Good morning, everyone, and welcome to the Waste Connections, Inc. Q3 2025 Earnings Call. Also note today's event is being recorded. At this time, I'd like to turn the conference over to Ron Mittelstaedt, President and CEO. Sir, please go ahead.

Thank you, operator, and good morning. I would like to welcome everyone to this conference call to discuss our third quarter results and to provide some thoughts about the remainder of the year and the setup for 2026. I'm joined this morning by Mary Anne Whitney, our CFO, and several other members of our senior management. As noted in our release, superior execution drove better-than-expected financial results in the third quarter, bolstered by continued improvement in operating trends. Another quarterly step down in employee turnover and new record low safety incident rates, together with strong pricing execution, retention drove adjusted EBITDA margins of 33.8%, reflecting underlying solid waste margin expansion of approximately 80 basis points in the period. I'm extremely pleased by our team's efforts to overcome incremental commodity headwinds and ongoing uncertainty in the economy in Q3 and to achieve the results above expectations. Assuming continuing trends and without further headwinds, we remain well positioned to deliver our full year 2025 outlook as provided in July. Before we get into much more detail, let me turn the call over to Mary Anne for our forward-looking disclaimer and other housekeeping items.

Thank you, Ron, and good morning. The discussion today 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 uncertainties. Factors that could cause actual results to differ are discussed both in the cautionary statement included in our October 21 earnings release and in greater detail in Waste Connections filings with the U.S. Securities and Exchange Commission and the Securities Commissions 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 business. 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 date. On the call, we will discuss non-GAAP measures such as adjusted EBITDA, adjusted net income attributable to Waste Connections on both the 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 differently. I will now turn the call back over to Ron.

Okay. Thank you, Mary Anne. We are extremely pleased to deliver third quarter results above expectations, demonstrating the durability of solid waste regardless of the economic environment. Q3 revenue growth was led by 6.3% for solid waste price with reported volumes slightly better than expected, down 2.7%. We delivered margins of 33.8%, up 100 basis points year-over-year, excluding the impact of commodities and our decision to close Chiquita Canyon landfill as of January 1. Said another way, normalizing for these factors puts our Q3 margins at 34.7%, without the benefit of any contribution from positive volumes. As we've said, we remain well positioned to enjoy the upside from any pickup in volumes from the broader economy, given our asset position and market selection strategy. As anticipated, we continue to advance that strategy through acquisition activity, which has continued at an above-average pace, resulting in approximately $300 million in annualized revenues, either closed or under definitive agreement year-to-date, with more expected in Q4 and by early 2026. We've had some fantastic M&A wins, including two of the largest private companies in Florida, one of which we closed during Q3 with the other signed and expected to close in Q4. Moreover, our operating performance, free cash flow, and balance sheet continue to provide the capacity for outsized acquisition activity and expanded return of capital to shareholders. To that end, our Board of Directors authorized an 11.1% increase to our regular quarterly cash dividend, our 15th consecutive annual double-digit increase since the initiation of our dividend in 2010. Additionally, as noted on our last call, we've been in the market buying back shares as we take an opportunistic approach to share repurchases and look to capitalize when we see compelling dislocation in the market or within our sector. To date, we bought back approximately 2.4 million shares or almost 1% of shares outstanding pursuant to our normal course issuer bid, which were renewed in August providing for annual repurchases of up to 5% of shares outstanding. Along with executing our growth strategy, we've also shown significant progress towards achievement of our long-term aspirational sustainability-related targets as highlighted in our recently released 2025 sustainability report. In fact, we've already achieved several of our initial targets, including emissions reductions, safety performance and recycling and being well ahead of our expectations. And we continue to challenge ourselves for further progress as we demonstrate that sustainability is integral to our long-term value creation and part of our corporate culture. Most notably, with multiyear reductions of 19% in emissions, our results demonstrate that outsized growth is compatible with the achievement of our long-term aspirational ESG targets. This improvement also applies to employee engagement, where we've seen ongoing reductions during 2025 in voluntary turnover and safety-related metrics. In Q3, voluntary turnover was down for the 12th consecutive quarter for a total reduction of over 55% from the peak in late '22 and early '23. Similarly, safety incident rates have shown continuous multiyear improvement, now down over 25% to new historic lows for the company. The cornerstone of our operating philosophy is that people are our strongest differentiator. So we're excited to see that the level of employee engagement has never been stronger. And as we've maintained, would be the case two years ago, we're seeing the benefits of higher employee retention and engagement in our financial results, as evidenced by our 80 basis points of underlying margin expansion in the quarter with more to come given record safety levels and nearly 3 years of progress. What may be even more compelling is the opportunity ahead as we harness that engagement to leverage technology in new and unprecedented ways while adhering to the fundamentals that have driven our growth and success. Along with human capital as a differentiator, we're excited to recognize the benefits of using technology to accelerate and expand the reach of our leaders. To that end, we're making long-term investments in technology and infrastructure to maximize their impact and position the company for continued margin expansion. These investments target productivity and efficiency gains as we look to further digitize and automate operations, enhance forecasting through data analytics, and improve service delivery, all while enabling a greater focus on the customer experience. We are already seeing positive outcomes, including improved pricing retention as we expand the utilization of data analytics across multiple platforms. We look to build upon these efforts as we deploy additional applications and expand our efforts in 2026 and '27. Now before we look ahead, I'd like to pass the call to Mary Anne to review more in depth the financial highlights of the third quarter.

Thank you, Ron. In the third quarter, revenue of $2.458 billion was above our outlook and up $120 million or 5.1% year-over-year. Acquisitions completed since the year ago period contributed about $77 million net of divestitures. Core pricing of 6.3% in Q3 puts us on pace for full year core pricing of approximately 6.5%, which is above our initial expectations coming into 2025 and reflects stronger pricing retention in our competitive regions. Volumes were down 2.7%, similar to Q2 and reflected ongoing purposeful and margin-accretive shedding of low-margin contracts and some price volume trade-off. Volumes also reflected continued sluggishness in the more cyclically exposed activities. The effects of slower roll-off activity and lower disposal volumes primarily from construction-oriented activity were similar to those described in previous periods. As such, we saw a more muted seasonal ramp, which would be typical for Q3. Looking year-over-year in Q3 by line of business on a same-store basis, roll-up pulls were down 1% and rates per pull were up 2%, which is a modest improvement from Q2. Year-over-year pulls in most regions were flattish with our Southern region still down mid-single digits. Markets like Florida and Texas continue to be our weakest, albeit less negative on a year-over-year basis than in previous quarters. Landfill tons were up almost 3%, led by higher MSW tons, up 2%, and special waste tons up 10%, with some of that increase due to the timing of jobs that were otherwise expected in Q4. C&D tons, while still negative at down 4%, were better on a comparative basis than in recent quarters as the rate of decline may be moderating or again as a result of some timing differences. We've seen pockets of C&D activity in our markets in our central and southern regions as well as ongoing special waste activity in certain West Coast markets. Moving next to commodity-related activity. Value to recycled commodities and renewable energy credits, or RINs, continued to slide during Q3, both ending the quarter down 30% to 35% year-over-year. On a combined basis, recycled commodities and landfill gas revenues were down 27% year-over-year on lower pricing, partially offset by contributions at new facilities. Our E&P waste revenues, on the other hand, were up 7% year-over-year, driven by our production-oriented R360 Canada business, while our legacy U.S. business was down nominally year-over-year. Adjusted EBITDA for Q3, as reconciled in our earnings release, was $830.3 million, up 5.4% year-over-year and slightly above our expectations. At 33.8%, our adjusted EBITDA margin was up 10 basis points year-over-year and better than expected. This was in spite of an extra 20 basis point drag from the decline in commodities during the quarter, as noted. In the aggregate, lower year-over-year revenues from recycling and RINs resulted in a margin drag of about 70 basis points in the quarter. Underlying solid waste margins, on the other hand, were up 80 basis points, even better than in recent quarters. Not surprisingly, we once again saw the greatest margin improvement in those areas related to employee retention and lower openings. That includes a range of cost categories related to third-party services, including labor and maintenance, parts and repairs. In contrast, we continue to overcome lagging reductions in risk management costs and look forward to unlocking savings for margin expansion in future periods. Net interest expense in the quarter was $79.4 million, and our effective tax rate for the third quarter was 23.6%. Our leverage remained comfortably within our expected range of 2.75x debt-to-EBITDA. And finally, year-to-date, we have delivered adjusted free cash flow of $1.084 billion on capital expenditures, up over $135 million year-over-year, providing visibility for full year adjusted free cash flow in line with our outlook of $1.3 billion. Assuming continuing trends and without further headwinds, there is no change to our full year guidance, which implies Q4 revenue of approximately $2.36 billion and adjusted EBITDA margin up about 90 basis points year-over-year to about 33.3%. With that, I'll turn the call back over to Ron to provide some preliminary thoughts about 2026 before we head into Q&A.

Thank you, Mary Anne. As we have described, we are pleased with our year-to-date results, which not only highlight the strength and resilience of our business but provide momentum for next year. Although we do not provide our formal outlook for 2026 until February, we are able to provide a high-level framework, assuming no change in the current economic environment. On that basis, we should be positioned for the following: mid-single-digit revenue growth in 2026 from price-led organic growth in solid waste and approximately 1% revenue carryover from 2025 acquisition activity to date, partially offset by continued headwinds related to commodities. Looking at margins, we remain well positioned for above-average underlying solid waste margin expansion, with offsets expected from margin dilutive impacts from acquisitions and commodities. These combined impacts suggest adjusted EBITDA margin expansion in what we would consider a normalized range. And depending on the timing of capital expenditures and other outlays, the conversion of adjusted EBITDA to adjusted free cash flow should improve relative to 2025. These aforementioned amounts will be positively impacted by the pace and magnitude of ongoing acquisition activity in Q4 and will grow during 2026 as we complete additional M&A. To the extent that we see improvements in commodities and RINs values, those impacts would also be additive to these preliminary thoughts. We look forward to having better visibility on the tone of the economy, including any government shutdown or tariff-related implications when we provide our formal outlook in February. We're most grateful and extremely proud of the dedication of our over 25,000 employees and the local leadership team responsible for the consistency of operational execution. We're excited to leverage their effectiveness and provide multiyear opportunities to accelerate growth through our investments in technology. We're also proud to welcome Jason Craft, a long-tenured local, divisional and regional Waste Connections leader to the role of Chief Operating Officer during the quarter. Jason's strong operational background and business acumen make him an ideal addition to the senior leadership team. We will continue to focus on operational excellence and stay true to our culture while also welcoming new and innovative ways to drive value creation. As we say, win from within. We appreciate your time today. I will now turn this call over to the operator to open up the lines for your questions. Operator?

Our first question today comes from Tyler Brown from Raymond James.

Can you hear me?

Tyler, we can hear you.

Mary Anne, just real quick on E&P. I think it was pretty strong, maybe felt like something was helping there. Can you kind of talk about Q3 and then how we should think about run rating that business, maybe not only in Q4 but maybe even into next year?

Sure. What I'd say is that as in Q2, we saw nice steady performance in our production-oriented piece of the business in spite of lower crude, and we talked about a little bit of weakness in our legacy R360 business. What was different about Q3 — what was incremental was that there was a sequential increase in that Canadian business, primarily associated with the remediation job. And so if I were run rating it, I would back out that $10 million, which is what it accounted for.

Okay. Perfect. $10 million. Okay. Got it. And I appreciate, Ron, the early look on '26, but big picture, is there really any incremental benefit from the new RNG investments in that EBITDA number? Is that going to be more of a '27 number? And then based on what we know today, where should that green CapEx come in for '25? And then what will remain kind of in '26 as you sit here today?

Yes, Tyler. So first off, there is no incremental R&D revenue or EBITDA of any amount materially in the balance to '25 guidance or in the '26 first look, okay? Nothing there because most of our projects are time to come online at some point during the fourth quarter. So there could be a de minimis amount, maybe a couple of months in '26. So that benefit is really not until '27 in revenue, EBITDA, and margin. We originally thought we'd spend between $100 million and $150 million in CapEx on R&D in '25. That number is now probably between $75 million and $125 million. So maybe stepping down about $25 million to $35 million. So there could be $25 million to $50 million of green CapEx rollover into '26.

Okay. Excellent. Very helpful. And then I just want to make sure that I've got your commentary about '26 margins. So I think you said a more normalized year next year. That is assuming outsized expansion in solid waste offset based on what we know today by dilutive M&A and dilutive commodities. Is that right?

That's exactly right. You have it exactly right. Right now, we believe commodities, if they stayed where they are, about a 20 to 25 basis point dilutive impact on a year-to-year basis and M&A, call that 10 to 15. So you're somewhere between 30 and 40 that you're overcoming.

Yes. Perfect. Okay. And my last one is just a big picture question, and you touched on it, Ron. There's obviously a ton going on in the world of technology. And it sounds like you guys and quite frankly, the industry at large probably stand to benefit from maybe some of the productivity that AI might bring. But can you just talk a little bit about your strategy where you are in the journey? What kind of tools you're talking about? And is that something that we should see a gift that gives over the next, call it, half decade? Or how should we just think about that broadly? Appreciate it.

Yes. Sure. Well, obviously, we are mostly talking about the 2 things. We're mostly talking about data aggregation amongst historically disparate systems and apps which are now being aggregated and can speak to each other and provide data analytics that we really haven't had to this degree. And then the utilization and overlay in multiple areas of AI to analyze that data and help us in areas of pricing, customer engagement, route optimization, maintenance projectability, and a variety of other things. We laid out in late '24 sort of a 3-year, call it, total digitization of the organization by the end of '27. So we are now — call that 1/3 through that. We focused heavily on pricing and budgeting, forecasting, and planning through the use of AI and data aggregation in '25. For '26, we will be doing the same on sort of route optimization. As we've mentioned working to sort of — what I'd call, ways for garbage, if you will, from a routing — a real-time routing standpoint rather than a static routing as well as a dramatically enhanced mobile application and a complete revamp of our maintenance software and its integration to our operating system. And then there are additional plans for '27. So I think those — I think it's too early to know exactly what that does margin-wise. It's obviously they are all a margin lift and continuing to help us with outsized margin expansion. But I can tell you the first 2 to 3 things that we have done in late '24 and '25, there's been a very, very rapid payback on those investments. And we're surprised at the magnitude of the impacts, favorably surprised. So I would tell you that looking out, as you said, maybe over a half decade or 4- to 5-year period, we should continue to see those. And I'd say those impacts are more in the 2- to 3-year period. We should see most of the benefit from.

Our next question comes from Noah Kaye from Oppenheimer & Company.

I'll pick up on Tyler's last question around really the runway for accelerating or improving pricing retention from some of these changes in tools. What are you specifically thinking about in price for '26 based off of the restricted and where you expect to be on open? And how much does this effort contribute to that?

Well, no, I'd actually start in '25 because we already said that we've actually been using this tool and been applying it this year — deploying it this year. And as you'll recall, we had initially guided to pricing of around 6%, and we've ended up giving you an updated guidance for 6.5%. And so that improved pricing retention we would attribute in part to the tool that we've been deploying. And we'd also acknowledge that those improving metrics on the operating stats like having our seats full and retention better, and lower turnover, that also contributes to pricing retention. So I'd say that gives you a flavor for the kind of benefit we're seeing, a portion of it we would attribute to that pool. So then when we think longer term, we think about really the life cycle of the customer and be able to hold on to customers by putting in smart price increases and minimizing the amount of customer loss and of course, rollbacks. And so we think of it as taking some pressure off using the pricing lever to drive that price cost spread and being incremental as we've demonstrated this year for the possibility that there's upside when we go into a year. To your specific question about how we're thinking about next year, as you know, we think in terms of the 2 pieces at the CPI-linked markets, and that's a lagging CPI adjustment, which over the past year, those increases have been smaller than in the prior year. So you'd expect less price in those CPI-linked markets. And then the real question becomes what are cost pressures doing and how much price do we need in our unrestricted markets and then how effective are those price increases. And so I think all of that could sort of inform you directionally that the expectation is needing less price in '26 than we did in '25. But of course, the particulars of that, we'll give when we give our guidance in February.

And no, I would just add that the expectation of still 150 to 200 basis point price cost spread is directionally how you should think of that and our confidence level of achieving that, I think, has improved with the utilization of the AI tool that we've been working on for the past year plus. So if we have a lower gross price and a higher net price with lower customer churn, we believe that can ultimately pull 50 to 100 basis points out of that reported volume number, meaning improving it. Because right now, we're getting a trade-off of probably up to 1 point for up to about 100 to 150 basis points more that we're pushing price. So as we can pull that down and offset that churn, that is — that layers for us in the organic growth number as well.

Very interesting. You mentioned, I guess, the $50 million potential year-over-year benefit from lower green CapEx to free cash flow in '26. Just what are some of the other puts and takes that we should be thinking about in our models for free cash flow conversion?

Well, of course, no, we need to get through this year to — so — we know the timing of CapEx, we've talked about taking advantage of bonus depreciation by potentially adding CapEx as we exit '25 for fleet and equipment. You should expect us to be looking at that. That will inform our thinking about '26. As we said, the green CapEx will inform it and ultimately what we guide to for EBITDA. All of those things will together inform our thinking about what the moving pieces are for '26.

And our next question comes from Konark Gupta from Scotiabank.

I just want to kind of follow on the last question about free cash flow. So I think one of the other moving parts, I think the last couple of years, at least, has been the Chiquita-related outlays. So can you update us on where the Chiquita situation today is in terms of your remediation obligations? And how do you expect those outlays to trend in the next year or so? And then also maybe update on where the litigation currently sits there.

Sure. I'll take a crack at this for you. So we would tell you that overall, the mitigation and treatment of the reaction or what we call the ETLF is actually going about as we expected or maybe in ways even a little better. We continue to make progress on the removal of the leachate from the landfill that is being generated by the reaction. And that amount continues to drop quarter-to-quarter. We keep handling over 400,000 gallons a day, and we are now handling about 220,000 to 240,000 gallons a day in real time. And at that 220,000 to 240,000 gallons a day, we are reducing the level of leachate within the landfill itself, which tells us that we are on the backside of the reaction curve because we're now effectively outrunning the reaction generation, whereas a year ago, the reaction generation was outrunning us. So those are some very good signs. We have completely capped with about 42 acres of synthetic liner, the reaction area. We have voluntarily agreed to cap an additional 50 acres over the next 3 years preventatively and at the request of agencies, and we agree with that. And we have completed drilling of all of the extraction wells and implementing all of the submersible pumps to remove the liquid. So — and we have dropped by over 95% the registered odor complaints that are monitored through local agencies and the state of California Air Board. So I would tell you that the reaction handling is going as expected or even better on that front. At this point, the outlays are running somewhat ahead of our expectations because we've taken additional steps to decrease the impacted area and accelerated some of those steps on our leachate treatment activities. We continue to believe and expect these efforts and that others that we're pursuing will and are resulting in decreasing outlays given the progress that we've made. So that's really the reaction front, and then you have the sort of the whole separately regulatory compliance and litigation that comes along with this type of event. And of course, we're not going to comment on litigation because we are in a public forum, but I'll just tell you that, that's probably expected as you would expect in something like this. So that's really the update on where we're at.

And that's helpful, Ron. And just in terms of guideposts around the outlays for the Chiquita this year versus what you can expect maybe next year?

Yes. Well, we're not yet prepared to outline that. We will obviously do so in February when we give our full guidance. But what I can tell you is that — as we said, we're somewhat ahead at this point right now this year. We don't necessarily view that negatively. We have no reason to expect as we sit here today that the total outlay that we have outlined when we originally took an impairment and a charge when we closed the site for our post-closure has any material change to the totals.

Okay. That's really helpful. And just to wrap up quick on the volume side of things. I think heading into the third quarter, the expectation was volumes to be a little bit worse than what you guys have seen in the first half. So just trying to understand like if you can parse out some of the key underlying drivers in the volumes here with respect to macro, the Chiquita obviously overlap because you shut down the landfill in Q4 last year. And also anything else in the volume that you can call out for Q3 and expectation in Q4?

Sure. So to your point, coming into Q3, we've seen some incremental weakness at the end of Q2. And our expectation was that perhaps there was really no seasonal ramp, and we did see a bit of a seasonal ramp, but we would describe it as muted. I think it was up about 1.5% sequentially, which is less than half of what you would typically expect to see. So some muted improvements. As I mentioned in the prepared remarks, special waste was up by about 10%. I'd always hesitate to generalize from something that's event-driven and pretty lumpy since last year special waste was down 10% in the quarter, but it was encouraging to see less negative trends, again, as I mentioned in the remarks, in C&D. So a little better than it had been in prior quarters. Again, I wouldn't generalize from this because also, as I've mentioned, some of it is just timing. And we had expectations about what the back half of the year could look like. And if some of it occurs in Q3, that means you shouldn't assume it happens again in Q4, again, given the event-driven nature of the business. But encouraging to see that things aren't incrementally worse. Arguably, this is our eighth quarter or even more of just kind of flattish activity levels and so you're not seeing the creation of new volumes.

Our next question comes from Chris Murray from ATB Capital Markets.

Maybe just — maybe just thinking about volumes as we go into next year. And just if you think about that, we're going to be rolling off Chiquita, which has been a pretty big headwind, if I think about the kind of the revenue guide kind of mid-single digits with kind of, call it, 3 percentage type inflation numbers, can you just really give us an idea how you're thinking about getting to that kind of mid-single-digit number? And does that include any sort of expectation for any volume growth kind of in MSW year-over-year?

Sure, Chris. So of course, we're not giving guidance. And these were broad strokes, but at a very high level, a way to think about it since — as you know, we think in terms of price-led organic growth and as I mentioned earlier, we think in terms of how much price we need and whether or not we're seeing incremental headwinds from inflation or we're seeing any easing. And given the fact that, as we've talked about the underlying margin expansion we've enjoyed because of the self-help measures and the fact that trends aren't getting worse based on what we're seeing right now, one could envision that the pieces would have price that's not as positive as it was in the current environment, and there might be volumes that are not as negative. And the net impact of those two would get you to be approaching the kind of numbers we're talking about. And then you layer on the M&A with some offsets. And so I'd say that's the way to think about the building blocks. And of course, we'll have better information and insights in February when we actually give our guidance.

And Chris, I would tell you that, look, we have said that our costs this year have been running. Of course, they were higher at the beginning of the year, coming down throughout the year. We point to labor because that's the largest cost item. As we exit the year, we are approaching going below 4% in labor. It was 4.1% in Q3. And our other costs are running just below that. So we believe that next year that, that labor number runs closer to the mid-3s, maybe 3.5%. So again, we've talked about maintaining the type of spread we've had this year in price. So assuming that is what continues in the cost, I think you can get yourself pretty close.

Yes. No, that's helpful. And then maybe taking like the giant kind of step and into '27, assuming that you kind of get the normal kind of inflection, at least the thinking has been as we've been bringing in these RNG investments, and thank you for the clarification. It's probably going to be a Q4 '26 thing, but as we get into '27, it was — I guess the expectation was always there would be about $1 of EBITDA for every dollar you sort of put into the program. But if you just have any updates and any thoughts around how we should maybe frame that as we think about maybe those years, that would be helpful.

Sure. So Chris, we've talked over the past couple of years about the fact that, that dollar of investment had grown and the fact that we've seen the cost creep and the delays on these projects and that has continued, and it's contributed to the expectations that those don't come online until late '26 or early '27. The other major factor driving that equation is what RIN values are. And of course, at one for one was in an environment of $2.50 to $3 RINs. And if we're sitting at $2.25 and have been below that, that certainly alters our expectations. And you could see the 1:1 moving closer to 2:1 depending on what those ultimate values are.

Our next question comes from Kevin Chiang from CIBC.

First of all, congratulations on the progress you're making on some of these safety metrics. I guess as you think about 2026, I'm wondering if you start seeing the benefits of less of a headwind, I guess, from the risk management inflation you're seeing in the 2025 results? And then I did notice Canada actually had — at least you called out in Q3, risk management was actually a tailwind to your margin. Just wondering what's happening in Canada from a risk management cost perspective versus what you're seeing in the U.S.

I think that was specifically related to a comeback on workers' comp episodically. We get a credit, and so that can cause some lumpiness quarter-to-quarter. All of our regions are seeing improvement in safety. And to your question about when we see the benefit of risk management costs, again, given the nature of the lagging nature and the fact that it's statistically driven or actuarially driven and clean development periods impact or influence how long it takes to see. We'd always be cautious about putting too fine a point on it. But even in our overall program costs, I'm optimistic that there's some benefits in '26 versus '25. I think the key thing to take away, Kevin, is that we had talked about 100 basis points of margin expansion, and we're driving the kind of results you've seen in spite of the fact that it's not just that we haven't gotten the risk benefit, but it continues to be a headwind of 20 to 30 basis points in the quarter. So it gives you an idea of what unlocking it could do as we look ahead.

That's helpful. Maybe just on your Canada R360 opportunities. If I recall, you had some idled assets when you made the acquisition, I guess, from Secure. Just given where energy prices are, just — how do you view that optionality, I guess? Is that still something that you'd look to invest in to bring some of these facilities online? Or do you need a higher energy price to make that work?

Yes. Good recollection on that, Kevin. In fact, there were 6 idle assets when we closed the transaction 2.25 years ago or 2.5 years ago now. We have, in the course of 2025, invested in and opened 2 of those 6. And that has actually helped us in Q3 at one of those facilities. Again, these are smaller facilities and smaller contributions, but they certainly were positive to volumes and our performance in Q3 and will be in Q4. We're going to assess each of the remaining 4 — we reassess all the time. It isn't as much in Canada because it's a production-based business. It isn't as much the price of crude, although that is influential, no question. It's where there is new drilling activity and its proximity to facilities that you might have shuttered. So as activity moves amongst formations from time to time, and it moves much slower in Canada because they have much longer-life wells. That will really affect when we open those additional facilities.

That's super helpful. And maybe if I could just fit one last one in here. Just any update on the newer commercial zones. It looks like they're going to open up to, I guess, the two Bronx regions, which I think you have I guess, the permit in those markets as well. Just how is that going? And if you're experiencing Queens, I guess, as that test run has come to an end here.

Yes. You are right. In fact, they have opened two additional zones, and we have permits in both, Kevin, to answer your question, they opened those October 1. So we're 2.5 weeks into it. It's going fairly well. And again, I would say about as expected. We didn't mention this in our commentary, but in the fourth quarter, we will be closing the large — closing on the largest remaining transfer station in the Queens market that we have had under definitive agreement since back in April and May, and there's a complex regulatory process to get through in New York. And we have gotten through that process and gotten approval to close on that transfer station. And that really gives us one more leg in this jigsaw puzzle of how the franchise business comes together in New York City. So we are looking forward. We will have that open here — well, we'll have it under ownership here in the fourth quarter. So we're making good progress. It's a scramble when they open these zones, but we are very, very well positioned for that with the magnitude and size of our sales force and our operating footprint there. So that — I'd say that continues to play out about as expected, and we look forward to them rolling out the remaining zones over '26 and '27.

Our next question comes from Jim Schumm from TD Cowen.

Nice quarter. All of my questions have been answered. I have just two quick ones for you, though. Are you seeing any issues obtaining new trucks? And do you think there will be any tariff impact next year? I know there was pretty much no impact this year.

Yes, Jim. I mean, first off, I would tell you that we are really not seeing, and it's a good question because up until, I would tell you probably about mid this year, there was still some supply chain delay, but that has really eased. And in fact, we are in the market currently buying additional fleet that we're pulling into '25 because of availability of it and our desire to not only obtain it, but to take advantage of bonus depreciation with the change in law. So no, we're really not. So I wouldn't want to use that as a reason we couldn't deliver on getting all of our vehicles. As far as tariffs, we are hearing from manufacturers that there's probably somewhere in the neighborhood of a $3,000 up to about a $7,500 per truck impact because it affects different components of both the chassis and the bodies separately. So I would tell you that, that is relatively de minimis in the total scheme of things, but there is some very small impact at this point in time in '26 going forward from the manufacturers.

Okay. Great. And then you guys talked quite a bit about volume. And just maybe one more on that. From a volume standpoint next year, are there any major contracts that expire that you're likely to shed for next year now? I know that there's always going to be some, but I mean like large sort of needle movers, whether it be from Progressive or any other contracts.

Right. Understanding that there's always ins and outs. No, there's no significant chunky contract. And in fact, in Q4, the chunkier one that's been impacting this year, about 20 basis points that actually expires or anniversaries. And so it eases that shedding a little bit.

Our next question comes from Tobey Sommer from Truist.

With commodity prices in RINs recycling kind of being a headwind here for a period of time, does this influence an effect at all the way you think about the mix and exposure that you want to have within the portfolio and income statement in these buckets? And how much higher or lower do you think your exposure might be in 3 or 5 years?

Tobey, we think in terms of providing the service to our customers, and so it's really a function of the mix of markets where, as you can appreciate on the West Coast, where we've always had a high amount of diversion and therefore, recycling, and that's a great model for that business. And then off of the West Coast in places where really, we've always taken kind of a slow-moving approach to get critical mass and then build out our own recycling facilities. Again, it's all based on meeting the customers' needs. And then we think about derisking it to the extent we can. That's why you've seen us build our own recycling facilities in certain markets, and it's really coincided with the incremental technology in these facilities, and so that's made it a better business. And partnering with a nationwide broker to get better pricing through volumes. So we've approached it as how do we mitigate the overall impact, make it a better underlying business and then communicate to you all what the sensitivity is with movement in commodity values. Because we've always maintained — particularly given the fact that the recycled commodities running through our facilities come off of our own trucks, it really has to start with pricing it appropriately at the street. And so that's what we focus on.

And the last thing I'd say, Tobey, is with regard to that is if you think about or — I'm going to use this word growth algorithm where we have predominantly price-led organic growth. It — obviously, if that's the case, your percentage of commodities will naturally drop over time mathematically. And unless your M&A is materially outpacing in a year your price-led organic growth. And it has been running about the same or maybe a little under. So I think over time, it is much more likely that the percentage of things that are linked to a commodity that has some market volatility continues to drop as a percentage of revenue in generalities.

And I wanted to ask a question about the great labor retention and cascading positive financial impacts on the income statement. Much of a margin impact sort of delta is there between the current trend, which is phenomenal and what you might consider to be normal because should the labor market ever kind of change here and start to improve, there may be a little bit of giveback for the industry and the company.

Yes. Well, I would characterize it in this way. We have — originally, when we went down this path, we said, hey, there's about 100 basis points of margin expansion that can be unlocked over a 2- to 3-year period as we achieve our turnover reduction goals. And we said that, that doesn't show up in just one line item; it sort of shows up in 7 or 8 at 10 to 15 basis points per line item. And that has happened. We are about 2/3 through, I'd call it, 65 to 70 basis points of that unlock has been achieved. Now here is the thing. We've actually achieved 130 basis points because we've overcome the margin headwinds of things that have affected against us, such as drops in commodities, RINs as we've talked about, and increases in risk from prior period severity. So we've still got another 1/3 to go to get that at 100, but that would actually put it at closer to about 160 to 170 is what we would have achieved through that. So we believe you'll see the vast majority of that finish out over the course of '26. And then if there is, to use your word, additional give back because there was some labor softening, that would be determined. But I will tell you that, look, you're always in the market to hire the best quality people. And even in the time of labor softening, best quality people in this economy have opportunities. So I wouldn't think of not flexing downward. I would just think of it as being more stabilized.

Our next question comes from Sabahat Khan from RBC Capital Markets.

Just a quick clarification on the margin and maybe a bit more of a detailed one. If we caught it right, I think you were saying about 50 to 80 bps of underlying margin improvement, offsetting about 30 to 40 bps of headwinds, one, did I catch that correct? And secondly, is this just more kind of price cost spread and benefits of the employee sort of safety and all the retention-related benefits? Or are there kind of other benefits that you expect, maybe even if you think about 2, 3 years, kind of where are some of the margin levers that we should look at?

So just to make sure we're all saying the same thing. We think of normalized margin expansion in the 20 to 40 basis point range. So however you net to that number is the right way to think about being driven by that underlying solid base margin expansion. You've seen us deliver underlying solid waste margin expansion for the past several quarters and acknowledging that there are headwinds from commodities, which we said is, call it, 20-ish, 25 basis points, and that acquisitions are dilutive and would be expected to continue to be to the extent anyone's layering more deals, of course, we wouldn't encourage that. But just need to be mindful of those dynamics. So I think we're all saying the same thing, but that would just be the clarification there. And again, in terms of what's driving the underlying margin expansion, again, we go into any year thinking of that price/cost spread and the opportunity to do better than that because of these self-help measures, whether it's on pricing retention or employee retention and the cost benefits associated with that, including those lagging benefits from risk. But any of the granularity on the drivers, we'll certainly look forward to talking about in February when we give our guidance. We appreciate the opportunity to communicate at a very high level broad strokes how we're thinking about next year.

Okay. Great. And then just within that 7% growth number in the E&P, I think you mentioned there's a small facility that added as well. Is there any way to quantify what the sort of an annual run rate benefit from a facility like that might be?

The annual contribution from a facility like that is probably in the $3 million revenue range and $1.5 million to $2 million EBITDA range.

Great. And then lastly, I think there's a comment in this quarter, the results there is an amount related to a landfill. Presumably, it's something different than the Chiquita landfill. But should we assume that this was just sort of like a one-off? Is there any sort of bookends you'd want to put on some amount like that? Or should we just see this as a one-off remediation type cost that was incurred in the quarter?

Yes. Thanks. Nothing to do with Chiquita. It's a one-off, as I said, I mean it's just a timing difference in commissioning and disposal well on some incremental costs in the meantime.

Our next question comes from William Grippin from Barclays.

Just one quick one for me here on capital allocation. You obviously ramped up share repurchases here in the third quarter. Just wondering how we should think about maybe the split between spending on acquisitions and buybacks as we look into '26, maybe in the context of the M&A pipeline that you kind of see in front of you right now?

We believe that pursuing strategically aligned and reasonably priced acquisitions will always be our top priority. We aim to continue growing the business as we've traditionally done, focusing on markets that have contributed significantly to our success. There remains considerable potential for growth, with an estimated $4.5 billion to $5 billion in private company revenue that aligns with our strategy. While the timing of deals is largely dependent on sellers, the deal pipeline remains strong. We are seeing success this year and are closing transactions in the fourth quarter, with more opportunities ahead for next year. It's important to note that, despite our dividend's consistent double-digit annual growth since inception, we also have significant flexibility for share repurchases, which we leveraged recently during a favorable market moment. This illustrates our approach, with our leverage at $275 million indicating we can pursue multiple strategies, while M&A will remain our primary focus.

Our next question comes from Tami Zakaria from JPMorgan.

I'll add one quick question here. Any thoughts on how much of a volume headwind we could see next year from some of the contract shedding you're doing woefully? And if you could remind us how much of a drag it's expected to be this year? That would be helpful.

Sure, Tami. As we've said, when we look at the 2.7% in negative volumes, about 70 basis points of that has been this intentional shedding. I mentioned earlier, we know about 1/3 of that will step down even in Q4 because of one contract with anniversary. And then going forward, it will really be a function of how much that continues to decline would be a function of any incremental shedding from acquisitions that we're currently doing or have done in the last year. And so given the fact that we've still been busy, there's certainly potential for pieces there, but I wouldn't expect it to get greater than what we've recently seen. I would expect those losses overall to be smaller than they have been in recent periods.

Our next question comes from Michael Doumet from National Bank.

I just wanted to ask a question on the regional results. It looks like Canada and the Southern U.S. are seeing some pretty solid margin expansion while the other regions are flat to down year-to-date. I mean, is that reflective of where the recycling business is a little bit larger? Just wondering what is driving the differences in the margins in the regions.

So typically, the biggest drivers would be, yes, it would include recycling, to your point, our Western region and our Eastern region both have large recycling impacts. It also reflects acquisition activity because acquisitions are typically dilutive and so you would certainly see that in any of those regions where we've closed deals.

And the other thing I would say, Michael, is it also reflects — when you ask the difference between original margins, it also reflects the general tip fee, landfill tip fee has built into the regional differences. So where you are in the Northeast and you're talking $80 to $120 tip fees or the West where you're talking $60 to $120 tip fees, you're going to have suppressed EBITDA margins relative to the central part of the country and the South and Southeast, where you're experiencing $20 to $40 landfill tip fees. So some is just a structural difference.

Got you. And then I guess on the — if I remember correctly, on the Q1 conference call, I remember you indicating that there are a few chunkier deals in the pipeline. And it sounds like you've closed a few of them. But I was wondering if there are more ahead and how they are progressing and just generally on how you view the M&A environment for 2026.

Yes. Well, I mean, you are correct, Mike. We have closed some of those deals. We closed a very nice side, a large company in South Florida in Q3. We have signed and will close in the next few weeks another nice company in Central Florida. So some of those were ones we were referring to. We are also referring to this large transfer station in New York that we have under definitive agreements since May. And as I mentioned earlier in a question asked, we will be closing that in this quarter as well. And there are always our deals of various sizes that are under constant discussion and negotiation. I would characterize the M&A environment as continuing to be very strong, very robust. We've already done sort of about 2x a "normalized year" through 3 quarters and will continue at a strong pace in Q4. So this is going to end up being a more than double average year. And we're not really seeing any material change to that in any way as we head into '26. I think if and when and hopefully soon, the economy turns, as interest rates continue to pull down throughout '26 and private owners get a little more lift in their sales, that helps accelerate M&A activity. So the catalysts that drive things are not going — they're going in the right direction, not the wrong direction.

Our next question comes from Shlomo Rosenbaum from Stifel.

Ron, I just wanted to start asking you if you could flesh out a little bit more your discussion on pricing that you've gotten from technology, and it sounds like you've been kind of favorably surprised in where you can both price and kind of help you price, I guess, in a very pinpoint way so you're not impacting churn. Where do you think you are in terms of kind of rolling those learnings out across the organization? And in your efforts to kind of explore and analyze it, are you finding additional adjacencies with that technology and analytics that are kind of ongoing, where you're consistently finding some new areas where you feel like you can press additional buttons?

Yes. Well, first off, to answer your question, I think we're only in the second inning of a 9-inning game as far as deployment. So very, very early in doing so. We have deployed this to about 1/7 of our P&Ls so far, and that will grow to about, call it, half to 75% throughout '26. So I think you'll continue to see improvement in that '26 and into '27 before you really start to see all of the impact. And really, look, the ultimate objective, I think, and I don't think we're any different than any of the other large public companies is how do you achieve your price increase objectives with the least customer churn by type of customer, by geography. And so instead of being, I'm going to call it more uniform with, if everybody is getting a 7% increase in a certain market, does somebody get 1.9% and somebody get 10.4% based on individual customer specifics of sort of an algorithmic stack of what we believe causes customer price acceptance or rejection or negotiation. And so I think ultimately, this takes pressure off volume, trade-off between price and volume, and you're going to begin seeing that in '26. And continue to see it as we go forward. And I think it allows us to achieve with less customer rollback and defection, our price increase objectives. So I think it's a little too early to say what else that means. But if it accomplishes that objective alone, we'd be extremely satisfied. And the early indication from 1/7 of the company's location is very positive. It's a 30% to 40% reduction in churn on similar price increases. So that's pretty significant.

And then maybe, if you can comment a little bit on the margin expansion going into Q4. I mean, would you give us any guidance on sequential margins? What should we expect there?

Yes. So as Mary mentioned earlier, we anticipated a sequential improvement there as we look to Q4, and we believe it will be up about 90 basis points year-over-year versus Q3, driven by the general improvement in margin trends we've been discussing. That's the anticipated expectation going forward.

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 the management team for any closing remarks.

Okay. Thank you, operator. Well, if there are no further questions, on behalf of our entire management team, we appreciate your listening to and interest in our call today. Mary Anne 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, Regulation G and applicable securities laws in Canada. Thank you again, and we look forward to connecting with you at upcoming investor conferences or on our next earnings call.

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.