Waste Connections, Inc. (WCN) Q3 2026 Earnings Call Transcript

Hello, everyone. Thank you for joining us and welcome to the Waste Connections, Inc. Q3 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, please press star one again. I will now hand the call over to Ron Middlestadt, President and CEO. Ron, 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 increased outlook for 2026, along with some thoughts about the setup for 2027. I am joined this morning by members of our senior management team, including our CFO, Marianne Whitney, who will first provide our forward-looking disclaimer and other housekeeping items.

Thank you, Ron, and good morning. The discussion 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 21st earnings release and in greater detail in Waste Connections filings with the U.S. Securities and Exchange Commission and the Securities Commission 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 on both a 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.

Thank you, Marianne. We are extremely pleased to deliver third quarter results above expectations, setting up another increase to our full year outlook and demonstrating once again the durability of our model, regardless of the macroeconomic environment. Most notably, underlying margin expansion of 50 basis points drove adjusted EBITDA margin of 34% despite surging diesel costs late in the quarter. Solid waste organic growth in Q3, including core pricing of 5.5%, plus fuel and material surcharges of 1.3%. On average yield of 4.3%, unit volumes declined, eased to 1.2%, a sequential improvement of 70 basis points from Q2, primarily as a result of a pickup in more cyclical landfill volumes, with Q3 special waste up 7% year-over-year and construction and demolition debris up 5%. We are also encouraged by trends in our other lines of business. We saw continued strength in E&P waste revenue, up another 6% sequentially, and in certain recycled commodities, including OCC, where values have improved in each of the past three quarters to now up 35% from year-end levels. Additionally, we are benefiting from increased renewable natural gas generation from the new facilities we have brought online, as we have discussed earlier this year. Moving next to M&A, year-to-date acquisitions of $130 million in annualized revenues include two West Coast solid waste collection franchises closed during Q3. The pipeline remains robust with dialogue ongoing that will result in the closing of additional transactions later this year or early in 2027. With liquidity of over $1 billion and leverage remaining at about 2.75 times debt to adjusted EBITDA, we continue to have capacity for outsized acquisition activity while funding our growth strategy, sustainability-related projects, and expanding our return of capital to shareholders. As announced yesterday, our board of directors authorized a 10% increase to our regular quarterly per share cash dividend, our 16th consecutive double-digit increase since the initiation of our dividend in 2010. Year-to-date, we have completed record levels of share repurchases totaling over $1 billion, or 2.5% of shares outstanding, as we have and will continue to take an opportunistic approach to buybacks. Additionally, as highlighted in our recently released 2026 Sustainability Report, we remain on track to achieve our long-term aspirational sustainability-related targets. Since 2018, we've invested over $500 million in sustainability-related projects and are benefiting from the expansion of our network of renewable natural gas facilities and the introduction of enhanced automation in new and existing recycling facilities. Moreover, we continue to enjoy the results from three years of improvement in employee retention and, most importantly, record safety performance. Our continued progress and ongoing investments in sustainability-related projects reflect our commitment to the environment, our employees, and the communities we are truly privileged to serve. We consider these efforts an enduring part of our corporate culture, rather than a program within a defined endpoint, as we view sustainability as integral to our strategy for long-term value creation. And now I'd like to pass the call to Marianne to review more in-depth, the financial highlights of the third quarter are increased full-year 2026 outlook and what that implies for Q4. I will then provide some preliminary thoughts about 2027 before heading into Q&A.

Thank you, Ron. Third quarter revenue of $2.638 billion exceeded our expectations and was up $180 million or 7.3% year-over-year. Contributions from acquisitions, net of divestitures, totaled $53 million in the quarter. Organic growth in solid waste collection, transfer, and disposal was led by 5.5% core price, which ranged from below 4% in our mostly exclusive market Western region to above 6% in our competitive regions. Fuel and material surcharges of approximately $30 million, or 1.3%, stepped up sequentially from Q2 by about 20 percent, reflecting higher diesel costs in Q3, and they will continue to be impacted by the pace and magnitude of changes in diesel pricing. Yields of 4.3 percent on solid waste unit volumes down 1.2 percent reflect the following year-over-year results in the third quarter on the same store basis. Roll-off polls were down about 2.5 percent on rates per poll up 5.5 percent. Consistent with activity in recent quarters, poles were down year-over-year in all regions, except in the western U.S., where poles were up 2.5 percent. Landfill tons were up 3 percent on rates per ton, up about 4 percent. Q3 reflects a step up from Q2 when landfill tons were effectively flat year-over-year, and it represents the first quarter in the past two years during which all three waste types showed year-over-year improvement msw cnd and special waste activity was led by strong special waste in cnd towns along with a nominal increase in msw special waste was up seven percent in q3 on multiple jobs across many geographies ranging from new york and pennsylvania in the northeast to oregon in our western region cnd towns were up five percent on similarly widespread increases, most notably in our southern region, led by Texas, and in California in the west. Looking at other lines of business, as Ron noted, E&P waste revenue continued to ramp during CURE-3. Year-over-year organic growth of about 5% was led by a 9% increase in the U.S., most notably in the Permian, where rig count has increased by about 10% since early this year activity in canada while more production oriented and therefore considered less sensitive to crude values remained about flat year over year when normalized for an outside remediation project in the prior year moving to other commodity related revenues recycling revenues were up about 12 percent year over year driven by higher occ values particularly offset by ongoing weakness in plastics landfill gas sales were up 35 percent year over year due to the combination of higher volumes from new rng facilities and higher values for rims up about 10 percent year over year to an average of about two dollars and fifty cents adjusted ebitda for q3 is reconciled in our earnings release was 895.8 million dollars up 7.9% year-over-year. At 34% of revenue, our adjusted EBITDA margin was up 20 basis points year-over-year. Excluding a margin drive of about 30 basis points for higher fuel costs, underlying adjusted EBITDA margin was up 50 basis points. Said another way, adjusted EBITDA margin would have been 34.3%, excluding fuel impacts. Once again, our outsized underlying solid waste margin expansion reflected favorable price-cost spread dynamics, magnified by benefits from employee retention and safety, most notably savings and risk management costs. And finally, year-to-date adjusted free cash flow of $1.09 billion was in line with our expectations, and we remain on pace for full-year 2026 outlook of at least $1.4 billion. dollars. Given our outperformance in Q3, along with higher fuel costs and expected recovery thereof, as well as incremental contributions from acquisitions and commodities, we are increasing our full-year 2026 outlook as reconciled in our earnings release to revenue of approximately $10.09 billion and adjusted EBITDA of approximately $3.345 billion, or 33.2%. This implies Q4 revenue of about $2.52 billion and adjusted EBITDA margin of 33.3%, up 20 basis points excluding fuel, about as expected in what we knew would be our toughest quarterly comparison versus the prior year period. Our outlook assumes no change in underlying economic trends. The closing of additional acquisitions would provide upside to our increased 2026 outlook, as would further improvement in commodities and related activity. Further movement in fuel prices and the timing of recovery of higher fuel costs will also continue to impact results. With that, I will turn the call back over to Ron to provide some preliminary thoughts about 2027 before we head into Q&A.

Thank you, Marianne. As we've said, we're extremely pleased once again to raise our outlook on the strength of our operating and financial results in spite of the magnitude of unexpected headwinds from record diesel rates and ongoing daily macroeconomic uncertainty. The consistency and visibility of our results, most notably in a challenging year like this one, are a validation of the differentiated market selection strategy that has guided waste connections since inception 29 years ago, along with our decentralized operating philosophy. We're most grateful for the commitment and dedication of our over 25,000 employees, as we recognize that superior execution by empowered local leadership has been and will continue to be a true differentiator. Given the level of engagement of our workforce, we're excited by the early indications from AI-driven applications focused on our operations, recognizing that these returns on these technology investments will be most fully realized by teams knowing how best to put them to use. We're proud of the results we've delivered to date in 2026 and our positioning as we exit the year. In fact, from an operational standpoint, we feel about as good as ever. We've recovered higher fuel costs faster than expected and delivered outsized underlying margin expansion on record safety performance, while also managing the reaction at Chiquita as we expected, bringing new RNG facilities online and integrating another $130 million in acquisitions year-to-date. We've also returned record amounts of capital to shareholders through opportunistic repurchases and continued double-digit per-share dividend growth, all while maintaining low leverage, setting up for continued growth and free cash flow generation. In short, we've honored our commitments, and regardless of market sentiment, we will maintain our focus on what ultimately drives value creation. As we continue to lead the industry and adjusted EBITDA margin and true free cash flow generation. To that end, although we will not provide our formal outlook for 2027 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 mid- to high single-digit revenue growth in 2027 from the combination of about 1% combined rollover from acquisitions already completed and R&G facilities brought online in 2026, price-led organic growth in solid waste, ongoing fuel and material surcharges, and higher commodity-related revenue from E&P waste and recycling, along with acquisitions that we will complete during the remainder of 26 and throughout 2027. Adjusted EBITDA margin expansion in what we would consider a normalized range from solid waste, with outsized impacts from higher fuel costs at recent levels expected to be largely offset by increased commodity-related tailwinds, depending on the timing and extent of surcharges, and double-digit growth in adjusted free cash flow per share, reflecting the continued declining impact from spend on Chiquita and the substantial completion of our RNG CapEx outlays. These expectations will be impacted by the pace and magnitude of ongoing acquisition activity in 26 and expected to grow during 2027 as we complete additional M&A. To the extent that we see further improvement in commodity values, those impacts would also be additive to these preliminary thoughts, as with ongoing share repurchases. We look forward to providing more detail when we report Q4 and give our formal outlook for 2027 in February. We appreciate your time today. I will now turn this call over to the operator to open up the lines for your questions. Operator?

Thank you. We will now begin the question and answer session. Please limit yourself to one question. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, please press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you're unmuted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Kevin Chiang with CIBC. Your line is open. Please go ahead.

Hi. Thanks for taking my question and good results there, team. Thanks for the the framework for 2027 there, Ron. I was wondering if we can get a little bit more color on how you think the cadence of free cash flow conversion trends as we look out maybe into 2027 and beyond. You know, you've talked about some of the things that have burdened that free cash flow conversion the last couple of years, and some of that does get released in 2027. So, you know, if we look at the conversion in 26 is, you know, and ultimately getting to like a high 40% number. Is there a way to frame kind of how 2027 might look as we progress along that journey?

Hi, Kevin. It's Marianne. In terms of free cash flow, obviously the piece that we haven't gotten specific on is the extent to which the Chiquita outlays declined, which of course will provide in our February outlook. But what we do know and made clear is that the RNG spend is substantially complete. So, if you think about that, you know, we said we'd be spending about $75 million this year. And so, if that largely doesn't repeat, that's one bucket. And then, again, we'll get specific with Chiquita. But, you know, we're looking forward to being able to communicate what the expected decline is in 27 versus 26, the same way we communicated the decline in 26 versus 25. So, So, you know, stay tuned for that. As you said, we think longer term, we ultimately get back to that 48 to 50 percent. We're around 42. So you start bridging that gap, but a little too early to get really specific about where we fall in that range.

Yeah. And Kevin, the only thing I would add is, look, I think the step down on Chiquita from 25 to 26 is exactly in line with as we guided. and I think you can expect a similar type step down for $27,000.

Okay, that's helpful. Just a follow-up question. I noticed in your 10Q this morning, the eastern region had a higher risk management cost. It looked like every other region saw a decline in the prepared comments in the 10Q. Just anything to call it on the eastern region from a risk management cost perspective that made it an outlier in Q3?

No, there's nothing to call out. What happens is episodically when a claim gets paid out, it actually hits the region. And so you might, you see that dynamic in the quarter when that happens.

Okay, perfect. Thank you very much.

Your next question comes from the line of Noah Kay with Oppenheimer & Co. Inc. Your line is open. Please go ahead.

Hey, good morning. Maybe just looking at 4Q, it looks like in the guide the revenue growth would decelerate sequentially by about a point. And so I guess between the higher surcharges, better commodities, and other trends, maybe just understand why 4Q top-line growth wouldn't be comparable to 3Q. Any offsets we should be thinking about? Just conservatism.

Yeah, you know, I'd say, Noah, we enjoyed the benefits of that sequential improvement. in volumes and all waste streams at our landfills being positive for the first time in several quarters, so a little too early to assume that that continues. So that would just, I guess, to your word, maybe a little conservatism there. You also know that there's always anomalistic differences year over year, and although you didn't specifically ask about margin, a reminder that last year's Q4 was our, it'll be the toughest quarterly comparison, and it was strong on a relative basis.

Okay. Just a quick follow-up to that. Any sign of slowing from the trends in October versus some of the pickup that you saw in the third quarter?

The only observation would be that while special waste has continued to be positive, and we never generalized from a few weeks of data, but it's good to see that special waste continued to be positive in October, we didn't see a similar increase in C&D. Reminder that these projects are sensitive to things like interest rates and fuel costs, and they're lumpy.

Yep. Just a quick one on 27, margin expansion. You know, I think Ron said that normalized for solid waste and, of course, for perspective. I mean, the solid waste margin expansion in the business on an underlying basis has been outstanding the last several years. A lot of that has been driven by the safety gains, the retention improvements. You've talked about the AI initiatives, maybe providing some additional fuel, you know, for better margins going forward. And so I'm just wondering how much is baked in for margin expansion underlying in 27 from AI versus sort of normal course, you know, WCN blueprint.

Sure. Yeah, no, I mean, in that commentary. on normalized underlying, we have assumed no benefit or no incremental benefit in 27 is baked in from AI at this point. That's not saying some cannot happen. As you know, we experienced some in 25 and 26 from our initial initiative, which was a pricing initiative, and that has exceeded our expectations. We will – the main three initiatives that tie together that we are working on throughout this year and in through next year will really not be fully deployed, a couple of them, until the end of 27 and one of them until the middle of 28. So, you know, the real beginning impact of the AI initiatives, margin-wise, we'll start to see in 28 and not really realize until fully until probably 29.

Very much looking forward to that. Thank you all.

Your next question comes from the line of Faiza Ali with Deutsche Bank. Your line is open. Please go ahead.

Yes. Hi. Good morning. I wanted to ask a little bit more about how you're thinking about 2027, you know, volume and pricing trends. I know that you're probably assuming that, you know, fuel prices stay where they are, but just curious how we should think about, you know, core price versus volume, and, you know, if you're assuming that volume trends sort of, you know, normalize, stay flat, or, you know, still potentially decline in 27.

Hi, Taisa. You know, we're really not getting granular on all the moving pieces, but clearly, you know, it's cost pressures that inform our thinking about how much price is needed. So, you know, we will certainly continue to look at what we're seeing in the business, you know, and we know where we've been this past year. And to the extent that there's not a material change, it feels like the right ballpark for the way to think about pricing. And we certainly are encouraged by the, you know, what our tools have done for us in terms of retention, but we're mindful of the pressure on consumers. So all of those things will go into our thinking, but we generally would think of that 150 basis point spread between price and cost. So that's why I started with cost. And we'll go from there, but early days to get too granular.

Understood. Thank you.

Your next question comes from the line of Adam Bubis with Goldman Sachs. Your line is open. Please go ahead.

Hi, good morning. On the M&A front, I think you've acquired $130 million of revenue year-to-date. More broadly, if we look at years prior to 2026, say the five years prior, it's characterized by really outsized acquisition activity. Is this sort of $100, $200 million annual acquired revenue contribution a more reasonable assumption going forward, or do you see potential to return to the higher levels of activity seen in prior years?

Yeah, Adam. Well, you know, historically, number one, as you know, we don't guide to acquisition revenue and have it for, you know, two decades now. But, you know, 150 to 200 million was sort of a historical, probably five to 10 year ago average. We have stepped that up as the size of the company and the geography has changed and two countries, et cetera. So, you know, I would tell you that, you know, 200 million is sort of a probably a more normalized low watermark now, whereas before it might have been more of a high watermark. And no, you know, you're going to there's nothing's changed in the strategy or the opportunity. Acquisitions are opportunistic and timing. And sellers really control that, not us as acquirers. So, you know, it will be very likely as you look out over a three- to five-year period that it'll look much more similar to the, you know, pick at the 22 through 25 timeframe than different from that.

Great. And then on Chiquita, it's nice to hear that's trending as expected. Are you able to provide any color on sort of the key remediation processes that still need to occur through 2026 and 2027? Just trying to get a sense from an operational standpoint, you know, what needs to happen at the landfill for the liability to be resolved.

Yeah, I mean, number one, Adam, the remediation at Chiquita is following what we would tell you, and I think experts in the field would tell you, including the EPA, a typical curve of a decelerating ETLF, okay? And there's a lot of statistics that support that, and those go into, you know, what we know about the cost structure. Obviously, as the reaction cools with time, you get less leachate generation, therefore you have less leachate disposal costs, and you have less infrastructure such as wells to do, cover to put down over the reaction area, etc. So, you know, we began by covering some 41 acres with a geosynthetic membrane. We've expanded that and buffered what we call the west toe of the landfill this year. You know, that doesn't repeat as an example going into 27. So that's an example. We don't drill additional wells per se. You know, we've drilled some 300 wells. You know, I'm not saying that can't go up five, but it's not going to go up 100. So those are the things that inform our thinking about why it continues to decelerate. So really the main costs are related to leachate management, and as that continues to come down in volume, the costs come down, put very simply. And that has happened in 26, over 25, and it will continue to step down in 27. it.

Great. Thanks so much.

Your next question comes from the line of Tony Kaplan with Morgan Stanley. Your line is open. Please go ahead.

Thanks so much. I was hoping you could talk about volumes in special waste and C&D and maybe also in the past you've had some shedding of contracts more in the resi space and just wondering if you could provide an update there.

Sir, I'll start with the second part of your question, Tony. We continue to see some decline in the amount of shedding. As was a previous question asked, I believe, by Adam, we had quite a bit of M&A activity in 23, 24, and 25. And so it takes, you know, multiple years to come up upon contracts that you may not want to renew. So I'm not saying shedding is certainly that's always happening, but that is declining. And I think Marianne will give some color on the first part of your question.

Sure. So special waste, I mentioned the prepared remarks that they were broad-based and called out the Northeast, Oregon, Texas, California, in terms of volumes more broadly. And, you know, looking, digging into the types of projects we've been seeing, it's not one particular thing. It's everything that ranges, you know, by geography, by what's going on there. So you've seen highway projects, infrastructure projects, remediation, data center and chip plants, yes, in some markets like in Texas, and commercial projects. So it really, really runs the gamut. What's encouraging is that broad-based nature of it and the fact that, for instance, 60% of our locations had positive special waste tons in Q3, and four of six of our regions were up. And that's in comparison or in contrast to last quarter, only two of six were up. So that's the way I would characterize it. That's the incremental color I can provide, Tony.

And Tony, the only last thing I'd say on that is, you know, on the C&D front and the commercial front, look, historically in our industry, it's taken about 1.5 to 1.8 new housing starts to create organic volume in that business, which then converts to permanent volumes. As you know, this week, that number has been announced stepped down to 1.2 million new housing starts and expected to go lower with current interest rates into 27. So I think, you know, there is one economy going on with things like Marianne just outlined, infrastructure, data center, et cetera. And then there's a residential construction, that is just really is sort of struggling with what's going on with interest rates and fuel costs and the other thing that affect consumers and contractors.

Thank you. And then on EMP, just high energy prices for a little while now, how are you thinking about the upside there, maybe going into year end as well as potentially next year as well?

Yeah, well, look, I mean, as we said, A&P continued to step up sequentially once again after stepping up in the second quarter again, so it has continued to improve in both the U.S. and Canada, more so in the U.S. because it is more drilling-oriented in the business versus production in Canada. But, you know, I think you have to understand that producers are not going to react to what they believe is a short-term stimulus. And, you know, we have an on-again, off-again hourly war in Iran and the Strait, and that is a short-term believed phenomenon. So you've seen about a 10% increase in drilling activity this year. You know, some people would think with a 70% increase in crude, you'd see a like increase in drilling. You would if it was believed that was a permanent scenario. That is not the belief of most of the producers at this point in time. If it becomes, you know, six months from now, it's sustained, now it's going on a year and a quarter, that could change that dynamic.

And, Tony, the way I would frame it is when we think about next year, we think that there should be a higher correlation between the pickup and activity in E&P and crude. So, said another way, to the extent that crude remains at these elevated levels, we would expect to see more. We'd say what we've seen year to date, even though it's ramped sequentially, really doesn't reflect $100 crude. That's just, you know, rig counts are still down. You know, they started declining in the first quarter of 24 and have stepped down and they're still down about 50. It's only up 10% since earlier this year. So that's how we think about it. And that's what we're communicating with those broad strokes about next year.

Terrific. Thank you.

As a reminder, please limit yourself to one question. Your next question comes from the line of Jerry Riewicz with Wells Fargo. Your line is open.

Please go ahead. yes hi good morning everyone um i'm wondering if you just talk about hey ron uh i'm wondering if you just talk about uh the internalization rates on the night nice to see that uh 58 percent in the in the quarter uh you've made good progress on arrowhead can you just update us on uh where volumes are are tracking on rail for you now and you know looking ahead over the next 12 months as we exit 27, you know, obviously a range of possible outcomes, but can you talk about where volumes for the landfill could head to and what that means for your internalization rate 12 months from now?

Sure. I mean, you know, you're referring, Jerry, I believe, fully to our Arrowhead infrastructure, Arrowhead landfill, and our rail infrastructure. Look, we're, you know, We're peaking right now between 7 and 7,500 tons a day, which is triple where we started less than three years ago, two and a half years ago. So we're very, very pleased at that. We have continued to work on infrastructure at our intermodal facilities, which is some of what's required to step that up again. And we believe that as we look out over the next 24 months, it's reasonable for us to step Arrowhead up to 8,500 to 9,000 tons and ultimately, you know, at some point get that number higher. But that's obviously that takes incremental track and other facility enhancements at both the transfer station and intermodal end and the landfill end. So, and then, as we mentioned, we began a rail project in the end of the second quarter in the Miami-Dade County area, going into one of our Florida landfills. That stepped up in the quarter nicely, and, you know, we'll continue to ramp into 27. So, we, you know, we definitely have more volume moving on rail in the third quarter than we've ever had. And we expect that to make, you know, incremental improvements as we go forward. Again, as we've mentioned, rail is a sort of a unique geographical modality. It's not something I think you're going to see in most parts of the U.S., but in the upper northeast and a few places like southern Florida, you know, that's where you're going to see this grow.

And, Jerry, if I could just add one more comment about internalization, because you started there just more broadly. You should think in terms of we're at 58 percent. I know last quarter we were at 60. The difference there is just the mix of business. And so you should expect us to stay in this 58 to 60 percent range. That's really no change in internalization. And to that point, our eastern region has actually increased its internalization. so there's nothing else going on there.

Super. We'll stick to the one question. Thank you.

Your next question comes from the line of Konark Thupta with Scotia Capital. Your line is open. Please go ahead.

Thanks, and good morning, everyone. I just wanted to get back to the 2027 margin outlook. I understand you'll probably provide some more color in February on that, But directionally, Marianne, if I'm thinking this right or wrong, let me know, please. So for 27, I mean, usually you guys see, you know, 20 to 40 beeps of underlying you've talked about in the past. And, you know, this year we have seen that trend to the low end on a net basis because of fuel, I think, probably, though we saw some commodity price rebound. So, but next year, I mean, if the expectation from the market is, let's say, fuel to kind of normalize to some degree, should that be a small tailwind maybe? And then commodity prices, the way they are tracking up now, should that also be a tailwind? And then your RNG EBITDA dollars will likely ramp up, which are higher margins. So, I'm just thinking the 20 to 40 is your standard normal range of margin expansion. should we be thinking more toward the higher end of the range or should we be somewhere in between because of some other factors?

Sure. So it's early days, but we would consider fuel continuing to be a headwind. And that's why we're saying, look, underlying cost pressures, you know, we feel comfortable thinking in terms of, so ex-fuel, that 20 to 40, as you said, is the right way to think about it, but we continue to see headwinds from fuel, and the expectation is that to the extent they do persist, that there should be some correlation between those commodity-driven revenues, which would absorb some of those incremental pressures. If fuel breaks and it's lower, then it could be a tailwind. But again, what do those other commodities do? So that's why that's why we framed it this way, that the expectation that one would support the other.

Okay. Thank you. Thank you.

Your next question comes in the line of Jim Shum with TV Securities. Your line is open. Please go ahead.

Hey, thanks. And good morning. So I was just, I just wanted to talk about the M&A a little bit more. So it's sort of slowed down relative to obviously last year's pace. And I'm just kind of curious, is that obviously you're at the mercy of when sellers are willing to sell, right? So I was just curious whether is it is it a function of there's not a lot for sale in 2026 or does it have more to do with like, you know, uses of capital where you feel like your stock price is very depressed and you just want to you just want to allocate more capital to buying back stock? Like, how are you thinking about that?

Yeah. First off, let's break that apart. It has nothing to do with any change or approach to uses of capital.

We have adequate plenty of capital access and liquidity to do both to almost any degree we want.

So no one should read into, you know, stepping on the buyback with the stock dislocation as a reason that M&A is slower, because that is inaccurate. Look, the reality is, is we are disciplined buyers. It would be great if all the strategics and non-strategics were that way, but that's not necessarily the case. So, look, not all solid waste is created equal. Not all EBITDA is created equal. There's all kinds of what we would consider poor assets that some companies are scooping up. That's not something we're interested in. And we're not out trying to outpay private equity who has more money to put to work on any deal so they don't have to return it to LPs and continues to be undisciplined. So, you know, when we spend, when we do less M&A, the market should be happy because that means we were disciplined in that period when others were not. So there's no change to the strategy. The opportunity remains significant. There are timings at M&A ebbs and flows. and, you know, you can be sitting here in a quarter or two and we're on track for what could be a record 27 and, you know, you wonder what happened. What happened was just timing and opportunities and discipline. So, you know, that is what I tell you, but we have ample capital to do everything we've said we're doing.

Okay. Thanks, Ron. That's clear. Just a quick clarification question. I know that you guys never guide and include future M&A, as you said, but when you gave the guidance for 2027 revenues, mid to high single digit revenue growth next year, I believe you also said that it included future M&A or you said something about future M&A. Can you just clarify, does the mid to high single digit revenue growth include any future M&A?

Yes. So, just to clarify, you know, we didn't give guidance. What we gave was a framework for thinking about how next year we'd expect it to play out. And so, I think thinking about a normalized amount of acquisition contribution is included in that. So, yeah, if you think of it as kind of that one to two percent, which would be normalized amount of contribution. That's in that number.

Okay. Okay. Great.

Thank you very much. your next question comes from the line of chris murray with atb cormac capital markets your line is open please go ahead yeah thanks folks um maybe just turning back to the energy business i'm thinking about this a little bit broadly um you know ron you made the comment that you know there's still a little uncertainty about what the path of of energy prices is going to be like um but there is some discussion around the fact that there's been a lot of infrastructure broken in the Gulf, which could keep this be kind of longer. I'm wondering, as you're thinking about the energy business and maybe taking half a step back and your positioning in it, I know in recent years you've added to Canada. You've got the traditional more landfill-oriented business in the U.S. South. You've added RNG. I'm just kind of thinking about, you know, as we think over the next two to three years, what's your perspective on either growing the energy business or changing the mix in the portfolio? And how do you think about the opportunity set around that? Because while it's a smaller piece of revenue, it is a pretty high incremental and decremental margin.

Yeah. Well, look, Chris, I think, look, first and foremost, in both the U.S. and Canada, we are a disposal-oriented E&P company. We don't do transportation. We don't do field services. We're not interested in low margin, highly competitive pieces of the business. We're predominantly a landfill and processing company in both countries. Canada is production oriented. The U.S. is drilling oriented. The reason we did that two years ago was to balance that portfolio. You know, right now, E&P is, again, I'm rounding, is going to be 6% to 7% of revenue, you know, higher than that because of the margins in EBITDA. That will continue to grow, will continue to do tuck-in deals in both the U.S. and Canada. But it will actually come down over time as a percentage of revenue because the corpus of the other 93% is so large and there's so much opportunity there that it will just naturally come down. And, look, we are comfortable with the size of it. If it didn't come down below 6%, 7%, we're also okay with that. It is a great business, as you said. It's an excellent cash-on-cash-return business. But, you know, look, while it's great on the margins, it does have volatility. We acknowledge that. That's why we think that's the right size for it, right? And it can move with crude. So it's, again, why we like balancing it to 50-50 with the Canadian business we did on the production side. So, you know, it's a long-winded answer to your question. I'm sorry, but we're not out there looking for some outsized deal in E&P, and we're not looking to diversify what we do in E&P at this point.

Okay, I'll leave it there. Thank you.

Your next question comes from the line of Trevor Romeo with William Blair. Your line is open. Please go ahead.

Hey, morning. Thanks for taking the questions. I was hoping we could maybe go back with volume for a second and dig into the data center opportunity, just because I think Marianne, you called it out as being a boost in areas like Texas. So just curious, I mean, is there any way to think about maybe quantitatively how much of a boost data center construction is giving you at this stage?

And then just thinking about the growth of data centers that could happen the next several years, maybe how meaningful that could be for volume growth in the future yeah trevor um first off whatever we would tell you it would be a guess um and it's probably best not to do that i mean as you know while a data center um is is a huge capital investment no matter what the size uh and has a lot of activity during construction once it's actually constructed, you know, they probably produce an eight-yarder of trash a week because they got, you know, 10 people. So, it's not something that converts into some big commercial or industrial waste or recycling opportunity. It's more of a front-end construction opportunity. So, you know, in markets like Texas, in markets like Virginia, Utah, which we're actually not in, where we're seeing Oklahoma, Tennessee, we're seeing some of this construction of these sites, it is a boost. It comes in sometimes as some special waste, but more as C&D waste on the construction side. But we would just be guessing to try and tell you what that could be. Could it be 20 bips of volume or something? I mean, we don't want to sit here and say it's 1% of volume growth or something. If it is, that'd be great, but I'd expect it to be more, you know, 20 to 40 bps of volume growth.

Okay. That's helpful. Thank you, Ron.

Your next question comes from the line of John Wyndham with UBS. Your line is open. Please go ahead.

Okay. Perfect. Congratulations on the result. Thanks for taking all the questions. You touched on interest rates a little bit earlier. Maybe Marianne or Ron, at least on my numbers, you don't have a lot of refinancing in 2027, but can you talk about the debt maturity profile and just your approach to refinancing on the debt side? Thanks.

Sure. So we're about 80-20 fixed to floating with a weighted average tenor of about eight years and an average cost of debt of about 4%. And no near-term maturities will continue to look. I mean, we had good timing this year, last year, when we put, you know, issued notes, and we'll continue to try to be opportunistic, but don't have a lot of exposure.

Perfect. Appreciate it. Thank you, John.

Your next question comes from the line of Shlomo Rosenbaum with Stiefel. Your line is open. Please go ahead.

Hi. Thank you very much for taking my question. I want to ask you to think through a little bit and help us out in terms of your expectations for diesel cost-generated inflation going into 2027. And how are you thinking about that? Are you expecting labor costs to go up because of that, because of the cost of living going up? How are you thinking about potential for customers to push back on pricing because of of this? And then just kind of the internal inflation, kind of the second derivative where companies will start to charge you more for the things that they're sending you because of the cost of diesel. If you can just, you know, kind of walk us through that and how we should think about that in 27.

Sure. So, you know, we're certainly sensitive to the fact that we've talked about the direct impacts of higher fuel that we're buying and third-party fuel surcharges like third-party brokerage. But, Shlomo, we're certainly watching carefully and have seen some cost creep that we believe is related to higher fuel. I mean, everything that's delivered to us has a slightly higher sticker price now, whether it's parts and materials, building and property, or CapEx, repairs. You know, we are seeing that. I mean, the good news is we came into the year well-positioned for outside underlying margin expansion, so that hasn't been an issue we've highlighted. But it certainly informs our thinking about how much price we need going into next year. And that's why over the next few months, that'll really crystallize for us. And then to your question about sensitivity, you know, we've talked about that. Depending on the market, we believe there is some sensitivity, you know, especially given the fact that smaller players may not have imposed fuel surcharges, for instance. And, you know, the good news is we've seen better than unexpected retention and lower rollbacks as a result of our pricing tools. So, you know, it's helpful to have smart and more selective price increases. That can make a difference as well. But we're absolutely mindful of the incremental pressure that's out there.

Okay. And then just, if you don't mind, how are you dealing with that in terms of your forward contracts? Because I think historically, you know, you future buy, you use forwards for maybe 50% of diesel, given where prices are. Does that still make sense for next year or does that kind of lock you into something where it might go down?

Well, you know, there we try to be opportunistic on hedging and clearly the past year hasn't given us much opportunity to get locks on for 27. So that's another thing we'll watch and observe because to your point, you know, does it make sense at these levels or is there an opportunity to remain floating to take advantage of lower fuel?

So we'll continue to evaluate that. all right thank you your next question comes from the line of tammy zachariah with jp morgan india private ltd your line is open please go ahead hey good morning thank you so much um a two-part question i think i heard marianne say that maybe next year enp growth could should correlates with increased drilling activity. So should we expect ENP to outgrow the mid to high single digit enterprise growth framework you mentioned for next year? And then related to RNG, given most of the investments will be largely done by this year, could you remind us what revenue and EBITDA accretion you would expect incrementally in terms of 7?

So, as you can appreciate, Tammy, we've provided a framework for next year, so we're really not getting specific on that. The comment about the correlation to higher fuel was really to make two points. One is, even though ENT has been up this year, we'd say it doesn't reflect $100 crude. You know, we've seen some increase in rig count. But again, whatever the reason that there's an expectation that it's not sustained or whatever that reason is, we would argue that we really haven't seen a material increase. And the observation would be that as we think about next year, we don't know exactly what fuel is going to do, but what we're saying is that we would expect when we gave that framework, it has an expectation that there is a higher correlation. But again, I wouldn't read through that to say that runs contrary to expectations about what percentage of the overall mix it is, et cetera. It's just too early for any of that discussion.

Thank you. And about R&G related revenue for next year?

Oh, again, what we said was that there would be about a one point associated with the rollover contribution from acquisitions and those new R&G facilities. So that implies somewhere around the $40 million type of range on R&G. and I'd say the margin contribution will be a function of where we really are in startup and shakedown on any of those newer facilities and to the extent to which costs have normalized. But again, early days to be getting too granular on outlook we haven't yet provided.

Thank you.

Your next question comes from the line of Toby Sommer with Truist. Your line is open. Please go ahead.

Thanks. I wanted to ask you a question about Chiquita, but not sort of the near term. But with your experience that you've gained over the last three plus years, how would a future event perhaps be different in scope and or cost as a result of changes you put in place and the learnings that you've accumulated?

Well, at first, I think that the answer to that is two different things. Number one, it would be different in a material way because it would not be in California. And so that will drop the scope and cost 90 to 95 percent. So let's just full stop with that. That's why you don't hear about these anywhere else in the country through the public companies while they're going on in real time. in many locations because they're not material. So, this is material because of where it's at. Now, what did we learn through this? That would also help drive down the cost of any future ETLFs, should we have them, wherever they would be, because we've learned things through this three-plus-year process that we have put in place through centralized well monitoring, you know, incremental, more rapid leachate extraction, incremental gas well installation as temperatures rise to a lower level. And by the way, temperatures rise at landfills for, you know, dozens and dozens of reasons that have nothing to do with an ETLF. So the reality is the learnings would drive down the future, but the main driver, if anyone were to happen anywhere, it would be de minimis relative to Chiquita because it wouldn't be in California.

Thanks for the clear answer room.

Your next question comes from the line of Brian Bergmeier with Citi. Your line is open. Please go ahead.

Good morning. Thanks for taking the question. And Marianne, maybe just on guidance for 26, you know, so EBITDA guidance, I think, is up maybe, you know, 30 million or so since the start of the year. But free cash flow guidance, I think, is mostly unchanged. Is there just an easy way to kind of explain maybe some of the moving pieces around cash that prevented that flow through? I'm not sure if there's, you know, some bigger items or some kind of smaller nickels and dimes along the way.

Yeah, I mean, certainly the biggest change would be interest since we bought a billion, spent a billion dollars on share repurchases. So our interest expense has gone up by about $40 million.

Got it. Thank you. I appreciate that. I'll go ahead and turn it over.

We have reached the end of the Q&A session. I will now turn the call back to Ron Middlestad for closing remarks.

If there are no further questions, on behalf of our entire management team, we appreciate your listening to and interest in the call today. Mary Ann 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, Reg 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.

This concludes today's call. Thank you for attending. You may now disconnect.