Good day, and thank you for standing by. Welcome to the WM Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After this biggest presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advised when your hand is raised. To withdraw your question, please press star 11 again. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Ed Egel, Vice President of Invest Relations. Please go ahead.

Thank you, Olivia. Good morning, everyone, and thank you for joining us for our fourth quarter and full year 2025 earnings conference call. With me this morning are Jim Fish, Chief Executive Officer, John Morris, President and Chief Operating Officer, and David Reed, Executive Vice President and Chief Financial Officer. You'll hear prepared comments from each of them today. Jim will cover high-level financials and provide a strategic update. John will cover our operating overview, and David will cover the details of the financials. Before we get started, please note that we have filed a Form 8K that includes the earnings press release and is available on our website at www.wm.com. The Form 8K, the press release, and the schedules of 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 the most recent Form 10-K and Form 10-Qs. John will discuss our results in the area of volume, which unless stated otherwise, are more specifically references to internal revenue growth or IRG from volume. Jim, John, and David will discuss operating EBITDA, which is income from operations before depreciation, depletion, and amortization. References to the legacy business are total

WM results excluding the healthcare solution segment.

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 that 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 the earnings press release and tables, which can be found on the company's website at www.wm.com, for reconciliation to the most comparable gap measures and additional information about our use of non-gap measures. This call is being recorded and will be available 24 hours a day beginning at approximately 1 p.m. Eastern time today. To hear a replay of the call, access the WM website at www.investors.wm.com. Time-sensitive information provided during today's call, which is occurring on January 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 express written consent of WM is prohibited. Now I'll turn the call over to WM CEO Jim Fish.

Okay, thanks, Ed, and thank you all for joining us. We're pleased to report another year of outstanding results in 2025, including a record performance in operating expenses as a percent of revenue. This performance, combined with our disciplined approach to pricing, drove full-year operating EBITDA margin 150 basis points higher in the legacy business. Long operational performance translated to double-digit growth in cash flow from operations and nearly 27% growth in free cash flow. Our results highlight the strength and momentum we built in our business model through operational excellence, scaling sustainability businesses, and integration of health care solutions. You've heard me talk about the strength of our collection and disposal business with our differentiated assets and the best people in the industry. All of these were on display in 2025 as we drove our best ever operating leverage in our collection and disposal business, reflecting the intentional investments we've made in our people, technology, and fleet. Better frontline retention, and a decreased average age of our trucks delivered improvements in labor and maintenance costs. Meanwhile, we continue to drive organic revenue growth from both price and volume. By using data and analytics, we're offering pricing that reflects the premium value of our service, our leading commitment to environmental sustainability, and the strength of our network. It's our unmatched network, particularly our transfer and disposal assets that drove volume growth in 2025, more than offsetting the residential volume declines as we shed some low-margin business. In our healthcare solutions business, 2025 was a year of teamwork, focus, and execution to build momentum to our integration. Service delivery metrics and customer service scores have improved to levels above our legacy business. Customer call volume has been trending down, and the standardization and enhancement of customer-facing processes and invoices are all leading to rising customer satisfaction. Just last week, we received an acknowledgement from one of our largest Healthcare Solutions customers for the improvements we've made on invoicing, which is a great indicator of the significant progress we've made in the last year in our systems and back office processes. At the same time, we continue to significantly reduce SG&A and operating costs, streamline our operations, and greatly improve. There's still work to do. Progress we've made to date puts us in a good position to grow the earnings and cash flow from this business with a lean and efficient cost structure, a healthy pricing environment, and new opportunities for volume growth through both cross-selling and market share expansion. On the sustainability front, we drove notable strategic expansion in our sustainability businesses. Seven new renewable natural gas facilities, expanding our renewable energy network and further positioning WM as a leader in environmental sustainability. We completed automation upgrades at five recycling facilities and added facilities in four new markets, which are enhancing the performance of our recycling network and creating new opportunities with customers. The value of our recycling investments is clear, particularly when you consider our recycling segment delivered over 22% operating EBITDA growth despite nearly 20% lower commodity prices in 2025. This combination of operational excellence and strategic investment across our business has produced record margin performance and accelerated cash generation. As we enter 2026, we're well-positioned to convert more of our earnings into long-term shareholder value. Turning to our outlook, we expect continued strong growth in the year ahead. Our guidance is for operating EBITDA growth of 6.2% at the midpoint, or 7.4% when you normalize for wildfire cleanup volumes in 2025. Free cash flow is expected to grow nearly 30% at the midpoint, reflecting structural earning strength and the benefit of our investments. As announced in December, our board approved a 14.5% increase in the planned quarterly dividend rate in 2026, our 23rd consecutive year of dividend growth. We also authorized a new $3 billion share repurchase program. We plan to return about $3.5 billion to shareholders through dividends and share purchases in 2026, representing more than 90% of free cash flow we expect to generate. We will continue to balance these returns with disciplined reinvestment, tuck in M&A, and a solid investment grade credit. Looking ahead, our priorities are clear. The core business by leveraging our focus on customer lifetime value, operational excellence, and network advantages. Second, capturing and maximizing returns from our investments in our recycling and renewable energy businesses. And third, driving a creative growth in healthcare solutions as we take the business from integration to scalable growth. Finally, executing our disciplined capital allocation plan to deliver compelling long-term shareholder value. The hard work of our entire team, our customers with pride every day, their commitment fuels our performance and sets the foundation for the opportunities ahead. In 2026, we will build this momentum, strengthening the core, scaling our growth platforms, and creating meaningful value for all our stakeholders. I'm incredibly proud of what we've accomplished and excited for what's ahead and with that I'll turn the call over to John to provide more detail on our operational performance. Thanks

Jim and good morning. WM delivered another fantastic quarter to close 2025 driven by discipline pricing and continued cost efficiencies across the business. In the fourth quarter operating EBITDA on our collection and disposal business grew more than 8%, and operating EBITDA margin expanded by 160 basis points, supported by strong execution in the ongoing benefits of automation and technology across our operations. The strength in Q4 was driven by operating expenses as a percentage of revenue improving 180 basis points to 58.5%, marking our third consecutive quarter below 60%. And for the full year, our cost management is just as impressive. We finished 2025 at 59.5%, which is the first time in company history that operating expenses have come in below 60% for a year, with each quarter of 2025 improving sequentially. As I said on Investor Day, we are fundamentally changing our cost structure through the investments we're making in our people, technology, and processes. 2025 was the year we proved the change is real and durable, and we're well positioned to continue capturing these benefits for years to come. The improvement in operating costs was led by substantial improvement in repair and maintenance costs on both a dollar basis and as a percentage of revenue, driven by operational and fleet strategies that are yielding tangible benefits. Accelerated investments in new trucks over the last three years has improved our average fleet age, significantly reducing unplanned repairs and the need for third-party maintenance support. And at the same time, our disciplined focus on fleet optimization and a more streamlined maintenance model increased technician productivity and reduced reliance on rental units and external services. These structural improvements were complemented by enhanced route automation and resource planning tools that lessen wear on the fleet and improve overall asset utilization. Taken together, these initiatives reflect our strategic commitment to operational excellence and are driving sustained cost efficiencies that strengthen our performance. Our repair and maintenance costs were not the only cost category reflecting the strength of our operating model, as we saw a similar story in labor. In Q4, labor costs improved as we continue to see benefits from our people-first culture across our frontline teams. Driver turnover reached its lowest level of the year at 15.7%, demonstrating our ability to sustain our meaningful improvements in frontline retention. We've implemented a people-centric approach to onboarding, training, and accountability, which is improving retention, safety, and operating efficiency, while also reducing overtime hours and training needs. We also benefited from our connected truck platform, which gives leaders real-time visibility into sequencing, downtime, and efficiency to help reduce labor dependency while improving service reliability. And it's also worth noting that our connected truck benefits are not limited to cost advantages, as the technology enables right-sizing service levels and other revenue opportunities. These people, process, and technology-driven improvements extend beyond our legacy business. And now that we've successfully integrated the healthcare solutions business into our existing field operations management structure, we expect to extend these improvements we've already seen in on-time service delivery, driver turnover, asset rationalization, and network optimization. In both the legacy business and the healthcare solutions business, we are structurally lowering our labor cost base, strengthening day-to-day execution, enhancing service reliability, and delivering continued opportunities for long-term operating improvements. Turning to the top line, we delivered another quarter of strong, balanced growth. Pricing continues to be a strength for us, with core price of 6.2% in the fourth quarter, not just because of discipline execution, but because of our strong customer focus and the consistent value we provide to our customers. Our asset positioning and scale, service reliability, and the investments we've made in technology and automation differentiate our service offering, which all support our pricing. And on the volume front, we've seen notable growth in 2025 in special waste, renewable energy, and recycling. In residential collection, intentional shedding moderated in the fourth quarter, and we continue to drive operating EBITDA and margin growth. We anticipate steady residential volume improvement as we move through 2026. In closing, I'll close by thanking the entire WM team for their commitment and execution throughout 2025. We're entering 2026 with strong momentum, an optimized operating model, and clear opportunities to continue delivering value to our customers and shareholders. And now I'll turn a caller to David to discuss our 2025 financial results and 2026 financial outlook in further detail.

Thanks, John, and good morning. Our 2025 performance demonstrates the meaningful progress we're making toward our long-term strategic goals. Operating EBITDA margin expanded 40 basis points to 30.1% for the full year, which is a result that overcame 140 basis point margin headwind from the combined impact of the acquisition of the healthcare solutions business and the expiration of alternative fuel tax credits. This result significantly exceeded the margin outlook we provided at the beginning of 2025 as we outperformed our own high expectations for cost optimization in our legacy business and synergy capture in the healthcare solutions business during each quarter of the year. Normalized for these known headwinds I just mentioned, our legacy business delivered 180 basis points of margin expansion for the year. This was driven by 120 basis points of growth in the collection and disposal business from the benefits of price, cost optimization, and improved business mix, particularly growth in landfill volumes and the shedding of low-margin residential business. Margin growth was also bolstered by a combined 60 basis points from lower commodity pricing in the recycling brokerage business, recycling automation benefits, the growth of our high-margin renewable natural gas business, and the lower risk management cost. Cost optimization remained a central theme in 2025. SG&A expense for the legacy business was 9.2% of revenue for the full year, a 10 basis point improvement compared to 2024, as we continue to rationalize discretionary spending. Within Healthcare Solutions, we are making consistent progress in reducing SG&A expenses as we integrate and optimize the business. Fourth quarter 2025 Healthcare Solutions SG&A of 20.8% of revenue is a notable improvement of 350 basis points from the prior year period, and a significant step toward our long-term ambition to get the SG&A of this business in line with the rest of the company. At 10.4% for the full year, it is clear that we are on track to get total company SG&A as a percentage of revenue below 10% in short order. Our strong execution translated into robust cash flow generation in 2025. Cash flow from operations grew more than 12% to $6.04 billion and free cash flow reached $2.94 billion, an increase of nearly 27%. These results showcase our success in driving margin expansion and disciplined approach to capital investment. For the year, we spent just under $2.6 billion on capital to support the business. $633 million on sustainability growth investments. In 2025, we allocated $1.3 billion to dividends and paid down $1 billion in debt, reaching a leverage ratio of 3.1 times. We expect to reach a leverage ratio within our targeted range of between 2.5 and 3 times during 2026. We also invested more than $400 million in token acquisitions to expand our traditional solid waste and recycling footprint. Moving to the outlook, we expect operating EBITDA to be between $8.15 and $8.25 billion in 2026. This projection reflects an update to the classification of accretion expense, a change we are making to enhance the comparability with our industry peers and to better reflect operating performance. As a result, our 2026 operating EBITDA guidance excludes projected accretion expense of approximately $150 million. Our plan calls for a typical quarterly cadence of operating EBITDA contributions across the year. Additionally, we expect an effective tax rate of approximately 24% and a share count at the end of the year of about 402 million shares. We anticipate capital expenditures for 2026 to be between $2.65 and $2.75 billion, which is inclusive of about $200 million directed towards high-return sustainability projects. Sustainability growth capital includes spending of about $85 million on two recently approved renewable natural gas facilities and one new recycling growth project, each expected to be completed and to begin contributing operating EBITDA by 2028. These projects are attractive opportunities to extend our network while bolstering WM's industry-leading return on invested capital. In 2026, we expect free cash flow growth of nearly 30% to $3.8 billion at the midpoint of the outlook, which drives our projected operating EBITDA to free cash flow conversion above 46%. Our guidance includes an anticipated benefit from investment tax credits of about $110 million, which is about a $75 million headwind from the prior year. In closing, 2025 underscored the strength of our business model, the resilience of our operations, and the discipline with which our teams execute every day. We are proud of our progress toward our long-term strategic goals, driving margin expansion, strong cash flow generation, and continued optimization across the enterprise. I want to thank our dedicated team members whose commitment makes these results possible. As we look ahead to 2026, we are confident in our ability to sustain this momentum, to continue delivering operational excellence, and to generate long-term value for our shareholders. With that, Livia, let's open up the lines for questions.

Finally, ladies and gentlemen, as a reminder, to ask a question, you will need to press star 1-1 on your telephone, and wait for your name to be announced. To withdraw your question, simply press star 1-1 again. Please stand by while we compile the KNA roster. Now, first question coming from the lineup, Sabahat Khan with RBC Capital Markets. Your line is now open.

Great. Thanks, and good morning. Just maybe starting with sort of the top-line guidance, can you maybe give us some perspective on, you know, the industrial activity has been weak for some time. There's some views just broadly out there that the economy picks up. So maybe just what you've embedded in terms of the macro backdrop. Obviously, we see sort of the directional volume and pricing commentary. But if you can just delve into what you're seeing in some of your local markets and is an industrial C&D-type market picking up at all.

We're cautiously optimistic, and I think that's been pretty soft over the last couple of years. I think we've been down 3% or 4% in volume each of the last probably. And that business actually has bounced back to almost flat. So that's an encouraging sign for us. I think, similarly, as John mentioned in his remarks about the residential line of business, that's been negative for some time. That's been much more by design. But he also mentioned that that is starting to come back to more of a normalized number. And we think by the time we get to kind of the back half, I think, John, of 2026, we should see that down maybe half a week. Encouraging signs. You look at the landfill line of business, that's been a source of strength for us for a number of reasons. Special waste, as John mentioned in his remarks as well, has been good. So all of that would tell me that the economy is on pretty firm footing.

And then just to follow up on the health care side a little bit, can you talk about it? It sounds like the integration is largely there, but can you just talk about 426, what you're sort of thinking on the pricing front, and maybe some of the larger initiatives on the cost refinement, getting that percentage more to where you want it to be on the SG&A side. So maybe we can delve into some of the commentary you shared earlier on the initiatives for this year on the health care side and what could those margins look like sort of over the next 12, 24 months.

Yeah, so a lot with health care solutions. We've made a ton of progress just in the last Q3 and Q4 even. If you look at Q3 to Q4, we talked about some lost accounts last quarter that would carry forward into this quarter and carry forward into 2026. And so that did, in fact, happen. But as I said in my remarks, we've made a ton of progress on our customer service. The customer service side of our business, in fact, to measure those, have actually jumped above our legacy. Similarly, we saw credit memos. We think they peaked in Q4. And so, as you know, those credit memos have been used to, in part, take care of some of these past due accounts that we've had. I think what I would say is we've really kind of built a wall now between all that is continuing to go on on the back office side of that business and the customer themselves, and that's a real positive. And the result of that, as we think about 2026, is going to be, I think, better price realization. We've been getting price all along, but we just haven't realized as much of it, and a lot of that has been these credit memos that we've been giving that has offset some of that price. I think when you get into 2026, we're expecting 4.2% price in 2026. Top line is going to be 3%, and that is a reflection of those lost accounts that will anniversary, for the most part, in the back half of 26. So that's the reason why it looks like all of our growth is coming from price. It is, in fact, coming from price, and it's due to those lost accounts. And then And when you think about the expense side of the business, John mentioned that we've rolled that in, and I think Roth the last quarter talked about how we've rolled that business into our areas. And so we're seeing the real benefits of that. We're seeing that what we've honed on the legacy business over the last, some of it through technology, some of it through process, gets brought to this routing logistics business, which is WM Healthcare Solutions. So we're really encouraged about what we're seeing as we roll the business into the areas. I guess the last thing I'll mention here is that cross-selling, which we put $50 million in cross-selling in the EBITDA synergy number back in June of last year, almost to a person. They were very, from their sales folks, in terms of cross-selling. I think it's important to keep in mind that some of that cross-selling benefit, though, does show up in the collection and disposal line of business. Not all of it shows up necessarily in the healthcare solutions.

Great. Thanks very much. I'll pass the line.

Thank you. Our next question coming from the lineup. Brian Berkmeyer with Citi. Your line is now open.

Hi. Good morning. Thank you for taking the questions. I appreciate all the detail in the press release. You're really helpful. I thought that footnote H seemed to say that maybe discussion on the 2027 financial targets would be put on hold for a little while. I'm not sure if I'm sort of interpreting that correctly. And, you know, if I am, you know, maybe from a high level, can you help us understand sort of what went into that decision? I guess there have been sort of some accounting changes. It's a pretty dynamic macro environment. But just kind of, you know, hearing it in your own words would be really helpful.

We did debate, Tony, whether we would get a question on footnote H. So Heather's the winner on this one. But here's what I would say about the 2027 number. You know, on Investor Day, we gave some high-level estimates. They weren't detailed guidance as we're giving today for 2026, and we will give detailed guidance on 2027, you know, a year from now. So I would tell you that those were kind of the best estimates we could make at the time. I mean, our business typically about as far out as we can look is 12 months. It's hard to look at things like commodity prices, you know, 18 to 24 months out. So those estimates, I wouldn't rely on those as guidance. I would rely on them as what they were intended, which is estimates. But I will say this, about 27, we don't see anything on the horizon that's concerning for us. And I would also say that, you know, if there's one thing you know about us over the last, you know, number of years, the consistency of our performance has been one of our strong suits, and I think that continues going.

Thanks for that. It's really helpful. And then maybe just digging into the guidance for 26 a little bit more. Maybe, John, can you give us an idea of maybe the level of margin expansion that you're looking for in collection and disposal this year on sort of an apples-to-apples basis? I guess it's kind of noisy with the landfill accretion and the wildfire comps, but your thoughts on net price and maybe some key cost buckets could be quite helpful. Thank you. I'll turn it over.

Yeah, Brian, you saw the guidance we gave in terms of yield and core price, and what we've really been focused on was really showing up well in Q4 and this year, as I mentioned in my preparative marks, is sort of the spread between price and cost, and we're continuing to expand margins, so we're really pleased. Directly to your question, there is a little bit of noise in there. We talked about the wildfires being one of those things that really showed up in Q2, but 50 basis points on a same-store sales basis is kind of what we're targeting from a margin improvement standpoint across the portfolio.

Don't grade me down by calling you the wrong name. I think I called you Tony. Thanks, Brian, for your question.

Thank you. Our next question, coming from the lineup, Trevor Romeo with William Blair, Yelena Salpin.

Morning. Thank you for taking my questions. The first one I had was maybe on the 2026 outlook for healthcare solutions, particularly on EBITDA, because I know you did give kind of a revenue outlook. You talked about continuing to optimize the business. I was hoping maybe you could level set how much cost energy capture you realized in 2025 and then how much is baked in for incremental in 2026. And then along with that, how much sort of underlying growth and margin expansion you'd expect from the business X energy.

Yeah, probably a couple of us could take this one, but I'll start and then maybe David and John can jump in. But first of all, as far as 25 goes, we did say at least on the SG&A synergies, we gave a range initially of 80 to 100, and we finished above the top end of that. So we're encouraged by that, and that ends up being a fall carries over, but some of it's 2025, so that ends up being a carryover benefit. The original synergy goal of 300, and that, of course, mentioned the 50 that's included in that for cross-selling, we feel very comfortable with that. I think there's a little bit of a scrambled egg happening here with these businesses because some of this, and I mentioned in cross-selling, some of that ends up showing up in collection and disposal. The same thing happens on the cost side, you know, particularly operating costs, but also SG&A. I will say this about SG&A, which is kind of the intent here, his remarks. But as you look at SG&A pre-acquisition, and that's been something that, you know, Devina and I spent a ton of time on all of us, but Devina and I in particular were very focused on getting SG&A down. And that number, pre-acquisition, had gotten down to, I think, the third quarter of last year was, or of 2024, was 8.9%. And for a year, I believe 2024 was 9.4%. And then that jumped up after the acquisition to a high of 11% in Q1 of last year, of 2025. We have, it ended the year at, I believe, 10.3%. But as David said, there's a near-term pathway to getting that, continuing to get that thing down as a corporation. That includes health care solutions down to below 10%. And as we've said many times, that business was running at a much higher SG&A. I think it was as high as 25% when we bought it. It has come down to 20. I think the number that was in our Synergy Capture was 17. and then Davina said a number of times, look, we think that there's no reason we couldn't expect that number to be down close to our own number, which is, you know, kind of 9%. And as it gets down there, you can see any number continue to come down. And then maybe, John, on the operating

side? Yeah, I would say from a, you know, a synergy perspective, cross-selling and internalization, those avenues are going very well. And as Jim mentioned, Trevor, we're seeing a good bit of the benefit right now showing up sort of in the core solid waste business. I commented on our roll-off volume last quarter being a portion of it, about 60 basis points being driven by simply taking that work and putting on WM trucks. That's not something that's going to show per se in the healthcare segment. And like I said, in terms of internalization and other synergies, we're getting out of the business, that's all going extremely well.

Yep. Makes sense. Okay. Thank you both for that. And then I did want to follow up on the RNG business. I don't know if maybe Tara's on the call, but appreciate the, I guess, the 60% of volumes contracted for 2026. That's encouraging. For the 40% of the uncontracted volumes, I think the comment in the press release was an expectation for $24.50 for MMBTU on the pricing side. I think if you use today's spot prices, that would imply something, you know, a decent amount higher than that, let's say. So maybe you could just talk about that a bit. Is that kind of where you see the voluntary market right now, or is there some conservatism built in there, or just thoughts on

pricing? Yeah, so I'm here, and we're really pleased with the progress that we've made on selling a portion of our volume, a pretty significant portion, and it's a testament to how we've been managing the risk that's in this business. On the 40% that remains unsold, This is going to be the first year, if you look at it, our volume is doubling year-over-year from about 40 million MMVTUs to now 21 to 22 plus. So we're going to have a portion that is not allocated to our fleet that will be sold in the voluntary market, and that's what you're seeing in there. RIN pricing perspective, we're anticipating RIN pricing to hold steady in that $230 to $240 range. So that's what it's all based on. Okay. Very helpful, Tara. Thank you.

Thank you. Our next question coming from Delaina. Tyler Brown with Raymond James. Your line is now

open. Hey, good morning. Good morning. Hey, I'll reiterate lots of good detail was in the release. But David or Tara, I just wanted to unpack the comments about the approaching $1 billion in sustainability EBITDA by 27. So I think in the release, you provided a baseline now. So I think that baseline is $300 million. And I just want to make sure that I have it right. But are you basically expecting the investments to yield, call it, slightly less than $700 million of incremental EBITDA over the time frame, and can we comp that to the $760 to $800 that you laid out at the analyst day? And if so, can we just talk about what's driving that delta?

So you absolutely have the parts right, and let me just take a step back on two key points. First, we're incredibly pleased with the progress on the recycling and the renewable energy investments. It bears repeating what was in Jim's script, with 18 percent lower commodity prices and delivering 22 percent higher EBITDA on the recycling business. That's a testament to what we're delivering in labor savings, in premium savings, and we've had strong volume growth which has a halo effect with our customers. And then likewise really having a lot of momentum on the RNG business. I mentioned before that we're we're going to be doubling our output. What you can bridge from the 700 to the 760 is really just in two buckets. The first is a difference in recycled commodity prices. You know, what was in our investor day materials was $125 a ton, and now what is in the number is 70, which we do view as a low point, so you can consider that there could be some upside if and when commodity prices come back and that's over half of it the other piece is if you go back to 2023 when we had come out with uh this broader platform we've learned a lot and one of the things that we've learned is that there have been some different differences in operating costs primarily related to electricity costs which is a bit of a headwind but also in the medium and long term a potential tailwind for us Because we do have a robust landfill gas to electricity platform, and that is something that we can lean into as we look at whether or not we expand those types of facilities on our landfill.

Tyler, this is kind of case in point to my earlier comment about trying to predict things in that Investor Day, 2023 Investor Day, about sustainability. Just really difficult, so we're kind of dealing with what we have at the time. And so, yes, commodity prices have dipped, and hence I think it kind of makes the point for us that these businesses and the paybacks on them have to three. Now they may be three to four, but still incredibly good paybacks.

Yeah, no, I just was trying to get to Delta. That was extremely, extremely helpful. John Morris, question for you. So if I look at the normal course CapEx, it looks like that CapEx number is running at less than 9.5% of sales. It just feels maybe a bit light. I realize that Stericycle is less capital intensive, so that's part of it. But is this kind of a good, call it forward capital plan? Is there something unique in 26 that keeps the budget down? I think you and Jim mentioned the lower fleet age, but I just want to just try to level set on where that CapEx will run longer term.

I think probably a little higher than that, Tyler, probably the 10-ish percent off the cuff. There's a few things you mentioned. One, 1,500 trucks is what we said is probably normal run rate for the traditional solid waste business. And as Jim mentioned, we've been obviously catching up and advancing some of those investments, which, by the way, are clearly paying off, as I mentioned in my prepared remarks. We do have some work to do on the fleet on the healthcare side is because they leased virtually every one of their vehicles, but we are systematically unwinding that where it makes sense and when it makes sense, right? So there's a timing aspect to when we peel back some of those leases. And then lastly, obviously, the sustainability investments, as you saw in the release and the remarks here, is coming down by roughly $400 million to $200 million. So there's some puts and takes, but back to where we started, I think that 10-ish percent range is probably a good mile marker in terms of go-forward capital.

Yep, perfect. Okay, thanks, guys.

Thank you. Our next question coming from the lineup. Toni Kaplan with Mark and Stanley. Yolen is now open.

Thanks so much. I also wanted to ask about the health care business. You talked about the 3% growth next year, the 4.2% pricing. It sounds like you're still having some of the issues with the StarCycle customers. You mentioned the credit memos. Do you expect all this to be resolved this year? And how are you thinking about growth in this segment for future years? And just maybe if you could talk about market conditions within the medical waste space and if that's proceeding how you sort of saw it when the deal was launched or when you announced the transaction where you were talking about sort of a higher market growth for the health space.

Yes, so fair question here. And one thing I would maybe correct you on a little bit is the customer, that's why I wanted to make sure I mentioned that we're getting to, and I would argue we're there, where the customer is getting a good invoice, they're getting a payable invoice. There's a lot going on behind the scenes for that, especially for the larger customers. By the way, there is a lot going on behind the scenes for our larger customers in the legacy business, too, in our national accounts. There's a lot of manual effort that is ongoing there. But our intention was to really kind of build a wall between the back office work that is ongoing, and we'll be ongoing through. And that's why in my remarks, I talked about the, you know, the improvement in our customer service stats to levels above and tells us, and I think, you know, I mentioned that for really improving our invoicing, that was a big customer, I didn't name the customer, but a big customer. We've done an effective job of putting that, you know, kind of wall in place. So the customers, they really don't care what goes on in the background as long as they're getting good service, and then we will take care of the system issues, we'll take care of the process issues, all of that, And that is all, we're making big progress on that. It's all ongoing. So all that's part of the ERP that we've talked about many times. It also gives us, I mentioned, and you asked about kind of the growth of this business. Look, I would tell you this, 2% price, but only 3% top line. And that negative volume piece, as I mentioned, is largely related to these accounts that we've lost. and we knew we had lost them. We knew that it was going to have an impact on Q4, and we know it's going to have an impact on the first half of 2026. As we get to the back half of 2026, that actually turns into potentially a tailwind for us on a year-over-year basis. And then the last thing I'll mention about this, so I guess to finish that point, we do feel strategic business case for some skepticism out there about, well, is this business not going to grow at the 5% to 6%? You take out those lost accounts, and you're almost there. When we get to the back half of next year and into 2027, when you look at the pricing power that we have across the entire business in the next 20 years, Canada and the U.K., so that has to be a beneficiary of it. So I think my long answer is, yes, we're very confident in the growth trajectory for the business, And we're also very pleased with the progress we've made. Not done yet, but we've built this wall, and the customer is now seeing.

And just moving to, you mentioned some technology and automation improvements that you've made. When you think about 2026, which areas are you most focused on for efficiency or technology? Just anything to highlight with level of automation that you're able to continue to do? and which areas have the most runway for that.

Maybe I'll start with Tara can chime in. On the recycling side, I think you've seen the benefits. Tara commented in some of her answers about the progress we've made from the investments we've made in recycling, and a lot of that has driven sort of the middle of the P&L, and that's where technology enablement and AI are paying off already, and we've made a lot of progress there. When you think about the 15,000 refuse vehicles we run, and now called another $4,500 on the healthcare side. Building out technology enablement as a logistic service is where I think that's paying off, too. When you look at the margins in the OPEX in particular and the momentum that we've built in 24 into 25 and into Q4, I think you're going to see that continue to carry forward into 2026. And then lastly, on the post-collection side, we've talked a lot about the value of our network and having strategically placed assets in the post-collection side, whether it's transfer facilities, recycling facilities, landfill facilities, we're taking a kind of an IOT approach at our landfills too by embedding technology in those facilities that's going to give us visibility to the operation in a much more efficient manner than we traditionally have done. And those are complex operations, as you know, so we still see a lot of opportunity on the post-collection side, particularly landfills to to embed technology to uh to really drive down operating costs there as

well thanks thank you now next question coming from the lineup paisa are we with deutsche bank

human is now open yes hi thank you um i wanted to ask about you know just volumes in the collection and disposal business in the fourth quarter i thought they came in a little bit light relative to what we've seen and i know we've had some you know obviously special waste volumes and i know earlier in the call you talked about you know uh sort of the industrial business and and the macro uh environment there and that you're optimistic so i'm just curious is there anything more to you know consider as it relates to collection and disposal volumes in the quarter relative

to trend other than just special waste yeah look we don't talk much about weather just because we choose to make it up. I would tell you that weather impacted us in December. The numbers, it didn't impact the overall numbers. So we made it up on the EBITDA line, but when you think about volume, it did have a bit of an impact on volume. MSW was a bit soft. The two lines of businesses that are most impacted negatively by weather are MSW and the industrial. So those were clearly impacted by the weather in early December. That would be my answer, a little bit of softness

there, but it doesn't impact. The only thing I'd add on there, Jim, is residential is the one that sticks out. It's been negative for a number of quarters. And I would tell you, while we see that starting to turn into more of a growth engine in 2026, when you look at 2025, we finished the year at high teens and EBITDA margin side and over 20 for the quarter on residential, which has always been a high watermark for us. So I kind of look at the volume attrition there a little bit different than I would the other pieces of volume. But again, I think it's important we see that we see The team's pivoting from using that as shrinking to greatness to now growing to even better margins as we go forward in that particular line.

Well, I think it's been mentioned today, Fiza, but also, you know, volume line, when we look at 2026, we have a 50 basis point from that fire volume. A big headwind on volume, also a big headwind on EBITDA. $82 million was the number from last year on the EBITDA line. So when you look at, you might say, well, gosh, you know, a lot of the reports were saying a bit soft on guidance. Keep in mind, that's why I pointed out that 7.4% EBITDA growth if you take out that from the fires. Unfortunately, these things do happen, so something else may happen. It may not be as big. Hopefully, it's not. Hopefully, we don't have anything this year. But if we do, we have the assets, the geographic coverage, the people. We have all of that.

Yeah, understood. Makes sense. And then, you know, I was going to ask about just the margin guide for next year. and was hoping you know there are a few moving pieces in particular with the wildfires and and also i guess this is the role end of the sustainability project so you know maybe you can help us a little bit around the quarterly cadence of of margins at a high level and how to think

about that sure i'll give you some of the components this is david um i i'd be remiss if i didn't talk just about the records that that was mentioned previously you know both in the the quarter of 31.3% and for the full year of 30.1, which I do think is a testament to how our team members focus and dedicate on this throughout the year. But as we looked at 2026, we're calling for our fourth consecutive year of EBITDA margin expansion of 30 basis points at the midpoint, but as Jim just alluded to, 50 basis points on an adjusted basis. The biggest contributor to that is going to be from our collection and disposal business. So as we execute our pricing programs while continuing our strategies around operational excellence and leveraging our network, that's a big piece. We also have some business mix as we've alluded to, continued shedding of some lower margin residential business relative to our volume growth in the landfill line of business. And then on sustainability, there's about 30 basis points collectively of benefit in 26 in terms of the bridge. As we bring new plants online, we've got four recycling facilities and six RNG facilities coming online in 2026. There is a modest decline in recycling commodity prices year over year that will have a minimal impact on margin. And then healthcare solutions, as we've been discussing, will contribute to margin expansion overall for the year as we capitalize on our value capture opportunities, execute our pricing plan, continue our cross-sell efforts, even though that will show up most likely in the C&D business, and then continue our progress on lowering our cost structure. And then in terms of cadence throughout the year, it's, call it 47% in the first half, you know, 53% on the back half in terms of mix, but that's in line with our historical averages.

Thank you. Thank you. Our next question coming from the lineup, Adam Hughes with Goldman Sachs.

Yolanda Snellman. Hi, good morning. Just had one more follow-up on margins. You know, really impressive in the quarter. And I think if you just compare your 4Q margin prior exit rates to where you typically ended the next year, it would sort of imply that this 4Q exit rate points to potential for better than 30 basis points of margin expansion in 2026. So just wondering out of the 230 base points of margin expansion in this fourth quarter, how much of that expansion was maybe more one-off? I know you called out the outsized RIN sales that were

going to happen this quarter. I think for the most part, these are sustained initiatives that we've been executing on, and it just highlights our focus on discipline cost management, and so we're just seeing it come to fruition. I think as Jim alluded to with the volume, you know, some of it which we can't control, like just the ability of the business to flex accordingly in the environment that we're operating in, it allows us to maintain and sustain that margin going forward. So for most of it, I think we can carry that forward versus, you know, a number of one-offs that was, you know, idiosyncratic to that, to the quarter.

But one thing we haven't really talked too much about is the fact that for next year, a 250 basis point delta, and we typically have gotten this question, so we haven't gotten it yet today, but a 250 basis point delta, I don't know how that measures up historically, but it's got to be one of the bigger ones, is reasonable considering the 20 basis points of...

Terrific. And then on the landfill gas side, can you just update us on voluntary off-take discussions. I think eventually 50% of your production will go into voluntary markets. So what's your confidence level that that 50% will be absorbed by those markets,

and how are those discussions going? We're confident that we'll be able to absorb that in the voluntary market. While the U.S. market right now is a bit softer than it had been, There are other markets that are strong, if you look at Canada, the UK, and some other international markets, we're able to tap into those as well. And then still in dialogue with some larger utility companies across the U.S. as their public utility commissions pass their rulemaking, that that should free up more of the voluntary market in the future.

Great. Thanks so much.

Thank you. Our next question coming from the lineup, Noah Kay with Oppenheimer. Your line is now open.

Good morning. Thanks for taking the questions. I'm sorry to beat the margin math, hopefully not to death here, but just I'm a little confused. So the walk here is 50 BIPs on an adjusted basis x wildfires. But I think you said that sustainability was maybe 30 bps benefit in the bridge. And then, you know, I think just with the synergies capture on health care and the pricing, you know, that has to be another, you know, 10, 20 bps or so, at least. So what am I missing here? Because it seems like collection and disposal is going to be positive based off of what, you know, Jim and Dave just said. Just trying to understand what moving pieces there are that we're not accounting for.

Yeah, there's some normalization of certain expenses in corporate and other that we've baked into the guide. Those may or may not materialize, but just we felt prudent just based on how we finished the year to adjust for that. There's also some technology costs that show up in there that are for the benefit of other parts of the organization. And so that's offsetting some of the points that you're highlighting.

Okay, that's helpful. Thanks. And then just a quick one on the recycling outlook, you know, the basket was $62 a ton in 4Q, and I think we're going to maybe add or slightly below that, maybe you can update us, but just the thought around the $70 per ton outlook for 2016, can you help us understand

So, 2026, the way to look at it is the first half, second half story, and so exiting, 2025 at $62 a ton, what we're anticipating for the first half is in that $60 to $65 range, and then it ramping the back half of the year. Why is that? Well, what we're starting to see is a little bit of green shoots on the fiber side. The headlines previously were that a lot of capacity had been taken out of the U.S. market, which is true. That was more inefficient milk capacity. But the larger mills that remain are going to be looking for material. Some of the cloud around tariffs has been lifted. So we're anticipating that OCC prices should bounce back a bit in the back half of the year. We're not expecting any material movement on plastic pricing

moving forward. Got it. Thank you, Tara. I'll leave you there. Thank you. Our next question,

And coming from the line of James Shum with TD Cowan, Yelan is now open.

Hey, good morning, guys. For WM Healthcare, can you give us the revenue split between document destruction and medical waste and then maybe give some color on document destruction profitability and whether you see this as a core business for you going forward?

So, James, I think the answer to the question is about two-thirds, one-third between healthcare and the document destruction business. And then, sorry, could you repeat the second part of the question?

Yeah, sure. Just in terms of like the profitability and document destruction, any color there. I think you talked about in the past that maybe you had an advantage here with your recycling business. Maybe you got better paper pricing. But do you see this as a core business going forward?

Yeah, I mean, first to start on the recycling side. I mean, it's interesting, both of those businesses are collection disposal and or processing businesses, right? And I think you heard some of that commentary from us earlier. So from that perspective, it lays nicely over whether it's on the SID side or on the health care side to what we see as some of our core competencies. The commodity side of it, I mean, Tara spoke to what we're going to see from a commodity side and probably some more green shoots on the fiber side in the 26, which certainly benefit that business. And then when you look at the healthcare side, it is a collection and disposal and processing business, and Jim gave a good bit of commentary on where we're at. I would tell you that the integration into the areas, which has just occurred over the last, call it, 120 days, I think is going to be a great platform for us to continue to drive some real expansion in margins now that our field leadership teams have sort of a full purview of the business at the local level, which not just similar to the WM core business, there's a lot of elements of this from an operating perspective that are local. So we're excited about what we're hearing from the teams. And Jim mentioned we just had our quarterly business reviews last week and got a lot of good commentary and a lot of positive commentary on where that business is going.

Okay, great. Thanks, John. And then, you know, Jim kind of touched on this, but collection and disposal core price in 2026 is expected to be like 5.6% at the midpoint. It seems very conservative off of 2025, 6.3% level. So just curious, what was the customer churn number in Q4, and what do you see as the right number for churn?

We see that obviously bounce around a little bit quarter to quarter for a litany of different reasons, but we've talked about churn being in and around that 10% range, and we're still bouncing around in that range, although it varies from quarter to quarter, and you've heard us comment at times it's been as low as 8 and change. It's been a little bit as high as 11. But when you stretch the tape out, that 10-ish percent churn number is kind of what we anchor on. In terms of the price side, when we take about core price and yield and the conversion, obviously that number's bounced around. It's been the high 50s to high 60s. But I think what I would point to is when we break it down by line of business and the margin profile of those businesses, what you're seeing is our operating expense under 59% in Q4, under 60 for the full year. So that's showing that we're making progress on the middle of the P&L. And then we look at that relative to, you know, customer lifetime value and what's the long-term perspective on pricing that we should take with each of those individual customer segments. And I think you're seeing it translate to all-time high margins. I mean, the collection and disposal business was 39%, which I think that's an all-time high as well.

Maybe one last point here on pricing, James, because you mentioned that you thought maybe five, six sounded conservative. Keep in mind that as CPI or some of these indexes come down, we've talked about this many times, there is a lag in those index-based price increases that we can take, largely on the res-e side of the business, but sometimes on other lines of business as well. That lag can be up to six months. We do expect that as CPI has come down throughout 2025, that we will see a bit of a lag there that will negatively impact 2026 pricing, something in the sixes for 2025. But as John just said.

Thanks a lot, guys. I appreciate the answers.

Thank you. Our next question coming from Delaina, Jerry Ribich with Wells Fargo Security. See, Linus, now open.

Yes, hi. Good morning, everyone. John, I wonder if we just go back to your prepared remarks. You mentioned some benefits from connected trucks and other tech. Can you just give us an update? Are you folks seeing an acceleration in terms of the savings that you're seeing from logistics management? And obviously, you had the session with Caterpillar at the Consumer Electronics Show. Are the returns from your tech investments accelerating as we head into this year?

Yeah, I think, Jerry, starting with connected truck, we've had that technology on all our commercial fleet for some time now. and we've actually expanded that to the automated components of our residential business, so we still see that there's runway there, so we'll continue to build on that. And I think to your point about the, I mentioned connected landfill, and in particular the heavy equipment side, we see plenty of opportunity that we're starting to unpack with this connected landfill. There was a good bit of detail laid out at Investor Day about what that pathway looked like going forward. So if you think sort of late middle innings on some of the connected truck elements that you mentioned, I'd say we're in the early innings on the post-collection side and see a lot of opportunity to drive cost out of that part of the business as well.

Okay, super. And then, you know, from a margin standpoint, just really impressive performance over the course of 25, even as recycling commodity prices got worse over the course of the year. David, I just want to make sure I'm not missing anything heading into the first quarter, because normal seasonality and the accounting change implies that you're going to be at roughly, I don't know, 30.5% margins in the first quarter, which is typically your seasonally weakest margin quarter. So I just want to make sure there are no moving pieces off of the really strong run rate that you folks have achieved as the year unfolded last year.

Yeah, I'm kind of thinking accretion aside, Jerry, to keep this kind of same store sales, but you're right. But Q1 is usually one of our softer quarters, and I don't know off the top of my head whether that's the right number or not. It feels a little bit high to me. I think it's a little lower than that, but we could circle back with you to confirm.

Good. Well, nice performance with the margin revisions consistently in 25. Thanks, everyone. Thank you.

Thank you. Our next question coming from the lineup. Konark Gupta with Scotia Bank, Elon is now open.

Thanks, Albert. Good morning, everyone. Just maybe one question on the top line. For the full year, I guess you guys are expecting about 5% at the midpoint. Just looking at the puts and takes on the quarterly side, you have probably stericycle is more like a second half story, Jim, I think you said. And then second quarter, you're expecting or seeing maybe top comps from the wildfire last year. How should we think about the growth cadence for the year by quarter? I mean, especially in terms of how the volumes kind of shake out on the C&D side.

Yeah, I mean, it's pretty balanced over the year, but you do see more of a pickup in the second half of the year. So, call it kind of below 5% or below in the first half, and then above that in the second half in terms of the revenue bridge across the year. And the Q2, to your point, is the toughest comp with the wildfire volumes.

and the volumes you expect that to be more evenly spread out throughout the year or it's going to

be more skewed the second half year? I think the one area that will stick out is we mentioned our residential volume has been you know negative four plus percent print and we see that rateably declining and by the end of the year we should be right around two percent maybe a little bit south of that in Q4 so that will be a that will be a clear tailwind to volume in the second half

of the year. Okay, thank you. Thank you.

Our next question coming from the lineup, Seth Weber with BNP Paribas. Elon is now open. Hey, good morning, guys. Thanks

for taking the question. Just wanted to go back to the healthcare cross-selling opportunity. I think on the third quarter call, you guys mentioned that it's largely been focused on small and medium-sized customers. I wanted to see

if that's still the case or if you're getting any

better traction with the large hospital networks at this point?

I think this ultimately is going to end up being more of a large customer. We've stratified our customers. You can imagine the A's, B's, and C's are the bigger ones. I think this is going to be more of a...

And then kind of related question, just can you update us on your national accounts business just across the whole company? It's been sort of low double-digit CAGR for the last few years. Is that still, you know, kind of running at that same, improving at that same level?

I mean, look, I would tell you, National Accounts has been one of one-offs. I mean, gosh, I would tell you, a decade ago, National Accounts was...

Thank you, guys. Appreciate it.

Thank you.

Our next question coming from the line of Slow Mo Resenbaum with Steve Folio and it's now open.

Hi. Thank you very much for taking my questions. I want to jump back to what you started kind of the questioning with on the call, just in terms of the healthy economy. and you said that things are looking, you say, not cautiously optimistic, just optimistic. Can you give us, just delve in a little bit more into some of the metrics on that? You know, the service interval trends, what are you seeing on scale report on some of the mature routes, and then, you know, on residential, also scale reports on the trucks that are coming through, how's the temp roll-off activity doing, you know, and prices and If you can just go through some of that, then I have one follow-up.

As we look at what might be considered leading indicators, but we do have some business that tends to be leading indicators. I would argue that the waste stream is kind of a leading indicator for us because while those jobs have to be done, companies have some discretion as to when they have to be done. And the pipeline, as we talk to our sales team, is good on the special waste stream. So that's a bit of a leading indicator for us. And what we're hearing from them is that those jobs, and we heard it from our area folks last week, that those jobs are starting to manifest themselves. So that is one of the indicators that we do look at. You know, the roll-off line of business as well, so I'm not sure that's so much a leading as a lagging indicator. But you mentioned temp roll-off, and temp roll-off has been pretty good for us. the C&D business. If I look at C&D, and that's been one that has been, you know, has really somewhat of a leading indicator as well, if you think about the one, because I'm trying to read some of the tea leaves. GDP, it looks like it could be strengthening. I don't know. I guess what I would tell you, in good times or in bad, I'm feeling, I guess, a bit more optimistic than

maybe I have in the past. Okay, great. And then just, I want to follow up a little bit more just on a question that was, excuse me, a comment that was made last quarter in terms of suspending kind of the pricing initiatives in the healthcare solutions area that would be expected to be done by the end of the first quarter of this year. Are you still on track for that? I mean, obviously from your commentary, it looks like pricing is going to pick up this year based on your discussion of 4.2%, but is it a matter of like really hitting that end of the first quarter or we're done with those issues that we're having that was preventing the pricing, or is that going to extend a little bit further, or have you already started it?

Yeah, so here's what I would say about last quarter's comment. I mean, that was not a universal comment. I mean, some customers, yes, we had suspended price increases, but the large majority of our customers were getting price increases, but as credit memos, which are really just a tool to try and clean up some of these past due receivables, Those credit memos, we believe, peaked, which ends up being a tailwind for us as we think about the whole year of 2026 versus 2025. So pricing, look, we have, I think, a fantastic price team, and they are definitely looking at the opportunities that are in front of us. But a lot of those opportunities are not so much a price execution as it is just, you know, less dilution to the overall.

Okay, thank you.

Thank you. Our next question comes from the line of Toby Summerwood, Truis, Yolanda's Melvin.

Thank you. From a capital deployment perspective, are you shifting broadly to share repurchase? Or as you look into 27, 28, sort of a longer period of time, you're supposed to produce about $12 billion in free cash over that three-year period. And how do you see it shaken out between acquisitions in the core, acquisitions and investments outside the core, and repurchase?

Sure, sure. Yeah, I mean, as we alluded to in the last quarter and also with our December announcement on some of our shareholder returns, we do view 2026 as a year of harvest and a balanced capital allocation program. But to your point, the beauty of our business is that it does generate a lot of excess cash flow. And you could expect a pretty balanced approach going forward. We do want to continue to return capital to shareholders, so you should expect that our share repurchase program is not a one-time event in 2026. We'll continue it going forward, but it's going to be governed by kind of what opportunities we have in terms of investment opportunities, both organically and also inorganically. But the key word here, I think, is balanced from a shareholder perspective, and that's what you should expect.

I'm curious what you're hearing from healthcare customers about their tolerance for price increase, particularly this year, given various declines in federal funding, ranging from the exchange subsidies to Medicaid cuts that may come in a year that could pressure hospital margins.

I guess I would just say I haven't heard anybody say that.

I think the handful of customers I've visited with, I would tell you that. I think what's encouraging is the fact where you combine what were WM kind of core services with the ability to integrate those with the additional health care services. I think the value proposition is something that's really resonating with the customers, especially the ones that Jim was referring to earlier. You know, these big hospital networks, we sit here in Houston, obviously one of the centers of the universe, if you will, on that front. And when you walk in the door with a comprehensive set of capabilities that these combined organizations have now. I think there's a value proposition that is not going to be matched out

there. Yeah, I think these A's and B's that we've talked about, A's and even C's, this is going to end up looking like they're similar in so many respects to our big national accounts on the legacy side. So it's going to be a, it's a negotiation that they have a contract. It's going to be a negotiation on price. What's the price increase going to be? And a lot of that ends up on how much they appreciate the differentiated service offering. So I think that's what we see with them.

I appreciate that. What are you seeing in the hazardous waste business? Is that industrial optimism that you kind of mentioned already palpable?

I think probably our special waste line that we've all commented on is probably a good spot to look. And we've said our pipeline is strong. Our results would demonstrate that through 2025. And I think going into 2026, we haven't seen any indications that that's going to solve. And that's probably the one barometer that I would point to that's probably most closely aligned with your question.

Our next question coming from the lineup, William Griffin with Barclays, Elon is now open.

Great. Thanks very much. I just wanted to come back to some of the incremental disclosure you gave on the sustainability business. So you gave us the parts to kind of get to sort of your 700 million implied sustainability growth EBITDA in 27, obviously a little below the target you gave at prior analyst days. But, you know, if I adjust for this sort of lower recycled commodity price environment based on your sensitivity, it implies that was maybe 150 million EBITDA headwind. And so, you know, sort of X out the commodity headwind, it feels like maybe this business is actually performing, you know, well ahead of your initial expectations. Is that a fair characterization?

We're really pleased with how the recycling business is performing. Absolutely. I think the number that you rattled off was really more for the aggregate of our recycling business versus the $700 million number relates to the growth projects of recycling and renewable energy. But the comment still stands. We've been very pleased with the investments that we've made in automation and everything that we expected and then some is being delivered coming out of those automation investments, whether it's higher throughput at those facilities, whether it's higher price points on the commodities that we sell, whether it's labor, which was huge for us and has been over a 30% improvement. So really pleased with those investments. I appreciate that. And just

the follow-up here, you gave the sustainability growth, keep it a breakout or contribution for the 2026 guide, I think $235 to $255 million. Have you broken that out between recycling and R&G?

We have not, but the way to think about it, including the royalty, it's about 60% renewable energy, 40% recycling.

Perfect. Thanks very much.

Thank you. Our next question will come from the lineup. Tammy Zakaria with J.P. Morgan.

Yelena Feldman. Hey, good morning and thank you so much. So the sustainability EBITDA growth of 235 to 255, can you help us with the cadence of this as we think about 1Q versus the rest of the

year? You're going to, similar story, the way to think about it, first half, second half. So you're going to have more of a ramp in the second half than the first half when you have the carryover effect of what we brought online the back half of 2025 and then we're bringing new projects online three in the first half of 2026 so you'll see a bigger half bigger impact in the second half

than the first half so for modeling purposes is um 4060 first half versus back half is a good proxy

i think ed can get back to you on that on some of the modeling questions

Understood. Thank you. That's all I had for today.

Thank you. Our next question will come from the line of Kevin Cheng with CIBC. Yolan is now open.

Hi. Thanks. It's Alexander on for Kevin here. I believe the EPA is set to finalize the renewal fuel blending rules in Q1. I was wondering if you could share any thoughts or insights into potential changes they could make to the volume obligations from their original proposal. Thanks.

Sure, yeah, we're hoping that the issue in Q1, we were hoping it would come out in late Q4, but the government shutdown delayed that a bit. What we've seen is pretty much the market has priced in, the current RVO, and if anything, we're cautiously optimistic. Maybe there might be some changes around the edges that could be constructive for pricing. We're not anticipating anything dramatic coming out of the RVO. I think that's the most important point. And we've really seen stability in RIN pricing, which is the most important thing for our business. And our team has done a great job in navigating selling our RINs rattably over time.

Okay, perfect. Thanks. I can turn it back.

Thank you. Our last question in queue coming from the line of Stephanie Moore with Jeffrey. See you later, it's now open.

Hi, good morning. Thank you. So I wanted to follow up on a prior question that was just asked on capital allocation priorities. I mean, I appreciate the commentary regarding, you know, keeping a balanced approach. But I also think as we think about 2027 and 2028, just the sheer cash flow that's going to be kind of spun off from this business, especially with the R&G investments coming through, you should be back to your targeted leverage this year. So as you think about that balance and maybe looking specifically at the M&A component, you're going to have, again, a lot of optionality. So if you think about that optionality, any areas that are particularly interesting, if you think about the next couple of years?

I mean, I think as far as M&A goes, dividends kind of set. But M&A, there's still plenty of good strategic $100 million as acquisitions throughout the year. It could be at the high end of that range. But if I were modeling, that's the number I would use is kind of $100 to $200 million in the past. Because really, the balance sheet, I think you would say, is in good shape.

Yeah, the balance sheet's in great shape. I think the one thing, just to your point about now that we have the share repurchase program, it's going to start back up this quarter. Obviously, we look at acquiring our own shares versus if we're looking at larger opportunities, we have a very biased view on kind of what the value of our company is. And so that's, I think you're going to see us to continue our share repurchase program just from that point alone. But we're very disciplined in terms of our pricing approach to acquisitions.

Thank you. And I'm showing no further questions in the queue. I will now turn the call back over to Mr. Jim Fisk, WMCO, for any closing remarks.

I had a 15-minute closing remark planned, but in light of the time...

This concludes today's conference call. Thank you for your participation, and you may now disconnect.