume for improved margins and quality of revenue.

SUMMARY

Waste Management (WM +1.30%) delivered broad-based operating EBITDA growth, nearly doubling free cash flow, and returned over $700 million to shareholders, while margins expanded in the core collection and disposal, recycling, and renewable energy businesses. Management emphasized successful pricing discipline, AI-driven automation, and progress on the 2026 sustainability capex program, with renewable natural gas facilities and automation initiatives contributing significant margin improvement. The health care solutions segment outperformed internal plans for EBITDA and synergies, with integration and ERP stabilization noted as pivotal to the 2026 revenue rebound forecast. IRS production tax credits benefited effective tax rates, and capital allocation remains focused on buybacks and dividends, with M&A expected to stay disciplined and opportunistic.

  • “We returned $385 million to shareholders in dividends, and we resumed share buybacks, repurchasing $344 million of our shares.”
  • Tara J. Hemmer said, “we have 80% of our volume locked up for 2026—some in the RIN market.” for renewable natural gas, supporting management’s $26 per MMBtu investment thesis.
  • Recycling automation enabled an 18% EBITDA increase despite a 27% drop in commodity prices, and “Total driver and technician turnover, both voluntary and involuntary, remained low at 17.2%, improving 130 basis points year-over-year.”
  • Management expects “a run rate of $300 million of total synergies by 2027” for health care, with $27 million annualized EBITDA cross-selling benefit already identified.
  • David Reed noted that “free cash flow nearly doubled to $920 million, putting us on track to achieve our full-year guidance.”
  • Repair and maintenance cost improvements, including “augmented reality tools,” yielded a 30 basis point cost benefit and improved asset utilization across the fleet.
  • Management guided that “Q1 is indicative—it is a normalized rate for the remainder of the year” in terms of corporate costs, suggesting stable SG&A levels near 10% of revenue in the near term.

INDUSTRY GLOSSARY

  • MSW: Municipal solid waste, the primary category for residential and commercial refuse collection and landfill operations.
  • RIN: Renewable Identification Number, a credit generated for the production of renewable fuels (such as renewable natural gas) under EPA regulation; used for compliance with renewable volume obligations.
  • ERP: Enterprise Resource Planning system, an integrated software platform for managing business processes such as invoicing, finance, and operations.
  • Yield: Internal revenue growth rate from pricing actions (excluding fuel surcharges, recycling, and other pass-throughs).
  • SG&A: Selling, General, and Administrative expenses; overhead excluding direct operating costs.

Full Conference Call Transcript

Edward A. Egl: Thank you, Jonathan. Good morning, everyone, and thank you for joining us for our first quarter 2026 earnings conference call. With me this morning are James C. Fish, Chief Executive Officer; John J. Morris, President and Chief Operating Officer; and David Reed, Executive Vice President and Chief Financial Officer. You will hear prepared comments from each of them today. I will cover high-level financials and provide a strategic update. John will cover an operating overview, and David will cover the details of the financials. Before we get started, please note that we have filed a Form 8-K that includes the earnings press release and is available on our website at www.wm.com.

The Form 8-K, the press release, and the schedules for the press release include important information. During the call, you will hear forward-looking statements, which are based on current expectations, projections, or opinions about future periods. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Some of these risks and uncertainties are discussed in today's press release and in our filings with the SEC, including our most recent Form 10-K and Form 10-Qs. James and John will discuss our results in the areas of yield and volume, which, unless stated otherwise, more specifically reference internal revenue growth, or IRG, from yield or volume.

During the call, James, John, and David will discuss operating EBITDA, which is income from operations before depreciation, depletion, amortization, and accretion. Beginning this year, landfill accretion expense was moved from operating expense to depreciation, depletion, amortization, and accretion to enhance comparability and better reflect operating performance. For comparability purposes, 2025 actuals have been updated to reflect the change. Any comparisons, unless otherwise stated, will be with the prior-year period. Net income, EPS, income from operations and margin, operating EBITDA and margin, operating expense and margin, and SG&A expense and margin have been adjusted to enhance comparability by excluding certain items management believes do not reflect our fundamental business performance or results of operations.

These adjusted measures, in addition to free cash flow, are non-GAAP measures. Please refer to our earnings press release and tables, which can be found at the company's website at www.wm.com, for reconciliations to the most comparable GAAP measures and additional information about our use of non-GAAP measures. This call is being recorded and will be available 24 hours a day beginning approximately 1 p.m. Eastern time today. To hear a replay of the call, access the Waste Management, Inc. website at investors.wm.com. Time-sensitive information provided during today's call, which is occurring on 04/29/2026, may no longer be accurate at the time of a replay.

Any redistribution, retransmission, or rebroadcast of this call in any form without the expressed written consent of Waste Management, Inc. is prohibited. I will now turn the call over to Waste Management, Inc. CEO, James C. Fish.

James C. Fish: Thanks, Ed, and thank you all for joining us. The Waste Management, Inc. team again delivered strong quarterly results with earnings and cash flow results that achieved our expectations. What continues to set us apart is our ability to consistently achieve strong performance regardless of external factors. Q1 operating EBITDA grew by nearly 6% compared to 2025, driven by solid performance in our collection and disposal business, and further supported by growth in our sustainability businesses and ongoing optimization of health care solutions. This momentum to start the year, combined with our proven operational execution and resilient business model, reinforces our confidence in achieving our full-year financial guidance.

In the first quarter, our results clearly advanced each of our four strategic priorities for 2026. First, we grew our collection and disposal business, achieving 6.4% operating EBITDA growth supported by our focus on customer lifetime value, operational excellence, and network advantages. Our strategically positioned post-collection network is driving profitable MSW volume growth while our technology leadership leads to differentiated services and lower costs. Our people-first culture and disciplined approach to retention are driving meaningful improvements in safety, service reliability, and operational efficiency. As we look ahead, we continue to see opportunities for tuck-in acquisitions that complement our existing portfolio that we expect to close in 2026.

Second, our sustainability investments continue to generate meaningful returns, underscoring the value of the capital we have deployed over time. In renewable energy, operating EBITDA more than doubled in the quarter, driven by the completion of seven new renewable natural gas facilities since 2025. In the recycling segment, even though pricing for single-stream commodities declined 27%, operating EBITDA grew by 18% as we realized automation benefits that lower labor costs and deliver higher-quality material, and processed 9% more volume. In 2026, we are on track to substantially complete the sustainability capital expenditure program we laid out in 2023. Third, in health care solutions, we continue to advance the business towards scalable, accretive growth.

While revenue was impacted by volume losses from last year, effective cost management and synergy capture drove operating EBITDA growth of nearly 12% in the quarter. Importantly, we expect an inflection in revenue growth in 2026 as the ERP is stabilized and the benefits of our integrated offering become more evident. And finally, turning to capital allocation. Our strong operating performance translated into significant free cash flow generation with Q1 free cash flow of $920 million, nearly doubling from the prior year. This enabled us to return about $730 million to shareholders through dividends and share repurchases.

As we close out the first quarter, our performance reinforces both the strength of our strategy and its alignment with the long-term trends shaping our business: delivering consistent results in our core operations, realizing returns from years of disciplined investment in sustainability, advancing health care solutions towards scalable growth, and pairing that execution with a thoughtful, shareholder-focused approach to capital allocation. As we progress through 2026, we are well-positioned to continue to produce strong results and harvest the benefits of our investments. I want to thank our employees for their continued dedication and hard work. I will turn the call over to John to discuss our operational results.

John J. Morris: Thanks, James, and good morning. The first quarter once again demonstrated the strength and resilience of our operating model and the progress we continue to make in optimizing our business. Despite a softer volume environment, driven largely by winter weather impacts and the absence of last year's wildfire-related volumes, we delivered strong financial performance by remaining focused on disciplined price execution, technology-enabled efficiency, and cost control. This is clearly visible in our collection and disposal business where we delivered operating EBITDA growth of more than 6% year-over-year with margin expanding approximately 110 basis points. From a cost perspective, our focus on operational excellence continues to drive meaningful results.

Operating expenses as a percentage of revenue improved 70 basis points and came in below 60% for the fifth consecutive quarter, underscoring the durability of the structural changes we are making across the business. Automation and technology continue to help us flex costs as volumes fluctuate. As an example, whole dollars repair and maintenance costs were actually lower year-over-year and improved by approximately 30 basis points as a percentage of revenue. This improvement reflects innovative solutions and disciplined fleet actions, including the use of augmented reality tools to improve technician efficiency, and continued benefits from rightsizing the fleet. Together, these initiatives are improving asset utilization and delivering sustainable cost savings.

Equally important, our people-first approach continues to show up in our results. Total driver and technician turnover, both voluntary and involuntary, remained low at 17.2%, improving 130 basis points year-over-year. The strong retention supports safer operations, higher service reliability, and greater efficiency across the business. Notably, our first quarter safety performance was our best-ever Q1 performance for safety-related incidents, which is particularly impressive given the challenging winter weather conditions. Together, these results reflect the engagement, consistency, and dedication our teams bring to executing our strategy every day. Turning to the top line. Pricing execution remains strong. Each of collection and disposal's core price of 6.3% and yield of 3.9% exceeded our expectations, with pricing dollars up year-over-year.

Core price growth in our commercial and landfill lines of business each exceeded 7.5%, reflecting the value of our service offerings, consistent execution in the field, and focus on price-to-cost spread. Shifting to volumes, we began the year softer than expected, with about half of the shortfall in collection and disposal volumes driven by severe winter weather. We did see several areas of underlying strength and stability. MSW volumes were up 2.7%, and special waste volumes were up 6.7% when excluding wildfire volumes from the prior year. Industrial collection volumes returned to modest growth in the quarter, supported by continued internalization of solid waste from health care solutions customers.

While volumes were a headwind early in the year, we expect improvement from seasonality as well as the lapping of a couple of larger, low-margin contract losses in the balance of the year. In Q1, our energy surcharge program recovered the increase in both direct and indirect fuel costs we saw in the first quarter. Higher revenue from fuel recovery created a 20 basis point drag on operating EBITDA margin. Putting together these pieces on pricing, volume, and energy surcharges, we expect to achieve our full-year revenue guidance in 2026. Turning to health care solutions. We continue to see the benefits of integration into our core operating structure.

Operating EBITDA margin improved by 200 basis points in the quarter, while SG&A costs decreased roughly 20% year-over-year, reflecting discipline, operational alignment, and the benefits of Waste Management, Inc.'s integrated business model. We remain on track to achieve a run rate of $300 million of total synergies by 2027 with results reflected across all of our business segments. In closing, I want to thank our teams for their continued focus, discipline, and commitment to serving our customers. The strong start to the year reinforces our confidence in our strategy, operating model, and ability to perform consistently in a dynamic operating environment. With that, I will turn the call over to David to walk through our financial results in more detail.

David Reed: Thanks, John, and good morning. We are pleased with our strong start to 2026, particularly when looking at the drivers of our first quarter operating EBITDA margin expansion, which reflects solid contributions from across the business. The collection and disposal business expanded margin by 110 basis points driven by strong pricing and our success using technology and automation to reduce costs. This growth includes the 20 basis point headwind John mentioned from the impact of higher fuel prices. Our recycling and renewable energy businesses together contributed approximately 50 basis points of margin expansion, reflecting accretive growth from investments in renewable natural gas facilities and recycling automation and new market projects.

Health care solutions contributed another 20 basis points of margin expansion due to effective cost management and synergy capture. These contributions were partially offset by 40 basis points of increased spending on technology initiatives and 70 basis points related to higher cost and timing-related impacts from incentive compensation and employee benefit costs. The strong execution translated into robust cash generation. Operating cash flow was $1.5 billion in the quarter, an increase of nearly $300 million compared to 2025. The increase was driven by working capital improvements and our strong earnings growth. Capital expenditures totaled $650 million in the quarter, including $61 million directed to sustainability growth investments.

Capital spending was approximately 22% lower year-over-year, as expected, reflecting normalized spend on collection vehicles and lower sustainability capital as several projects reached completion during 2025. Combining all of this, first quarter free cash flow nearly doubled to $920 million, putting us on track to achieve our full-year guidance. As James mentioned, we allocated the majority of our free cash flow to shareholder returns in the first quarter. We returned $385 million to shareholders in dividends, and we resumed share buybacks, repurchasing $344 million of our shares. Our leverage ratio at the end of the quarter was 2.94 times, returning to within our target range of between 2.5 and 3 times.

Our effective tax rate was approximately 18% in the first quarter, lower than planned, driven largely by the benefit of production tax credits related to our renewable natural gas business. During the quarter, the IRS clarified the qualification for these credits. We now expect to realize benefits during the next several years, another value add from our strategic decision to grow our renewable natural gas portfolio. That benefit is approximately $27 million for the 2025 tax year and $30 million to $35 million annually from this year through 2029. As a result of receiving 2025 and 2026 production tax credits, we now expect a full-year effective tax rate of approximately 23% in 2026.

In closing, I want to thank the entire Waste Management, Inc. team for their continued focus and execution. Their dedication has driven a strong start to the year and positions us well to deliver on our full-year financial guidance. Through our disciplined approach to operations, capital allocation, and investment, we remain confident in our ability to create long-term value for shareholders. With that, Jonathan, let us open the line for questions.

Operator: Certainly. Our first question comes from the line of Jerry Revich from Wells Fargo. Your question, please.

Jerry Revich: Thanks. I just want to unpack the really strong margin performance despite the lower volumes. In the quarter, really nice price-cost. As we think about the volume cadence over the balance of the year, can we double click on what gives you confidence that volume trends will be better in the back half of the year? Can you quantify the weather impact? If you want to talk about it month by month or just give us more visibility on that point, that would be helpful.

David Reed: Just in terms of the margin trajectory for the back half of the year, you should note that Q2 will be a tough comp for us with the wildfire volumes, but we do expect EBITDA margin to lift nicely from there in the second half and follow a pattern similar to what we saw in 2025. We had a strong start to our pricing plan for the year, and that also gives us confidence with the margin trajectory.

James C. Fish: And then, Jerry, as far as volume goes for the remainder of the year, first quarter was impacted by weather. We do not normally talk about weather because it happens every year, but this year in particular along the East Coast, three feet of snow in Boston—I do not think they have had that in 15 years. It did impact us. We had a number of facilities that were shut down. Some of our facilities were shut down for as many as 10 days, including our Stericycle facilities. So it did have a significant impact on volume. As we look at volume going forward, there are a couple of things that give us reason to be optimistic.

Specifically, special waste, which we knew was going to be a difficult comp because of Southern California fire volume last year. Including the fire volume, it was down about 1.5%. But excluding it, as John mentioned, it was up 6.7%. The reason that is meaningful is because it gives us an indication of what special waste will look like when we anniversary this fire volume, which is for the most part at the end of Q2. We did get some fire volume in Q3 in the month of July, and then it almost all went away after July.

So we will get to a clean year-over-year for special waste by August, and this gives us an indication that special waste volume should be strong for us—6.7% is a pretty decent number. John also mentioned MSW volume. Looking at the numbers for last week, MSW volume was over 4% positive for us, which is a positive. And industrial volumes have finally shown a reversal of a six- or seven-quarter trend. We had been negative on roll-off volumes for at least a year and a half, and we finally got to a point where we are slightly positive—about 0.2% positive versus last year's approximately 1.5% negative. We are fairly encouraged with volume numbers.

Will we hit our guidance for the year? We will reassess at the end of Q2, but we are encouraged with what we are seeing on the volume side.

Jerry Revich: Okay. I appreciate the color. And just to unpack the comments about the tough margin comp in 2Q, I think normally you are up somewhere around 150 to 200 basis points margins in 2Q versus 1Q. Given the weather that we just stepped through, it does look like you should be in a position for good year-over-year margin expansion in 2Q even with the tough comps from the wildfire standpoint, given the run rate in 1Q. I just want to make sure we are on the same page and not miss any moving pieces in the 1Q results as we think about the normal seasonality for 2Q.

John J. Morris: Jerry, I would say the outsized impact of the wildfires in Q2 is really worth noting again. I think the revenue number was about $85 million and probably strong flow-through on that EBITDA. If you take that out, what I would point you to is, if you look back in the tables, you can see whether it is collection, disposal, recycling, renewable energy, or health care, you can see the margin improvement in Q1. Net of the fire headwinds, we are going to see good margin from Q1 to Q2, but it will be somewhat muted by that volume not repeating in the landfill line of business.

Analyst: Thank you.

James C. Fish: Sure.

Analyst: Good morning. Can you hear me?

David Reed: Yes. Good morning. Thanks for taking the question.

Analyst: Overall, really strong margin expansion in the quarter. The only item that jumped out in a negative way was the magnitude of the increase in corporate expense. You had been flagging that would be up because of some technology-related investments. Is the level of increase in 1Q appropriate for 2Q, or should we think about that moderating throughout the year?

David Reed: Thanks for the question. We did expect Q1 to be a tougher comp in this segment. I will break it down into two pieces. There was a health and welfare cost aspect to an unusually favorable Q1 last year—it had some one-time benefits—so that made the year-over-year comp a bit difficult. We also had higher annual incentive compensation and annual wage increases, along with the increased technology costs that you mentioned. Those costs support strategic initiatives that benefit other segments, and if you look at the overall performance of those other segments, I think you are seeing some of the returns on those investments.

In terms of cadence for the rest of the year, Q1 is indicative—it is a normalized rate for the remainder of the year. It is pretty flat throughout the rest of the year at the Q1 level.

Analyst: Understood. Thank you. And then, John, you mentioned surcharges for rising fuel costs. Do you anticipate any drag on EBITDA in 2Q given potential timing differences between rising costs and surcharge implementation, or is this happening in real time?

John J. Morris: It is almost real time. There is a little bit of drag—we said 20 basis points on the margin side. Based on the way our billing cycles work, there is about a month lag, but from an EBITDA standpoint it is not going to be anything material.

Operator: Thank you. Our next question comes from the line of James Joseph Schumm from TD Cowen. Your question, please.

James Joseph Schumm: Hey, good morning. Looking at the solid waste volumes up quite a bit and transfer station volumes down, what is driving that? Does that have something to do with Waste Management, Inc. Health Care?

James C. Fish: No, James. The transfer volume is probably as much about the Northeast and the weather. In the New York metro area, there was significant impact due to the weather. That is really what is driving the transfer volume, not the health care business.

James Joseph Schumm: Okay, I see. On the health care business, can you give us a sense of customer credits? You said they peaked in Q4. What did that look like in Q1 and what does it look like in Q2? How is that trending?

David Reed: Customer credits peaked in Q4, as we said, and then fell off a little bit in Q1 and Q2, and then they will really reverse when we get to Q3 and Q4. So the year-over-year comp becomes quite a bit easier in Q3 and Q4.

James C. Fish: Overall, as I look at the health care business, it is really turning out to be exactly what we hoped it would be. EBITDA improved by almost 12%. We are better than our own business plan by about 3%. Pricing is right on track with where we thought it would be. We said last quarter that the year on the top line was largely going to be about price, not volume. Volume would be negative, mostly a function of losing a couple of hospitals. We projected to lose three hospitals; we actually only ended up losing one. That was a positive. I think the reason we only lost one is because our customers are now getting a very payable invoice.

All the work that continues to happen—we are still working on ERP—is behind the scenes, so it is invisible to the customers, and that is a real positive. The ERP is progressing, but we wanted to make sure it was not visible to the customer. We will continue to do the technology work, the systems work, and the process work, which is ongoing. A lot of that will be done by the end of the year; some will carry over into next year. My biggest concern was the customer, and now the customer is getting a good bill. That is why we only ended up losing one of the three hospitals.

As I think about cross-selling or synergies, cross-selling has been a positive. We had two big cross-selling closes for the quarter that benefited both health care solutions and solid waste. Pricing is on track and continues to improve as we get into the rest of the year. Synergies are at or even potentially ahead of plan. We are moving fleet maintenance in-house; that should be a positive on the cost line. Overall, we are very pleased. The credit memos in large part in Q4 were really cleaning up the mess from prior periods. We will always have credit memos, including in our solid waste business, but if you look at things like DSO—down 14 days—that is a major change.

Past-due receivables are down by two-thirds over less than a year. All of those are positive signs, and we think that the health care solutions business is shaping up to be exactly what we hoped when we bought it.

James Joseph Schumm: Since you brought it up, on the synergies on the path to $300 million, roughly where are you now?

David Reed: The total number we said would be $300 million; I think $50 million of that was cross-selling benefits. We are on track for that number, and you could argue we may be ahead of that a little bit. We are targeting $300 million still, but it could end up ahead of that and maybe as high as $325 million.

Operator: Our next question comes from the line of Faiza Alwy from Deutsche Bank. Your question, please.

Faiza Alwy: Hi, thank you so much. What are you seeing from a recycling commodity pricing perspective? Given higher oil prices, are you expecting an improvement in those prices, and can you help frame that in terms of upside? I know you are typically hedged, so potential upside to revenue and EBITDA?

Tara J. Hemmer: We were pleased with where we exited the quarter. March was at about $69 a ton, and as you recall, we guided to $70 a ton, so we feel positive about where that is heading. Two points: about 80% of our commodities stay domestic between the U.S. and Canada. We do have some exposure to what is happening globally, which really is about freight disruptions given what is going on in the Middle East. We have no qualms about demand for our products; it is really about us tracking what those freight costs might look like, and that will be a function of how long this goes on in the Middle East.

That being said, we feel really positive about the $70 per ton that we guided to. We will give more of an update in Q2 on where we think it could head up or down.

Faiza Alwy: Thank you. And on the health care cross-selling opportunities, could you frame how much of the improvement you are seeing on the industrial volume side is related to cross-selling benefits, and how much better are you doing relative to the underlying market?

James C. Fish: That is a good question. We will have to get back to you on how much of that cross-selling actually impacts the industrial line of business. I can tell you the annualized EBITDA benefit was about $27 million from cross-selling, but I do not know offhand how much of it was in the industrial line of business.

Operator: Thank you. Our next question comes from the line of Trevor Romeo from William Blair. Your question, please.

Trevor Romeo: Good morning, and thank you. On collection and disposal pricing, I think you said both core price and yield were coming in a little ahead of what you had expected. Where are you seeing pricing stick a little better than you thought, and what are the drivers? And then if CPI starts to trend higher, and given some contracts take time to reset, how does that impact your ability to price in a higher inflationary environment? Could we see those pricing and spread metrics move up into 2027?

James C. Fish: I will take the second part first on CPI. We tend to say there is about a one- to two-quarter lag on the adjustments for CPI. About 40% to 45% of our total revenue is based on an index. Those indexes tend to reset on a quarterly basis, and it often takes two quarters for that reset to take place. Any movement in CPI we would have seen in Q1 probably will not have much of an impact until the back half of the year. On price overall, two lines of business were ahead of expectations—residential (Resi) and MSW. Resi yield was up 110 basis points versus 2025, and yield was 6.3%. That is really strong for residential.

We have been talking about residential for quite a while as we have pared down some unprofitable business, and that is part of that exercise. MSW might have been the single most impressive performer for the entire quarter, both on volume and price. MSW yield was 6.9%. What you are seeing with MSW yield—and this takes place slowly over years—we talked about it at last June’s Investor Day—as landfill capacity slowly comes offline for the industry or moves to more center-U.S. locations away from big cities, we end up in a better position because our lives—our landfill lives—are longer than the rest of the industry.

It gives us the ability to raise price to preserve airspace, and that is what you are seeing with MSW yield up 6.9%. It is a bit of cost recovery, but also airspace preservation. Those were both upside surprises. The rest were pretty much on track.

Trevor Romeo: Thanks. I would also love your perspective on AI and new technologies. Waste Management, Inc. has been leaning into automation for a long time, but in terms of AI, are there new tools you are looking at that could accelerate your efficiency going forward?

John J. Morris: Good question. We have embedded technology into the business across recycling, routing, and logistics with the roughly 19 thousand trucks we have on the street, and in the health care business. A lot of the technology benefits we see in our traditional collection and disposal business have yet to show up in the health care business, so we see upside there. We still feel like we are in the early innings in terms of embedding technology to drive efficiency and improve the roles, making them less labor dependent. Our turnover at 17-plus percent is the lowest it has ever been; part of that is we are changing the scope of roles.

On safety, our best Q1 safety numbers ever are helped by using AI for coaching with our 20 thousand-plus drivers. As much benefit as we have seen show up in OpEx and margins, we still see a lot of runway to continue to accelerate those investments.

Operator: Thank you. Our next question comes from the line of Noah Duke Kaye from Oppenheimer. Your question, please.

Noah Duke Kaye: Following on the safety discussion, risk management is at about 1.5% of sales, which is very good. That is a lagging indicator of safety performance. How sustainable are these gains on safety? Could we get further benefit, and how should we think about that translating to risk management going forward?

John J. Morris: This is not something that happens over a quarter or two. We have had slow and steady improvement in our safety results, and you are starting to see it show up in the risk numbers over time. Our recordable injury rate for the quarter was about 2.7, under 3, which is a big milestone. We still see plenty of opportunity, and it will translate positively to risk going forward.

Noah Duke Kaye: Thanks. Question on renewable energy segment contributions—how did the mix of lower RIN and higher energy commodities impact results in the quarter?

Tara J. Hemmer: We almost doubled our renewable energy production from our renewable natural gas plants, which was excellent and what we anticipated coming out of 2025 with plants that came online that year. We did not have any new plants come online in Q1. We expect three more to come online in Q2 and the rest in the back half of the year. That is up from 60% when we announced guidance in January. We are pleased with our performance, how we are tracking, and we are seeing the benefit of some higher commodity prices too.

Noah Duke Kaye: Thanks. One quick one for David. On the weather headwinds in the quarter, you said those were about half of the delta on volumes. Was that half of the 1.5% volume decline?

David Reed: It is half of the 1.5%.

Operator: Thank you. Our next question comes from the line of Analyst from Bernstein. Your question, please.

Analyst: Thanks. On AI investment, others in the industry have talked about benefits from a pricing standpoint—commentary that they expect a 100 basis point improvement in margins over the next few years. Have you seen similar benefits mainly on pricing, and do you have a sense of what that number could be, or is it still too early to tell?

James C. Fish: As it relates to AI and pricing, we have been using AI-enabled cameras on trucks to help with quality of material. As a can is dumped into a recycling truck, the AI-enabled cameras identify nonrecyclable materials accurately, and we can contact the customer to clean up their recycle stream. If they choose not to, we will bill them for it. It has been a positive on the price line and on the quality of material coming into the recycling plants.

Operator: Thank you. Our next question comes from the line of Robert Wertheimer from Melius Research. Your question, please.

Robert Wertheimer: Thanks. You mentioned 2H revenue growth as ERP stabilizes in health care. Is that mostly the absence of customer credit, or are you seeing more price and volume opportunity come through as you improve service quality? When do those factors start to make a bigger difference?

James C. Fish: It is all of the above. Credits will improve as past due receivables are cleaned up; they have dropped by two-thirds in a short period of time, and we will continue to see positive year-over-year change, particularly in the back half. Pricing—last year we were getting our sea legs a bit. This year, we are in a good spot. We understand the customer better, our customer service stats are as good as, if not better than, some of our solid waste stats, and that gives us the ability to put through price increases. It is hard to put a price increase through if your customer service has been poor, and we have turned that corner.

We also see volume contribution from cross-selling opportunities starting to manifest. The losses that presented a roughly $40 million headwind coming into 2026 were mostly a front-half issue. We are very optimistic because the front half versus back half story is starting to show up for us.

Operator: Thank you. Our next question comes from the line of Sabahat Khan from RBC Capital Markets. Your question, please.

Sabahat Khan: Thanks. Following up on health care, I think you are talking roughly flattish volumes this year with most of the gain coming from pricing. Longer-term number is about 3% to 5% top-line growth. Based on what you have learned about the business and the customer mix, how are you thinking about price versus volume opportunity going forward? Does this align more with solid waste where growth remains primarily pricing-driven?

James C. Fish: I think what we are seeing with price—particularly as we think about Q2, Q3, Q4—looks like what we would expect for the long term. Volume was where we had the most ability to improve, and that is why we are encouraged about the front half/back half. The front half was soft from a volume standpoint due to customer losses; we are encouraged those losses are lower than we thought. As we get into next year where we do not have this front half/back half dynamic, we expect a nice level of volume growth so the top line is not solely reliant on price. Price is quite good, and volume is coming.

Sabahat Khan: And on the back half of the guidance and the outlook, with RINs and commodities maybe in a better position than a few months ago, are you assuming volume inline with initial expectations with potential upside from RINs and commodities, or do you see those as offsetting?

Tara J. Hemmer: On sustainability-related businesses, we are still expecting to come in at that $240 million to $250 million benefit to EBITDA from the sustainability businesses. While we expect, at least on the renewable energy side, pricing to come in a bit better, one of the things that we are tracking is interconnect delays with utilities that might have been unexpected. All of that said, we are in a great spot to achieve our goals for 2026 and positioned nicely for 2027 when all the plants are online and our ability to meet or exceed the $26 per MMBtu number. David can speak to how that stacks with the rest of the business.

David Reed: It is still in line with what we guided to last quarter. It is a little more weighted in the second half in terms of EBITDA contribution. The margin trajectory for the remainder of the year looks similar to 2025 in terms of the slope—you do see sequential and year-over-year improvements in the back half on margin as well.

Operator: Thank you. Our next question comes from the line of Konark Gupta from Scotia Capital. Your question, please.

Konark Gupta: Thanks. First question on volume. Residential volumes have been soft. Where do you see that softening slowing down substantially? Is it still more a second half story or more of 2027 now? And the initial rebound in industrial volumes was small but positive in Q1. Would that, along with special waste strength, indicate the macro turning more positive?

John J. Morris: On special waste, as Jim mentioned and I noted in my prepared remarks, we saw strength net of the wildfire benefit last year. In our quarterly business reviews last week, there was optimism around the special waste pipeline. We feel good about that for the balance of the year. On residential, we posted about a 5% negative volume for the quarter—it does fluctuate. Looking back to 2023, with about a 3.5% volume decrease each quarter since then, we have seen revenue and EBITDA improvement. From 2023 to 2026, residential EBITDA was up 211%. While we traded off some volume, we have seen financial benefit.

We have automated the majority of that fleet, seen improved safety and efficiency, and focused on quality of revenue and contract terms. We said at the end of the year that we see some moderation coming in the second half—not to positive, but we will see positive movement through Q2 and Q3 in terms of slowing volume degradation. To date, every quarter for the last three years, we have shown substantial positive EBITDA dollar and margin improvement. We feel good about where we are, and we see residential becoming more of a tailwind over the next handful of quarters.

Konark Gupta: As a follow-up on margin, fuel is a headwind of about 20 basis points for now. For the full year, the EBITDA dollars are not impacted much given fuel revenue and fuel costs offset. Is the top end of the guidance range for margin, 31% for the full year, still obtainable in the current fuel environment, or might that be impacted just given the mathematical influence?

David Reed: Based on where we are now, we are very comfortable with the whole margin range we gave. For context on surcharge revenue, about a $1 increase in the price of diesel equates to about $200 million of annualized surcharge revenue. If you assume a one-to-one trade-off with fuel cost and surcharge revenue, that is about a 20 to 25 basis point headwind. We have that factored into our forecast and still feel comfortable with our guidance range.

Operator: Thank you. Our next question comes from the line of Adam Bubes from Goldman Sachs. Your question, please.

Adam Bubes: Good morning. On corporate expense, how should we think about what normalized corporate expense as a percent of sales looks like beyond 2026 and your ability to achieve leverage on that line item beyond 2026?

David Reed: The cost shows up in that segment, but the benefits are showing up elsewhere. For the remainder of this year, corporate and other is relatively stable at the Q1 level. You have to look at the whole picture in terms of returns, particularly on technology investments. That may mean SG&A as a percentage of revenue is more in the 10% range long term versus south of that, but you should also see improvement to OpEx so overall margin improvement as a result of those investments.

James C. Fish: Part of that 10% is having the Stericycle business onboard. Prior to Stericycle, the number was approaching 9%. Stericycle's SG&A was as high as, I think, 25%. We have reduced that to the high teens. It is still not down where the business was prior to the acquisition, so David's number of 10% is a reasonable, quite good number considering the high-teens business in Waste Management, Inc. Health Care Solutions. As we continue to get synergies—and a lot come out of SG&A—I think it is possible to get the business down into the low teens and maybe below that.

There is a long-term pathway to getting total SG&A back in the low 9s, but for now we are focused on sub-10% because of the Stericycle business.

Adam Bubes: Got it. And on free cash flow conversion trajectory from here—excluding growth investments as a percent of EBITDA, you would be at high 40s this year. Where can that trend beyond 2026? You will have landfill gas, which is high free cash flow conversion, ramping, and continued focus on working capital improvements. You also talked about incremental production tax credits.

David Reed: Given the quarter with $920 million of free cash flow, it is actually close to 50% for the quarter. For the year, it is around 46% including all investments. We see a path to continuously improve that, and I think 50% is a good number to aspire to. We are charging forward with plans and investments that should enable us to do that.

Operator: Thank you. Our next question comes from the line of Toni Michele Kaplan from Morgan Stanley. Your question, please.

Toni Michele Kaplan: Thanks so much. It looks like you restarted your buyback program with over $340 million of buybacks. Can you refresh us on capital deployment strategy going forward and how you are thinking about M&A and the pipeline for deals? How will you balance M&A versus buybacks?

David Reed: We commenced our share repurchase program right after our earnings call last quarter, and we are on track for $2 billion for the year. It is going to be a little more end-weighted—call it 55% to 60% in the second half. Our capital allocation strategy for this year is balanced. It is a year of harvest, and we are focused on returning cash to shareholders—over 90% of our free cash flow will be deployed in the form of dividends and share repurchases this year. We do have a decent tuck-in pipeline.

We previously said $100 million to $200 million; it is likely we will be at the high end of that, if not above, but we will give more guidance next quarter. Our leverage target is back within our long-term range, which gives us capacity and flexibility for acquisitions longer term. But this year, we are primarily focused on harvesting.

James C. Fish: One thing I would add—there were a few acquisitions we expected to close in Q4 or Q1 that have not closed yet, but we expect in the next days or weeks one of those will close. That was a little bit of a revenue headwind in Q1—just under $20 million. We expect to have it as part of our run rate going forward sometime in Q2.

Toni Michele Kaplan: Helpful. As a follow-up on technology and automation, which initiatives are you seeing the most benefit from right now, and which will continue to benefit you going forward?

John J. Morris: In recycling, despite low commodity prices, we are making more money with better margins because we have structurally lowered the operating cost model—automation and AI in plants. On trucks, all of our commercial and residential fleet is outfitted with technology that captures over 300 million images a year. We process about 95% of those images without human touch, providing data for safety, contamination, pricing opportunities, and right-sizing service. That technology has been around for close to a decade. From a safety perspective, AI helps us capture data on how folks are operating inside the cab, enabling coaching and contributing to historically low turnover and strong retention. Going forward, we see tremendous opportunity in routing and logistics.

We are piloting remote heavy equipment in a number of spots, a potential pathway to forms of autonomy at some landfills. Those are examples in place now and drivers of future benefits.

Operator: Thank you. Our next question comes from the line of Tami Zakaria from JPMorgan. Your question, please.

Tami Zakaria: Good morning. Probably a question for Tara. Your sustainability EBITDA dollars were robust, but margin sequentially ticked down to, I think, 45% from 50% in April. Is that due to seasonality? What margin are you expecting in 2Q and for the rest of the year for sustainability?

Tara J. Hemmer: We saw strong margin improvement year-over-year in both renewable energy and recycling, and we were pleased with where we came in. We previously said on recycling we would anticipate roughly 300 basis points of margin expansion this year, and we are still on track for that. In renewable energy, we anticipated 200 basis points of margin expansion related to growth investments, which might be offset slightly related to our third-party fuels program. Given that pricing is a bit higher in renewable energy than we anticipated, we would expect margins to tick up a bit based on what we guided to.

All in all, we are in a really good spot, performing as anticipated, and feel positive about where we are headed this year.

Tami Zakaria: Understood. And on the health care business, could you quantify the price versus volume you saw this quarter?

James C. Fish: We can follow up offline with that breakdown.

Operator: Thank you. Our next question comes from the line of Seth Weber from BMO. Your question, please.

Seth Weber: Good morning, and thanks for extending the call. Quick one on special waste strength. In your experience, is that typically a good leading indicator of the broader macro, and do you think about special waste as an indicator of the business?

James C. Fish: Yes. Special waste is one of the best forward-looking metrics we have. Customers have flexibility in timing on special waste projects. When we see that pipeline materialize in volume growth, it tells us our customer base is relatively optimistic.

Operator: Thank you. Our next question comes from the line of Shlomo Rosenbaum from Stifel. Your question, please.

Shlomo Rosenbaum: Thank you. Can you talk about the current price-cost spread within collection and disposal versus your outlook, and how we should think about that spread as we go through the year?

John J. Morris: You can see collection and disposal margins—EBITDA margins up 110 basis points, overcoming a 20 basis point fuel headwind. Operating expenses again below 60% in Q1. We are showing good spread between price and cost. We have talked about 150 to 200 basis points; it is probably a little more than 200 basis points now. That has translated to the 70 basis point EBITDA margin expansion across the business and 110 basis points in collection and disposal. On inflation, we are seeing around 3% to 3.5%, with a little more pressure on labor, probably closer to 4%.

Our core price performance quarter in and quarter out, the yield conversion, and margin translation give us confidence to continue driving margin expansion as we go forward.

Shlomo Rosenbaum: And on churn rate in the quarter versus last quarter and year-over-year, and the role of technology and AI in improvements in customer and price stickiness?

John J. Morris: We were still positive on service increases in the quarter. Churn was around 10%—it varies quarter to quarter; national account business can affect it. We have not seen wide swings. Encouragingly, we are driving strong core price and yield conversion without driving defection. On technology, it is broader than AI—we use predictive analytical capability our customer teams have built, using a lot of data filtered through technology tools to give a better predictive position on when and where pricing is warranted and how it will be received and accepted. You are seeing the results in our financial performance.

Operator: Thank you. Our next question comes from the line of Analyst from Barclays. Your question, please.

Analyst: Good morning. Coming back to the renewable energy business, the EPA recently finalized the RVO for 2026 and 2027. How has that impacted your discussions with customers in terms of forward selling of RNG, and pricing expectations on voluntary offtake?

Tara J. Hemmer: We were pleased the EPA slightly raised the renewable volume obligation. Prices have held steady at about $2.40 per RIN, which is good for us and well above what we anticipated for our long-term investment thesis at $2. We have been able to forward sell RINs, and we have 80% of our volume locked up for 2026—some in the RIN market. We are tracking the voluntary market more broadly. Roughly half of our long-term offtake will be transportation, and half in the voluntary market. We have seen strong voluntary markets outside the U.S. (Canada, the U.K., Europe, Asia). We are continuing to look at what public utilities might do in the U.S. as they pass along options to ratepayers.

We feel confident we can sell all of our volume in the voluntary market at or above our $26 per MMBtu investment thesis.

Analyst: Appreciate the color. Thanks very much.

Operator: Thank you. Our final question for today comes from the line of Kevin Chiang from CIBC. Your question, please.

Kevin Chiang: Thanks. Maybe for you, Tara. What are you seeing in the recycled plastics market? Virgin plastics have gone up significantly since the onset of the conflict in the Middle East. You did shutter a Natura plastic film processing facility. Do the economics of that facility change given the broader plastics market?

Tara J. Hemmer: Clearly, what is happening in the Middle East and with virgin pricing could impact recycled commodities, potentially positively. We are tracking that closely, and it is starting to creep back up, but the key word is creep. We are not anticipating any significant benefit from plastics pricing right now, nor would it change our view on the facilities we have shuttered at this point.

Operator: Thank you. This concludes the question-and-answer session of today's program. I would like to hand the program back to James C. Fish for any further remarks.

James C. Fish: Thank you. One last comment: we did not talk much about the geopolitical environment, but even with the uncertainty and the weather we discussed, we are most proud that our 60 thousand folks have produced good results and we are on track to hit our guidance for the year. We are very proud of that. Thank you all for joining us, and we look forward to talking to you next quarter.

Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This concludes the program. You may now disconnect.

Edward A. Egl: Good day.