Waste Connections Q1 2025 Earnings Call Transcript

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April 24, 2025
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Operator

Please note this event is being recorded. I would now like to turn the conference over to Ron Mittelstat, President and CEO.

Operator

Please go ahead.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Okay. Thank you, operator, and good morning. I would like to welcome everyone to this conference call to discuss our first quarter results and to provide a detailed outlook for the second quarter. I'm joining this morning by Mary Anne Whitney, our CFO, and several other members of our senior management. As noted in our earnings release, we're extremely pleased by the strong start to 2025 as price led organic solid waste growth and continued acquisition activity drove a top to bottom beat in the quarter, positioning us well for the full year.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Exemplary operational execution supported core solid waste pricing of 6.9% and drove better than expected results as we overcame incremental volume weakness from protracted weather events across many markets to exceed our outlook and deliver adjusted EBITDA margin of 32%. Our industry leading results are indicative of the durability of our unique approach to market selection, our decentralized operating model, and the resulting projectability from our commitment to excellence. To that end, we also saw continued improvement in employee retention for the tenth consecutive quarter along with record safety performance during the period. Before we get into much more detail, let me turn the call over to Mary Anne for our forward looking disclaimer and other housekeeping items.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

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.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

Factors that could cause actual results to differ are discussed both in the cautionary statement in our April 23 earnings release and in greater detail in Connections filings with the US Securities and Exchange Commission and the Securities Commissions or similar regulatory authorities in Canada. You should not place undue reliance on forward looking statements as there may be additional risks of which we are not presently aware or that we currently believe are immaterial, which could have an adverse impact on our business. We make no commitment to revise or update any forward looking statements in order to reflect events or circumstances that may change after today's date. On the call, we will discuss non GAAP measures such as adjusted EBITDA, adjusted net income attributable to Waste Connections on both 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.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

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.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Okay. Thank you, Mary Anne. We're off to a great start in 2025 in many respects, including pricing, employee retention and safety performance, and acquisition integration, all driving better than expected revenue and adjusted EBITDA in the quarter. We delivered margins of 32% during the seasonally weakest quarter in what would arguably be characterized as as uncertain macro environment, further complicated by extreme weather in many markets and without any relief from commodities or FX. Said another way, we're delivering on multiple fronts, starting with price led organic solid waste growth.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

In the first quarter, core pricing was up sequentially to 6.9 percent and exceeded our outlook on the strength of pricing retention. Volume, down 2.8%, was in line with recent quarters, in spite of incremental impacts from weather related events that were most pronounced in February and followed by a pickup in March. To the inevitable question about how our business may have been affected by concerns about tariffs or other geopolitical elements impacting expectations or the economy more broadly, as is evidenced by our q one results, we didn't see any noteworthy impacts, including with respect to solid waste organic growth. In fact, we were impressed by favorable trends in volumes and pricing, both of which increased sequentially in the quarter, normalized for outside weather impacts. To date, we have seen no incremental capital or expense increases associated with tariffs.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Moreover, we were and continue to be impressed by the quality of execution from our local leaders and further advances in key operating trends. Notably, q one marked our tenth consecutive quarter of improvement in employee retention, with voluntary turnover down another 60 basis points sequentially in q one to below 12% and down over 50% from our peak. At less than 12%, our voluntary turnover is within our targeted range with momentum for further improvement. Additionally, corresponding reductions in employee openings are in allow are allowing us to optimize staffing levels and focus on quality. We would argue that voluntary turnover is the single most important metric to determine a company's overall health.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

As we have indicated would be the case, the benefits from improved employee engagement are spread throughout the P and L and position us for continued growth and margin expansion. We are seeing real time benefits in reduced overtime, less reliance on third party services, and lower vehicle wear and tear, as well as improved employee morale and engagement. That is translating to higher customer satisfaction levels as seen in sales, pricing retention, and m and a integration, which, as noted earlier, are ahead of plan for 2025. Most importantly, we see the value of employee engagement and safety, our number one operating value and key performance indicator. Not only have we seen continuous improvement in company wide incident rates over the past two years, but we have now achieved historic low levels.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

That is we are experiencing safety incident rates that are lower than any other time in the company's history with dramatically more employees and vehicles. While acquiring and integrating in recent years record levels of acquisitions, which typically come on at much higher incident rates, we have also driven down the number of safety related incidents across our expanding footprint, reducing year over year incident counts by as much as 40% in recent months. This outsized improvement will unlock incremental cost savings in future periods from the lagging benefits of of reduced severity and incidents, which continue to be headwinds being absorbed in the current period based on our prior year's performance. Along with these achievements, our acquisition activity continues at outsized levels, with annualized revenues closed to date already over $125,000,000 including a strategic state of the art recycling facility in New Jersey to complement our growing New York City commercial collection franchise business discussed the past several quarters. Already approaching in four months what we used to consider an average year, we're on pace for another busy year with high level levels of seller interest across our footprint.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

We should be well past an average m and a year by the midpoint of this year. At debt to EBITDA leverage of 2.3 times, we remain well positioned for continued acquisition outlays in 2025 and, more importantly, their successful integration to drive value creation. The strength of our balance sheet and the consistency of our results provide tremendous optionality to execute on our growth strategy along with increasing return of capital to shareholders. And we're extremely proud to report our recent receipt of a rating upgrade from Moody's ratings to a three, reflecting that track record and providing greater support for our continued growth. Now I would like to pass the call to Mary Anne to review more in-depth the financial highlights of the first quarter and provide a detailed outlook for Q2.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

I will then wrap up before heading into Q and A.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

Thank you, Ron. In the first quarter, revenue of $2,228,000,000 was above the high end of our outlook and up $155,000,000 or 7.5% year over year. Adjusting for foreign exchange impacts from the decline in the Canadian dollar, year over year revenue was up 8.4%. Contributions from acquisitions, net of divestitures and operations closed since the year ago period, totaled $112,000,000 in the quarter. As Ron noted, solid waste organic growth was led by 6.9% core price, which ranged from about 4.5% in our mostly exclusive market Western Region to over 8.5% in our competitive markets.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

Total price of 6.7% reflected a reduction of about 20 basis points in fuel and material surcharges, primarily related to lower fuel rates. With over 75% of our price increases already in place or contractually provided for, we have high visibility for full year 2025 core pricing of at least 6%. Looking next at solid waste volumes, which on a reported basis are normalized for the impact of one less day in the quarter and our closing of Takeda Canyon Landfill at year end '20 '20 '4. Q1 volumes of negative 2.8% were in line with Q4, including 50 basis points attributable to outsized weather events, most notably in February, that contributed to reported volume losses to varying degrees across all of our regions except our Western region. Volumes also reflect ongoing purposeful shedding and nonrenewal of poor quality contracts from acquisitions in recent years, similar to prior periods.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

Looking at year over year results in the first quarter on a same store day adjusted basis. Roll off pulls were down 2% due primarily to February weather impacts, most notably to markets in the South And Southeastern US. In fact, excluding February, pulls were about flat year over year. Landfill tons were up 1%. Higher MSW tons, up 2%, and increased special waste tons, up 6%, were partially offset by weaker C and D tons, down 6%.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

Increases in special waste activity reflect some benefit from an easy comparison to last year and were broad based across a number of smaller jobs in most of our regions, except our central region. Looking at landfill tonnage by month, similar to roll off activity, February was the only negative month. Otherwise, tons were up four to 5% year over year. Beyond solid waste, revenues played out largely as expected in q one, with values for cardboard or OCC and renewable energy credits or RINs both down about 20% year over year and stable at those levels during the quarter, with offsets from increases in other commodities. In Q1, prices for OCC averaged about $105 per ton, and RINs averaged about $2.45, with little movement in either thus far in Q2.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

And finally, E and P waste activity was about flat year over year, adjusted for acquisitions, with some declines associated with decreased rig counts in certain basins in The US, offset by drilling activity in other US basins, and production oriented activity in Canada. Adjusted EBITDA for Q1, as reconciled in our earnings release, was $712,200,000 up 9.5% year over year. At 32% of revenue, our adjusted EBITDA margin was above our outlook and up 60 basis points year over year. This increase was driven primarily by underlying solid waste margin expansion of 70 basis points, which, along with 20 basis points net benefit from accretive acquisitions offset by closed operations, more than overcame a combined 30 basis point margin drag from lower commodity driven revenues and FX. Net interest expense of $79,100,000 reflects a weighted average cost of approximately 4% on quarter end debt outstanding of about $8,400,000,000 with a tenor of about nine years and a mix of 80 to 20 fixed to floating rate debt.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

Liquidity was approximately $570,000,000 and our leverage ratio, as defined in our revolving credit agreement and as noted by Ron, was about 2.73 times debt to EBITDA. Our effective tax rate for the first quarter was 22.8%, about as expected. And finally, adjusted free cash flow of $332,100,000 was in line with our expectations and our full year outlook of 1,300,000,000.0 to $1,350,000,000 as provided in February. I will now review our outlook for the second quarter of twenty twenty five. Before I do, we'd like to remind everyone once again that actual results may vary significantly based on risks and uncertainties outlined in our Safe Harbor statement and filings we've made with the SEC and Securities Commissions or similar regulatory authorities in Canada.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

We encourage investors to review these factors carefully. Our outlook assumes no significant change in underlying economic trends. It also excludes any impact from additional acquisitions that may close during the remainder of the second quarter and expensing of transaction related items during the period. Revenue in Q2 is estimated to be in the range of 2,375,000,000.000 to $2,400,000,000 Adjusted EBITDA margin in Q2 is estimated at approximately 32.7%. Depreciation and amortization expense for the second quarter is estimated at approximately 13.1% of revenue, including amortization of intangibles of about $50,000,000 or $0.14 per diluted share net of taxes.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

Interest expense net of interest income is estimated at approximately $82,000,000 And finally, our effective tax rate in Q2 is estimated at about 24.5%, subject to some variability. And now, let me turn the call back over to Ron for some final remarks before Q and A.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Thank you, Mary Anne. Our strong start to the year validates the disciplined approach to growth and value creation that we have employed since our founding. With solid waste pricing largely in place and another busy start to acquisition activity, we are well positioned to build on that success in 2025, particularly given the benefits of employee engagement we're seeing today, which should continue to accrue to us in 2025 and beyond. Looking at our outlook for the full year 2025 and acknowledging the broader macroeconomic uncertainty in the current environment as noted, we have thus far not seen significant changes to trends in activity or costs that would alter the outlook for 2025 that we provided in February. On that basis, we are reiterating our full year 2025 outlook for revenue, adjusted EBITDA, and adjusted free cash flow, while acknowledging that uncertainty.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Of course, we will continue to monitor trends as tariffs and other drivers may impact our results, and we intend to review and provide any updates to our full year 2025 outlook in conjunction with our Q2 earnings release. Regardless of the macro environment, we'll continue to focus on those aspects of the business that we can influence and position ourselves to address and mitigate the impacts outside of our control. To that end, we're most grateful for the commitment of our 24,000 employees who drive these outcomes while putting safety first and making Waste Connections such a great place to work. We appreciate your time today. I will now turn the call over to the operator to open up the lines for your questions.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Operator?

Operator

We will now begin the question and answer session. Our first question comes from Tyler Brown with Raymond James. Please go ahead.

Tyler Brown
Tyler Brown
Financial Advisor at Raymond James Financial

Hey. Good morning, guys.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Good morning, Tyler.

Tyler Brown
Tyler Brown
Financial Advisor at Raymond James Financial

Hey. Ron, thank you for all the color on the tariffs. But in a similar vein, the financial markets are obviously up and down. Interest rates are moving. And I think the HSR process got a little more difficult maybe in the past month or so.

Tyler Brown
Tyler Brown
Financial Advisor at Raymond James Financial

So number one, can you just talk about how those HSR changes do or don't affect you regarding M and A? And two, it doesn't sound like it, but is this uncertainty in the market having any material impact in getting deals over the line and closing them?

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Sure. Thanks, Tyler. So first off, I'm sure many on the call are aware that the HSR filing application process and timing changed effective February eighth of twenty twenty five. The process, the application became, you know, probably three to four times more lengthy, and the cost to prepare, became probably three to five times more expensive. The FTC and the DOJ are now saying that, you know, typical deals that might get reviewed in a thirty to sixty day process, people should now expect more like a ninety to a hundred and fifty day process.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

So it is expected to lengthen out those deals that require HSR. Now having said that, listeners should understand that 99% of our deals do not require an HSR filing, because we are acquiring smaller privately held companies almost exclusively under $125,000,000 in purchase price. And so we have very, very few HSR filings. In fact, we currently have no deals slated for HSR filings, and we have not had any year to date. So I am not looking for any delays in any of our m and a, but I can understand how if you're acquiring public companies or doing very large transactions, there could be a slowing due to the change in the HSR process this past February.

Tyler Brown
Tyler Brown
Financial Advisor at Raymond James Financial

Interesting. Okay. Yep. Very, very helpful. Mary Anne, just so I have it, but the 2.8 volume decline, that excludes the workday impact.

Tyler Brown
Tyler Brown
Financial Advisor at Raymond James Financial

Right? Was that maybe something like 40 or 60 basis points, give or take?

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

That's right, Tyler. It's about 60 basis points would be that one, one day in the quarter.

Tyler Brown
Tyler Brown
Financial Advisor at Raymond James Financial

Okay. But it does include the 50 basis points from weather. So if you kinda look at it somewhat cleaned up, I mean, maybe the rate of volume declines actually improved a bit sequentially if you take out, you know, weather and, you know, Chiquita's obviously taken out in the workday.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

That's correct. And that's the point, you know, I think, you know, Ron made that not only did we see sequential improvement in price, but we saw it in volumes when you normalize for that. And that that two, three would be lower than most of the quarters last year, except one where we had really lumpy outsized, special waste contributions.

Tyler Brown
Tyler Brown
Financial Advisor at Raymond James Financial

Okay. And then, Ron, just on landfill tons, I know those are probably your most kind of real time indicator, if you will. Just I know you gave the monthly, through March, but anything in April since all of this seemed to happen in April? Just anything month to date on the landfill tons?

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Yeah. I I can provide that. I actually received it last night on our, flash, Tyler. So, the last four week average total tons are up 4.5%. And year to date, they are up exactly 3%.

Tyler Brown
Tyler Brown
Financial Advisor at Raymond James Financial

Okay. Excellent. My last one here, I just thought I was very interested in the comments about incidents. I think you said record lows. I'm curious what's driving that.

Tyler Brown
Tyler Brown
Financial Advisor at Raymond James Financial

Yeah. Is that just cultural change, or is technology helping? Just any color on what's driving that. And then maybe you can just help us understand how the insurance markets work. I mean, I know that not having an accident is good in real time, but it does take a while for it to show up in insurance premiums.

Tyler Brown
Tyler Brown
Financial Advisor at Raymond James Financial

Can you just maybe give us some color there? Thank you, guys.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Yeah. Sure, Tyler. All right. Multiple parts to that question. I'll try to answer.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

So first off, what is driving that is is culture, number one, more than technology. We have had a very robust onboard technology for a very long period of time. We have used onboard cameras for over twenty years now. And of course, they have improved and the amount of views are improved. But our coaching effectiveness on risky drivers has improved company wide to approaching ninety percent of all incidents that are detected on a daily basis via our technology.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

And that is a dramatic improvement for us. It's a huge cultural focus for us. To give you a perspective, I mean, we would typically two years ago in the month of March, we had about 400 and some incidents, which can be as little as tapping a mailbox. So let me clarify that. And in the month of this year, in the month of March, we were in the 200s with dramatically more vehicles on the road and employees.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

So I would tell you that technology is part of it, but I would tell you it's 90% behavioral change through coaching, and that's a cultural issue for us. As far as the insurance market, you are right. Safety is a leading indicator, or incidence is a leading indicator of performance. But risk insurance is a lagging indicator. So we reset our premiums every August to September with third party for our umbrella coverages on our risk for both workers' comp and third party liability.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

And your severity in the prior two years really determines what's happening in your forward period. So last August, we priced our insurance for the 25 calendar year, And that was based on the '23 and part of '20 '4 performance. And that performance was not as good. We did have some serious losses in that period. And so that risk premium went up quite dramatically.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

In fact, our five year CAGR on insurance premium is about a 17% to 18% increase per year. We are projecting with our current performance, if we hold that and continue this line, we'll begin dropping with the renewal this September. So we think we will start seeing some benefit in the P and L from our current performance throughout 'twenty six.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

Yeah, the only other thing that I would add to that is that one observation, as Ron said, claims take multiple years to develop. And so, as we describe it, the risk is actually a lagging indicator, and that's what we tried to describe. The one observation would be is that lag is a little longer, arguably, coming out of the pandemic. When you had a couple of things happen, you had a whole slowdown in the processing of claims, therefore the development, but then you also had outsized inflation. And so that has prolonged, seeing the benefit in our P and L from our perspective.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

And as Ron said, we're looking forward to seeing that, in the years ahead.

Tyler Brown
Tyler Brown
Financial Advisor at Raymond James Financial

Yeah. Perfect. Great color as usual. Thank you.

Operator

And the next question comes from Konark Gupta with Scotiabank. Please go ahead.

Analyst

Hi. This is Eli filling in for Konark. Good morning, everyone. Thanks for taking my Just just one question. Are you seeing any meaningful changes in the RNG landscape, be it demand or pricing or competition due to a more pro carbon administration?

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

I I would say that we really haven't, but if you think about where we are in the process of developing new facilities, bringing them online, and existing facilities, we we basically are you know, this is a year of CapEx, and the new facilities will be coming online in late twenty six. And so we might not be the best indicator of anything real time that might be developing there. But what I can say is for the existing facilities we have, as we noted in our remarks, that RINs are made very stable in that kind of two forty five type of level. And we've seen them there really since the initial drop off right after the election and the adjustment to the RVO last year, but they pretty much stabilized at current levels for most of Q1, and we haven't seen any change in Q2 to date.

Analyst

That's helpful. Thank you. That's all my questions. Thank you.

Operator

And the next question comes from Jerry Revich with Goldman Sachs. Please go ahead.

Adam Bubes
Adam Bubes
Analyst at Goldman Sachs

Hi, good morning. This is Adam on for Jerry. Strong core price of 6.9% and it seems pretty robust in context of the guide initially put out of around six percent. Has your price plans changed at all since the start of the year? And it sounds like some of that has been driven by pricing retention.

Adam Bubes
Adam Bubes
Analyst at Goldman Sachs

Are you seeing any change in pricing retention trends year over year or sequentially?

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Yeah. No. So number one, nothing has changed, Adam. You know, I think I think we, you know, originally guided that our price guidance was six to six and a half percent. It was the range that we thought we would target for the full year.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Remember, q one, because of a lower seasonal denominator, weather wise, and seasonality is always sort of the highest point of your price, and then it will step down sequentially. It doesn't step down. It's just that the denominator in the math changes. So it gives that appearance that the price is already input for the year. So no, there there has been no change.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

I would tell you that the retention of the price has been better so far year to date than at this point last year or in '23. So that, I think, is very favorable overall. I think we've been a little more surgical about it. We're certainly attempting to be, and I think that is helping somewhat too. I've also believe our staffing levels and being fully staffed the way we are helps is assisting both in our service quality as well as our customer service response.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

So, you know, it all sort of feeds holistically to why we would hopefully retain more of that price. So that's that's really but there has been no change in in our approach from the beginning of the year.

Adam Bubes
Adam Bubes
Analyst at Goldman Sachs

And then can you remind us how many different suppliers you use for your truck fleet? And it sounds like your visibility on capital is pretty locked in there for the year. But can you just update us on conversations you're having with suppliers in context of tariff related inflation?

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Yeah. So first off, we use, I mean, we predominantly use about four chassis manufacturers and and, you know, four or so body manufacturers. Obviously, it depends on the, you know, the type of the fleet, meaning front load, rear load, side load, etcetera. So, you know, four and four. As as of today, we only have 10 remaining chassis for 25 to be built that could even potentially be subjective to tariffs, and we are being told that there is up to perhaps a $3,500 per chassis.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

So when we say there's virtually no exposure, that that's what we mean by that. Body wise, we have not as of yet been told by a manufacturer there will be any incremental tariffs or impacts to that. Now, so we really have no concern about tariffs for our '25 CapEx to speak of. Now that could certainly change for '26, depending on what transpires with tariffs and what is included and excluded. But but for this year, we we do not have any impacts, and we are not hearing any.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

On the parts side, you know, we are we are making a move in some of our locations where some of our parts were coming from various countries that would be subjected to tariffs. We are moving some of that parts inventory to domestic American manufacturers to avoid any potential there.

Adam Bubes
Adam Bubes
Analyst at Goldman Sachs

Great. Thanks so much.

Operator

And the next question comes from Trevor Romeo with William Blair. Please go ahead.

Trevor Romeo
Research Analyst at William Blair

Hi, good morning. I really appreciate you taking the questions. First one I had was on the incremental M and A that you've kind of announced I think you specifically called out the, state of the art recycling facility in New Jersey. Just wondering if you could, talk about that asset a little bit more.

Trevor Romeo
Research Analyst at William Blair

You know, why was

Trevor Romeo
Research Analyst at William Blair

it up for sale? Why did

Trevor Romeo
Research Analyst at William Blair

it look attractive to you from a from a strategic perspective? Just any more color on that would be great.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Sure. Happy to, Trevor. So the the the asset was a very large, as I said, state of the art built within the last, finished, being built within the last twenty four months facility in the Hoboken, New Jersey area, just outside New York City. As you know, we have a very large presence in New York City, and have been awarded 12 of the franchise areas in the city that will be rolled out over the course of the next two to three years, and have just been started rolling out at the end of 'twenty four. Along with that becomes a large amount of recycling, recycling that we're doing today and that we will need to be doing.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

This facility can process up to 20,000 tons per month, so a quarter of a million tons a year. It is highly, highly automated facility, as I said, state of the art using AI technology from an optical sorting, from classification, etcetera. The facility is processing about 13,000 to 14,000 tons a month right now, as it speaks, and we have not begun to bring any of ours into it. So multi generational company, very well known company, that had been in business in the New Jersey area for seventy plus years. Had actually had a facility fire several years ago, about three and a half years ago.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

And they ended up rebuilding this state of the art facility. So a company that we have been tracking for many years, and as we continue to grow there and knew we needed incremental processing after we acquired the Royal Waste transaction last year, we had been working on this. The Royal Waste transaction in New York City came along in Queens with a fantastic recycling facility as well. But we are literally bursting at the seams at that facility and needed incremental processing capacity to continue our expansion in New York City.

Trevor Romeo
Research Analyst at William Blair

Okay. Thank you, Ron. That's great color. And then maybe one for Mary Anne. I guess on the Q2 guidance, I think the margins of 32.7%, if I heard you right.

Trevor Romeo
Research Analyst at William Blair

I think that's maybe a little less year over year expansion than what you've kind of seen lately. So are there any kind of headwinds to margin you call it in Q2? Or could you just kind of talk through some of the upside or downside to that Q2 margin?

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

Sure. You know, it's important to keep in mind really, drivers of last year's margins and the impact that commodities and acquisitions have on reported margins. And so when I think about what changes year over year in Q2 versus Q1, there's about 40 basis points more drag in Q2, specifically from the fact that, for commodities, Q2 was the highest level last year, and so the headwind is greater. And then you have less benefit from the rollover impact of acquisitions. Last year, of course, you had the benefit of secure, and that dissipates over the course of this year, and that becomes a drag.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

So think of it as 40 basis points different, and that gets you very close to the year over year margin we just demonstrated in q one.

Trevor Romeo
Research Analyst at William Blair

Okay. That all makes sense. Thank you very much.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Sure. Thank you.

Operator

And the next question comes from Tony Kaplan with Morgan Stanley. Please go ahead.

Yehuda Silverman
Yehuda Silverman
Equity Research Analyst at Morgan Stanley

Hi. Good morning. This is Yehuda Selverman on for Tony Kaplan. Just a quick question on margin. What is your expectation embedded in the guide regarding inflation?

Yehuda Silverman
Yehuda Silverman
Equity Research Analyst at Morgan Stanley

Like, how should we think about margins in 2025 if, let's say, lingers rather than moderate?

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

Yeah. So, you know, coming into the year, we certainly were mindful of the fact that CPI prints were lower, but we think in terms of our own cost inflation and not so much headline inflation as what's driving our the pricing and how we think about that. So, you know, as we've said, we're we're delivering 6% core price, and what we would say is that our cost inflation is running in the four to four and a half percent. So that comfortably gives you that 50 basis point spread between costs and price that we typically look for, or think in terms of, and certainly feel very comfortable because what we've seen in terms of our major cost pressures led by, labor specifically, is that those pressures have mitigated, and so that spread is actually widening. So, if in your example, if things were to pick up a little, we would absorb it with the pricing we've already done.

Yehuda Silverman
Yehuda Silverman
Equity Research Analyst at Morgan Stanley

Great. And just one more question regarding volume. So, especially given the slowdown here is recently that have become more rampant. Can you remind us which areas would get hit the most or impacted the most both negatively and potentially positively during the slowdown?

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

Sure. So if you if you think about what is the most cyclically exposed piece of of the solid waste business, that would be the roll off side of collection, so construction levered, and then, of course, construction and demolition debris at our landfills. To give you some context, in the aggregate, it's about 10% of our revenue, which is more cyclically exposed. And on the collection side, the way that you adjust to that is you dynamically adjust. You know, that is a point to point business.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

It's not route based, so you have the opportunity to you know, it's not only the lowest margin piece of the collection business, but you're able to dynamically adjust to activity levels. And so that's where you would expect to see it, you know, primarily in those areas.

Yehuda Silverman
Yehuda Silverman
Equity Research Analyst at Morgan Stanley

Great, thank you.

Operator

And the next question comes from James Shum with TD Cowen. Please go ahead.

James Schumm
James Schumm
Analyst at Cowen

Hey, good morning guys. Thanks for taking my questions. Maybe, Mary Anne, just sort of following on to your point about price cost spread, you kind of priced at 6.9% in the first quarter. Your inflation is 4% to 4.5%. So the spread looks a lot wider here.

James Schumm
James Schumm
Analyst at Cowen

Was there any thoughts to raising the 2025 guidance? Are you being a little conservative because we're so early in the year and the macro is uncertain or, you know, but it seems like that spread, you've got a lot of wiggle room there. Can you just talk to that a little bit?

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

Sure, happy to address that, and important to clarify. So, coming into any year, our reported price, as Ron made reference to earlier, is it would typically be highest in Q1, and that's really just a function of the math of how you calculate the dollar contribution from price as the denominator gets bigger over the course of the year. So, one shouldn't generalize from 6.9% in Q1. We said it's a little better than expected, and it gives us incremental conviction on 6% plus pricing for the full year. But you should fully expect that number on a reported basis to step down over the course of the year.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

So that tells you that you'd step down from six, nine to numbers that are lower than that, and optically, you'd go below six as you move through the year to average six. Right? So that's all in line with our expectations. Retention, a little better in q one. So that's the math on reported pricing.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

The second point regarding adjusting our outlook after what we've described as a very strong q one, the the short answer is we typically don't review our outlook until the midpoint of the year when we have two quarters under our belt. If you think about it, we give quarterly guidance. So we give a lot of information each quarter. And, even though Ron did take opportunity, to reiterate the full year, that was really within the context of recognizing the macro uncertainty that was impacting other people's view of their numbers for the full year. So what people should expect is, as is customary, we will make the adjustments reflecting any of the changes we've seen, whether they're acquisitions, or commodity values or other things that impact the full year.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

We'll do that in July.

James Schumm
James Schumm
Analyst at Cowen

Got it. Great. Thanks for that. Maybe if I could squeeze two more quick ones in if possible. What the volume progression throughout the year, can you give us a sense of how that trends and maybe what the exit rate is?

James Schumm
James Schumm
Analyst at Cowen

And then lastly, SG and A was up 13% year over year in the first quarter. Just curious what's driving that and what are your expectations for the rest of the year?

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

Sure, so starting with the SG and A, first, you need to normalize for the, expensing of acquisition related expenses that we adjust for. And so that comes out of SG and A. I think that was almost 13,000,000 in the quarter, and that was up 2 or 3,000,000 from last year. So, that's one observation. And then the other would just be that sometimes there's lumpy moves, and one of them is incentive comp.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

So a good thing when it increases your numbers in a current year. And so I'd say that the single largest increase would be there.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

And then Yeah, with regard to the volume progression, James, so as we pointed out on the call, I think it'd be normalized for weather, you would see that the and and at Chiquita, which we have said we have normalized for, which we closed on January 1. You would be at about a negative 2.3 in that range. About a hundred basis points that of that is conscious price volume trade off. And so that will continue. We will continue to make that trade off.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

And then about a hundred basis points of that is contracts that we have shed. So again, that will continue because those those contracts have been have been canceled by us or not renewed. So that puts you at about a negative two as a starting point. So the delta to that will be, you know, what happens in special waste and what happens in C and D, which are somewhat, as you know, economically driven. If those are, you know, as we said in the first quarter, see, special waste was up, C and D was down a little.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Taken together, they were about flat. So if that continues to improve, then you will eat away against that negative 2% number. If that were to decrease because of economic activity, it would get a little worse. But there is nothing going on within that other than those two things. As we have said, we have been effectively, and I say we, I mean the economic environment, in a flat no growth economic environment for ten consecutive quarters now.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Roll off polls have been plus one to 2%, down one to 2%. Landfill volumes have been plus one to 2%, down one to 2% for 10 now. You know, we're covering 45 states and and seven provinces in Canada with over 10,000,000 customers. If volume's there, we get it. It's just that simple.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

We've just been in a no growth environment. You know, I know the government would report close to 2% GDP, but if you take out federal government spending, it's negative. We don't do business with the federal government. So, you know, when when when volume happens in the economy, we will have it.

James Schumm
James Schumm
Analyst at Cowen

Mhmm. Okay. Great. Well, that that's very helpful, guys. Thank you very much.

Operator

And the next question comes from Sabahat Khan with RBC Capital Markets. Please go ahead.

Sabahat Khan
Sabahat Khan
Managing Director at RBC Capital Markets

Great. Thanks and good morning. Maybe just following along that line of commentary with Ron and Ernie both share some comments around the special waste. Maybe if you can just help us think through what are some of the leading indicators you might be keeping an eye on to see where the special waste, some of the more C and D cyclical units might be trending? Whether this flat environment volumes have been flat to negative.

Sabahat Khan
Sabahat Khan
Managing Director at RBC Capital Markets

At what point in a typical economic cycle would those turn materially negative just based on the, you know, your history with the company next?

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Yeah. Go ahead, Mary.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

So, you know, I'd start by just the observation that special waste and C and B can be very lumpy. Right? So the main driver of volumes is, of course, MSW, which as we said was up 2%.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

You know, we made the point that special waste, while it was up 6%, you know, first quarter last year, was down 15%. This is, you know, so, again, the lumpiness. So when we think about what the leading indicators are, the signs that special waste jobs are coming, or maybe why they aren't, or maybe why there's weakness. Sometimes it can be things like interest rates staying higher for longer, which discovers, for instance, speculative real estate development, which would lead to clearing a site, which is what we would describe as special waste when soil jobs come to the landfill. In the current environment, in one particular market, can think of where there's been a slowdown, it's that the state money that would go to those projects hasn't been authorized because a budget hasn't been passed.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

So it can be dynamics like that that slow down jobs. What we've observed to date is that there haven't been the really big, the outsized infrastructure types of jobs. Instead, there have been smaller jobs spread across several markets that contributed, for instance, to the 6% increase year over year. And similarly on the C and D side where it's down, it wasn't one big job, it was several smaller jobs that didn't repeat, so small decreases across several markets. So those are just some observations about what we're seeing.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

And so really what needs to change for the pickup is more an economic activity pickup, and as Ron said, which we just really haven't seen.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Yeah, And I would add, you know, we did a review with our field, of our regional locations last Thursday, and we are not seeing a decrease in backlog of jobs that are in the pipeline to be released. In fact, it is actually quite robust. What we're seeing is a delay in some cases of the starting of the jobs, and that is state and local government reacting in in large part to uncertainty at the federal level. And so they are just holding back in many cases right now, I think waiting for greater clarity on what's going to transpire from a regulatory enforcement standpoint, as an example, from a budgetary standpoint, as another example. So, you know, we're not seeing anything underlying that says there's anything unhealthy going on out there, but they're definitely uncertainty is leading to delays.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

That's what I would say.

Sabahat Khan
Sabahat Khan
Managing Director at RBC Capital Markets

Great. No, that's great color. And then maybe just one quick follow-up on that. How do you think about given the lumpy nature of that business at times, just managing the cost, how do you think about labor versus just other fixed costs in that business? And how nimble could some of those costs be just through the cycle?

Sabahat Khan
Sabahat Khan
Managing Director at RBC Capital Markets

Just some perspective on that, please.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Well, I mean, I think I would point to this quarter. I mean, you know, we we delivered in the seasonally weakest quarter, a 32% adjusted EBITDA margin. And we you know, I I don't know that we noted it in the call, but, you know, labor was was down approaching 50 basis points from prior year period as a percentage of revenue. So, you know, we are we are managing it. I I think very closely.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Our field does an exceptional job of managing all expense lines, labor included, as a percentage of net revenue, which is how we look at the business. And and so that's a dynamic thing that we are doing on a daily basis at every one of our locations. You know, the the special waste business, as you were asking the question, you know, that's a landfill business, so it's a it's a high fixed cost, low variable cost business. So it it certainly is somewhat volume dependent. But, you know, I I don't think you will find us, you know, in in any environment hiding behind, you know, expense management or lack of expense management as a as an area of margin concern.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

That's not how we run the business, and we will deliver on the margin irrespective of what's transpiring in the revenue line.

Sabahat Khan
Sabahat Khan
Managing Director at RBC Capital Markets

Great. Thanks very much. And then just one quick last one, I guess, at a high level, I think over the last couple of years, a lot of progressive volumes still were being shed. Maybe is there any larger chunks remaining from past acquisitions or would you say it's more sort of, you know, just a run rate shedding that'll happen? Just want to get perspective on that aspect of the volume mix.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Yeah. First off, I would tell you that I believe, finally, that the shedding from volumes that we did not want to renew from Progressive is actually finally very close to done. The largest contract that was remaining, we gave up or did not renew October one of twenty four. So that is part of what's in the negative volume right now that will anniversary September thirtieth of this year. And that was the largest one I know remaining there that we did not renew.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Now we have had a very busy M and A for the last three to four years, as you are aware, certainly at least last three years. And so there is some remain, there is some shedding that goes with that, but it is not in nearly as large a pieces as some of the stuff that we had consciously not renewed from the progressive transaction we did in 'sixteen.

Sabahat Khan
Sabahat Khan
Managing Director at RBC Capital Markets

Great. Thanks very much for the color.

Operator

And the next question comes from Noah Kaye with Oppenheimer and Company. Please go ahead.

Noah Kaye
Senior Research Analyst at Oppenheimer & Co. Inc.

Good morning. Thanks for taking the questions. Sort of a housekeeping question that then plays into the 2Q outlook. Mary Anne, I think you had called out on the margin bridge for 2Q being up 10 bps, just a greater headwind sequentially from commodities. If I look at 1Q, you know, it looked like the recycling commodities were only about a $2,000,000 headwind to internal growth.

Noah Kaye
Senior Research Analyst at Oppenheimer & Co. Inc.

And that's about mid single digits versus recycling OCC prices being down close to 20% as you said. So just trying to understand the disconnect there. We might have thought recycling would be down more. And kind of what you're sort of expecting for 2Q. I guess the other component of that is RIN.

Noah Kaye
Senior Research Analyst at Oppenheimer & Co. Inc.

So maybe just help us understand what we saw in the quarter on the recycling side and how we should be thinking about 2Q.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

Great question, Noah. So in Q1, while, OCC was down 20%, you had other commodities which were up year over year, for instance, grades of fiber and plastics and and metals. And so that mitigated the year over year impact. Now, that was in line with our expectations, but the overall margin headwind that that created year over year was only about 10 basis points. So I look at that, I look at RINs, which were effectively no impact, again, because not because of RINs, but for instance, natural gas was up year over year, and so that offset the margin headwind there.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

And so when I look ahead, Q2 versus Q1, there are incremental headwinds since I don't have those same dynamics, and the comp is harder because OCC increased by 10 basis points last year between Q1 and Q2. So those are the dynamics I was referring to that create the incremental headwinds on the commodity driven piece of the business.

Noah Kaye
Senior Research Analyst at Oppenheimer & Co. Inc.

Okay. That makes sense. Thanks. Then, Ron had mentioned M and A being potentially at the midpoint of the year already above kind of historical at or above historical average. For everyone's reference, I assume that's still kind of roughly in the $200,000,000 range.

Noah Kaye
Senior Research Analyst at Oppenheimer & Co. Inc.

Maybe talk a little bit about Ron, I think you you alluded to the size before when we talked about HSR, but just talk a little bit about the mix of deals you see, potentially coming into the business.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Sure. Yeah, and to clarify as you did, Noah, yeah, I was referring to that February was sort of a historically average year and that I expected us to be already at that number by the midpoint of the year. You are correct. That is what I was referencing. So obviously, this would be well north of a historically average year.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Our mix of deals is is across the board. We have deals going on in all five of our US regions and our Canadian region. It is a mix of, I'd just say, historical consistent solid waste deals. This is nothing outside of historical solid waste. There there there are a few smaller E and P deals in there in both Canada and The United States, in the Permian as well.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

But they are they are smaller relative to the solid waste side. These are tuck ins, these are standalones, there are franchise deals, there are competitive market deals there. So I think, but yes, I did say that there was no large singular deal requiring an HSR filing that is sitting there, that is in that mix today. There are several deals in our pipeline that would require HSR filings, but I'm not expecting those to close by mid year. So that's what the mix is.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

And if you think about it, Noah, since 01/2025 is already done, this implies somewhere in the order of maybe it's 50 to 100,000,000 gets done between now and July. That's how you get to the, hey, we'll be at an average rate by the time we report q two.

Noah Kaye
Senior Research Analyst at Oppenheimer & Co. Inc.

That's

Noah Kaye
Senior Research Analyst at Oppenheimer & Co. Inc.

right. Thanks so much. I'll turn it over.

Operator

And the next question comes from Brian Bergmeier with Citi. Please go ahead.

Bryan Burgmeier
Bryan Burgmeier
Analyst at Citigroup

Good morning. Thank you for taking the question. Maybe just following up on some of the volume questions from earlier.

Bryan Burgmeier
Bryan Burgmeier
Analyst at Citigroup

Can you

Bryan Burgmeier
Bryan Burgmeier
Analyst at Citigroup

just remind us about how much visibility you typically have into the special waste or kind of event driven disposal pipeline? Would you say 2Q projects are kind of like locked in at this point or projects kind of being added or removed right up until the last minute? Just trying to think about how that pipeline kind of evolves as the macro environment changes this year.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

So Brian, I'd say in a typical year, we would talk in terms of ninety days. We typically, as Ron said, we're talking to all of our regions. At any point, we're looking at the quarter, and we have good visibility. And we'd say this year, that's a little stretched out, right? Because we've seen these delays that Ron referred to.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Yeah, and I would also say, Brian, that it's important to understand that special waste comes in all different types and sizes. You have special waste that comes from manufacturing and industrial production. I mean, that's a very predictable waste stream because it's a byproduct of their operations. You know, that is probably 60 to 70% of the special waste that we get, and that is very projectable and recurring. The event driven special waste is the larger projects that are, as Mary Anne alluded to earlier, they are infrastructure developed.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

That's where you're tearing up roads. You're taking down bridges. You're taking down and and rebuilding a stadium. You're cleaning up, real estate for speculative development. That obviously is, a little less predictable on the timing.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

You know it's gonna happen because people pull permits. They're permitting these projects for years in advance, and then they get and then they have a window to complete the next phase of that permitting, but that window can be a couple years long. So, you know, the the the start and finish dates are a little more speculative in that piece, but that's probably about 30% of what we reference as special waste. So if if you look at special waste as a total for the company, well less than 10 of total revenue, you know, and then you say that 30% of that 10% has you're talking about a couple two to 3% that really has, quote, you know, less visibility in it.

Bryan Burgmeier
Bryan Burgmeier
Analyst at Citigroup

Got it. Got it. Thanks for that detail. And then just last question for me, just on kind of Chiquita Canyon. I guess, you know, are we still kind of using that 100,000,000 to 150,000,000 cost estimate for this year?

Bryan Burgmeier
Bryan Burgmeier
Analyst at Citigroup

And then second, can you maybe just provide sort of a general update on the status there? Are you satisfied with the progress you're making on the ETLF with temperatures, your odor complaints, etcetera? Just sort of a general update on on Chiquita. And thanks. I'll turn it over.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Yeah. You know, first off, to your first part of your question, we do believe that that hundred to 150,000,000 is the right bandwidth for the projected outlay for this year, to answer your question. That starts higher in the beginning of the year because of the timing to the, what we believe was the peak of the reaction, which was probably the late third, early fourth quarter of last year. And and volume levels, production levels of leachate have come down by about 30% almost from that peak. So that would track with that.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

And to answer your question, yes. Everything we see from an engineering, an environmental monitoring, both internally and through third party experts, shows that the reaction is contained and stable. We have completely sealed the area with approximately 50 acres of synthetic to contain odor. Odor complaints are down over 90% from their peak. And, you know, the volumes produced from the reaction are down, as I mentioned earlier, probably about 30% from their peak of sort of last July through

Operator

And our next question comes from Stephanie Moore with Jefferies. Please go ahead.

Stephanie Moore
Stephanie Moore
Analyst at Truist Financial

Hi. Good morning. Thank you. I

Stephanie Moore
Stephanie Moore
Analyst at Truist Financial

I wanted

Stephanie Moore
Stephanie Moore
Analyst at Truist Financial

to circle back on on maybe the potential deregulation questions. If you could maybe touch on, you know, the potential to see some changes at the EPA and what this could mean for regulations as it relates to PFAS and any other landfill related regulations that you have dealt with over the last several years? Thanks.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Sure. Well, first off, would say, Stephanie, you know, obviously, it's relatively recent. We have not seen decrease in regulation at this point through the EPA that would would affect our business or bring any material change to our business from reduction, if you will, in regulation. As you may know, the EPA is expected, you know, perhaps by June to clarify their position on PFAS. They have not done so.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

There has been some discussions by staff within the EPA. The industry, know, has taken the position, and the EPA has taken the position overall that the industry is a passive receiver. And so that is, I think, an important distinction, and one we believe and hope will stay at that, and have reason to believe it will stay at that from conversations with the administration. But, you know, as far but we are prepared to and are handling PFAS. We we have been beta testing multiple technologies for the last, actually, two plus years at multiple of our sites.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

We have installed them at multiple of our sites. They work very efficiently to, I'm gonna use the word solidify PFAS, and and then that that solidification can be landfilled. So whatever the outcome of the EPA's regulation is, we are not overly concerned. We have the technology. The technology exists out there to fully comply with whatever they may do.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

And again, you know, if they take a more aggressive stance, we see this as advantageous for the public companies who have the ability to comply and the ability to pass on a greater price than the cost of the compliance for that. So it is, you know, it's an opportunity either direction in our mind.

Stephanie Moore
Stephanie Moore
Analyst at Truist Financial

Absolutely. And then just one follow-up. If you could provide an update on your Arrowhead landfill, maybe ramping an update on the ramping of the rail shipments to that site, and then maybe an appetite for bringing external volumes to the location. Thank you.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Sure. Yeah. As I'm sure you and others who followed us, we acquired the Arrowhead site, as you know, at the in August of twenty three. So we anniversaried it this past August. When we acquired it, that site was doing about 2,700 tons a day through a series of three intermodal transfer networks along the Eastern Seaboard in Massachusetts, Connecticut, and New Jersey.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

We now have that up on peak days to 7,500 to 8,000 tons a day. You know, those would be peak days that happened in the peak period sort of in that August to September timeframe. Down a little seasonally from that at this time of the year. But we, you know, we will approach 2,000,000 tons there this year. And we believe as we come through '26 and beyond, will get that number will push quite north of that 2,000,000 tons per year, which would get you closer to that 9,000 plus tons a day.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

So it is ramping. A large part of that has been internal redirection of waste from sites that we have on the Eastern Seaboard so that we can open up those sites under the permitted caps to third party volumes. And the last part of your question, our appetite for third party volumes at Arrowhead is very high. And we are actively out there pursuing that through the intermodal networks along the Eastern Seaboard.

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

Yeah, and in the meantime, Stephanie, what you see is the increase in internalization, which you saw in our numbers and the benefits and third party disposal and brokerage costs. So, you know, it's a very strategic purposeful move to internalize more of our tons.

Stephanie Moore
Stephanie Moore
Analyst at Truist Financial

Great. Thank you guys very much.

Operator

And the next question comes from Tyler Brown with Raymond James. Please go ahead.

Tyler Brown
Tyler Brown
Financial Advisor at Raymond James Financial

Hey. Thank you for the follow-up. I just Mary Anne, have a quick one here, maybe a few numbers, but I wanna try to get this. So I think last quarter, you said that we should model about 300,000,000 in incremental M and A in 'twenty five. I think at that time, you had closed $75,000,000 and now you've closed $125,000,000 of annualized revs.

Tyler Brown
Tyler Brown
Financial Advisor at Raymond James Financial

But I also think if I think back, you also said that some of the deals that were under LOI that had not been closed were in that $300,000,000 if I'm not mistaken. So basically, my question is given the incremental $50,000,000 should we change that $300,000,000 number? Sorry for all the numbers. I know that's risky on a call, but any color there?

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

No problem. If you added about 25,000,000 to $30,000,000 that would probably cover the incremental. When I think about what the increase was during the quarter in q one. It was, I think, $8,000,000. So that's probably a fair way to think about it, annualize that.

Tyler Brown
Tyler Brown
Financial Advisor at Raymond James Financial

Okay. And then you you added m and a versus Chiquita today on the call. So sorry. Just to clarify, should we think about the 300,000,000 net of Chiquita, or are those two separate numbers?

Mary Whitney
Mary Whitney
Executive VP & CFO at Waste Connections

No. Fair question. Think about it, think of those as separate numbers. So the number for acquisitions net of divestitures is 129, and Chiquita was 17.

Tyler Brown
Tyler Brown
Financial Advisor at Raymond James Financial

Yeah,

Tyler Brown
Tyler Brown
Financial Advisor at Raymond James Financial

perfect. Thank you for the clarification. Thanks.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Ron Mittelstadt for any closing remarks.

Ronald Mittelstaedt
Ronald Mittelstaedt
Founder, CEO, President & Director at Waste Connections

Okay. Well, 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 Anne and Joe Box are available today to answer any direct questions that we did not cover that we are allowed to answer under Regulation FD, Regulation G, and applicable securities laws in Canada. Thank you again, and we look forward to continue connecting with you at Waste Expo upcoming investor conferences or on our next earnings call.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Earnings Conference Call
Waste Connections Q1 2025
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