Waste Connections Q2 2025 Earnings Report

Waste Connections EPS Results

• Actual EPS: $1.29
• Consensus EPS: $1.25
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: $1.24

Waste Connections Revenue Results

• Actual Revenue: $2.41 billion
• Expected Revenue: $2.39 billion
• Beat/Miss: Beat by +$12.45 million
• YoY Revenue Growth: +7.10%

Waste Connections Announcement Details

• Quarter: Q2 2025
• Date: 7/23/2025
• Time: After Market Closes
• Conference Call Date: Thursday, July 24, 2025
• Conference Call Time: 8:30AM ET

Waste Connections (NYSE:WCN) provides non-hazardous waste collection, transfer, disposal, and resource recovery services in the United States and Canada. It offers collection services to residential, commercial, municipal, industrial, and exploration and production (E&P) customers; landfill disposal services; and recycling services for various recyclable materials, including compost, cardboard, mixed paper, plastic containers, glass bottles, and ferrous and aluminum metals. The company owns and operates transfer stations that receive compact and/or load waste to be transported to landfills or treatment facilities through truck, rail, or barge; and intermodal services for the rail haul movement of cargo and solid waste containers in the Pacific Northwest through a network of intermodal facilities. In addition, it provides E&P waste treatment, recovery, and disposal services for waste resulting from oil and natural gas exploration and production activity, such as drilling fluids, drill cuttings, completion fluids, and flowback water; production wastes and produced water during a well's operating life; contaminated soils that require treatment during site reclamation; and substances, which require clean-up after a spill, reserve pit clean-up, or pipeline rupture. Further, the company offers leasing services to its customers. Waste Connections, Inc. was founded in 1997 and is based in Woodbridge, Canada.

Waste Connections Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Q2 Results Beat: Waste Connections delivered second quarter revenue growth of 7.1% and 32.7% adjusted EBITDA margin, exceeding the high end of its outlook despite commodity and economic headwinds.
• Positive Sentiment: Robust M&A Activity: The company closed acquisitions adding $200 million in annualized revenue year-to-date and expects an additional $100–200 million in H2 2025.
• Positive Sentiment: Strong Cash Flow & Buybacks: With $699 million in adjusted free cash flow YTD and over $1.1 billion liquidity, Waste Connections repurchased ~1.3 million shares and plans further opportunistic repurchases.
• Neutral Sentiment: 2025 Outlook Maintained: The company reaffirmed its full-year guidance for ~6% revenue growth and 50 basis points of adjusted EBITDA margin expansion to 33%, excluding future deals.
• Negative Sentiment: Volume Headwinds: Reported same-store volumes declined 2.6% in Q2, driven by strategic shedding of underperforming contracts and continued softness in roll-off and C&D disposal.

Presentation

[Operator]

Good morning, everyone, and welcome to the Waste Connections Inc. Q two twenty twenty five earnings call. Participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. For question, you may press and then one on a touch tone telephone.

[Operator]

To withdraw your questions, you may press and 2. Note, this event is being recorded. I'd now like to turn the floor over to Ron Millstead, President and CEO. Sir, please go ahead.

[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 second quarter results and updated outlook for 2025, along with providing a framework for the back half of the year. I'm joined this morning by Mary Anne Whitney, our CFO, and several other members of our senior management. As noted in our release, we once again delivered results above the high end of our outlook for the quarter.

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

In spite of incremental headwinds in q two from lower than expected contributions from higher margin commodity related activities and continued sluggishness in the economy, along with tariff induced uncertainties. As anticipated, we have already completed an outsized year of acquisition activity at approximately $200,000,000 in annualized revenue with a robust pipeline and almost half the year still ahead of us. The strength of our financial profile and free cash flow generation keeps us well positioned for additional acquisitions while maintaining the flexibility for increased return of capital to shareholders, including through opportunistic share repurchases, which are already underway. Moreover, in spite of incremental and growing headwinds, our full year 2025 outlook remains within the ranges from February, providing for approximately 6% revenue growth and 50 basis points of adjusted EBITDA margin expansion to 33%. We remain well positioned for upside from contributions from additional acquisitions, improvements in commodity related activity, and incremental solid waste volumes.

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

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, 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, Executive VP & CFO at Waste Connections]

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

[Mary Whitney, Executive VP & CFO at Waste Connections]

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. 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, Founder, CEO, President & Director at Waste Connections]

Okay, thank you, Mary Anne. We are extremely pleased with our second quarter results, which reflect the enduring strength and consistency of solid waste regardless of the economic environment. Moreover, our operational execution was augmented by continued improvement in employee retention and safety to support pricing ahead of inflation and effectively manage costs. Most notably, we overcame headwinds from incremental weakness in commodities, RINs, and cyclical volumes and still delivered margins of 32.7%, consistent with our q two guidance. Remember, this also includes 20 basis points year over year headwinds from our decision to close Takeda Canyon Landfill as of January 1.

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

During the quarter, revenue growth of 7.1% was driven by 6.6% core solid waste pricing, comfortably exceeding our cost of inflation to drive 70 basis points of underlying adjusted EBITDA margin expansion in solid waste. Reported volume declines of 2.6% reflected the purposeful price volume trade off and ongoing shedding of underperforming contracts that we have described in previous periods. Beyond that, they reflect the trends we've noted over the past several quarters. That is underlying flat to negative volumes from continued sluggishness in roll off poles and lower disposal volumes primarily from construction oriented activity, both of which showed continued moderation during the quarter. Most importantly, we saw continued improvement in operating trends and the associated benefits.

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

In Q2, voluntary turnover once again stepped down sequentially, marking our eleventh consecutive quarter of improvement. On total turnover now below 22%, our voluntary turnover of less than 11% is down almost 60% from mid twenty two and has dropped below involuntary turnover for the first time in recent years. And safety results, which are highly correlated to turnover, once again hit new historic lows. Incident rates were down 15% year over year with momentum for continued improvement. In fact, year over year monthly incidents were down over 20% in June on a 5% increase in total employees due largely to acquisitions, which typically come on at higher safety related incident rates.

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

As anticipated, these improving trends are translating into outside margin expansion. Timberland in q one, underlying margins expanded by 70 basis points, about two times the more normalized margin expansion we would expect from price led organic solid waste growth. And this is without the benefit of positive A reminder that when volumes do recover, especially at landfills, they will be nicely accretive. And given our high market share model and broad footprint, we remain well positioned to benefit from any pickup in activity driven by construction or otherwise. In the meantime, we are focusing on controlling what we can, delivering industry leading margins, and positioning ourselves for future growth.

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

We continue to reinvest in the business through CapEx at existing operations and new acquisitions, pursue new organic growth opportunities, and advance our sustainability related projects. We're also focused on leveraging technology to highlight additional avenues for outsized margin expansion using AI driven applications across multiple platforms from customer retention and pricing to forecasting through data analytics, all of which we will be expanding during 2627 as we look to further digitize. We continue to focus on customer experience and our operations, targeting quality of revenue on the top line, and productivity and efficiency gains throughout our cost structure as we position ourselves for growth well beyond our current $10,000,000,000 revenue run rate. To that end, acquisition activity is continuing at an above average pace, resulting in approximately 200,000,000 in annualized revenues already closed to date. Our balance sheet strength, along with a robust acquisition pipeline built on long term relationships and a consistent disciplined approach to market selection, position us for additional activity.

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

In fact, including signed LOIs, we expect to close another 100 to 200,000,000 in acquisitions later this year or by early twenty twenty six with more to follow. Of course, contributions from any additional deals closing in 2025 would be additive to the outlook we've provided. And finally, as noted, we've been in the market buying back shares. As we've consist consistently maintained, we take an opportunistic approach to share repurchases and look to capitalize when we see compelling dislocations across the market or within our sector. To date, we bought back 1,300,000.0 shares or about half a percentage point of shares outstanding pursuant to our normal course issuer bid, which we renew annually in August, providing for annual repurchases of up to 5% of shares outstanding.

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

And speaking of which, in June, we announced an additional listing and became a founding member of NYSE Texas, a recognition of our corporate presence here in The Woodlands along with our operations across the state. We've enjoyed tremendous growth as a company since relocating our headquarters from California to Texas thirteen years ago and appreciate the business supportive environment Texas provides. We recognize the importance of strong community and appreciate the collaborative can do spirit that Texas is famous for. Shifting next to an update on our remediation efforts at Chiquita Canyon Landfill in Southern California. We continue to make progress managing the elevated temperature landfill or ETLF event.

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

At this time, there is no change to expectations regarding the cash flow or other impacts at the site. The most encouraging progress, however, is on the administrative front with the US EPA taking a more active leadership role in regulatory oversight of the facility. To that end, our team has been engaged in ongoing discussions with Region 9 of the US EPA. In an effort to further streamline ongoing regulatory oversight and approvals at the facility and in line with president Trump's and administrator Zeldin's stated goals of focusing efforts on powering the great American comeback, Chiquitas requested region nine's further assistance in minimizing regulatory indecision and inaction by taking a more active role at the site. To be very clear, this is good news and something we requested and will drive continued improvements in the management of the reaction and any impacts to local communities.

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

We expect the results will be more be a more effective and efficient and ultimately less costly process. And now I'd like to pass the call to Mary Anne to review more in-depth the financial highlights of the second quarter to review the elements of our updated full year 2025 outlook and what that implies for the back half of the year. I will then wrap up before heading into Q and A.

[Mary Whitney, Executive VP & CFO at Waste Connections]

Thank you, Ron. In the second quarter, revenue of $2,407,000,000 exceeded the high end of our outlook and was up $159,000,000 or 7.1% year over year. Acquisitions completed since the year ago period contributed about $113,000,000 net of divestitures. Core pricing of 6.6% was as expected in Q2 and reflected the typical cadence of seasonality. For the full year, core pricing of over 6% is now effectively complete or contractually provided for.

[Mary Whitney, Executive VP & CFO at Waste Connections]

Volumes down 2.6% reflect the following year over year results in Q2 on a same store basis. Roll off revenue was down about 1%, on pulls down 3%, and rates per pull up 2%. Looking at regional variances, pulls range from down high single digits in our Southern region to up mid single digits in our Western region, with most regions down slightly. Activity levels during the quarter, which would typically reflect a seasonal ramp of as much as 5%, showed only about a 1% sequential improvement between April and June. We would note the constantly changing tariff schedules during this period, which we believe contributed to uncertainty for customers.

[Mary Whitney, Executive VP & CFO at Waste Connections]

Landfill revenue was up about 4% on tons up 1.5%. Looking by waste type, MSW tons were up 3%, special waste was up 7%, and C and D tons were down 9%, slightly below recent quarters and indicative of limited construction activity. Values for recycled commodities already down year over year coming into the quarter declined another 10 to 15% during Q2. Renewable energy credits, or RINs, also stepped down by about 15% during Q2. And our U.

[Mary Whitney, Executive VP & CFO at Waste Connections]

S. EPA waste activity, which is highly correlated to crude prices and related drilling activity, was down about 10% year over year, most notably in June, as crude volatility was magnified by ever changing policies. By way of contrast, we did not see a corresponding decline in Canada, where our business is more production oriented. In fact, our R360 Canada revenue was up year over year on both price and volume, in line with our expectations. A reinforcing reminder of our rationale for pursuing this business in 2024, with ongoing growth since then to shift the balance of our E and P waste mix from drilling towards production.

[Mary Whitney, Executive VP & CFO at Waste Connections]

Adjusted EBITDA for Q2, as reconciled in our earnings release, was 786,400,000 up 7.5% year over year and slightly above the high end of our outlook. At 32.7%, our adjusted EBITDA margin was in line with our outlook and up 10 basis points year over year in spite of an extra 20 basis point drag from commodities, which declined during the quarter. In total, total commodity driven revenues were a drag of about 60 basis points in the quarter, in addition to Chiquita, which was another 20 basis point drag. Underlying solid waste margins were up 70 basis points similar to last quarter, as Ron described. Similar to Q1, we saw margin improvement across a range of cost categories related to third party services, labor, and maintenance, as we are seeing the benefits of improved employee retention and reduced openings.

[Mary Whitney, Executive VP & CFO at Waste Connections]

In contrast, risk management cost reductions continue to lag and remained a headwind in the quarter, providing opportunity for continued outsized underlying margin expansion as we look ahead. Net interest in the quarter was $80,400,000 and our effective tax rate for the second quarter was 25.4%, about 100 basis points above our outlook on higher foreign exchange rates. And finally, year to date, we've delivered adjusted free cash flow of $699,000,000 on capital expenditures, up over 110,000,000 year over year. As such, we're well on our way to deliver adjusted free cash flow of $1,300,000,000 as guided. During the quarter, we completed a public offering of $500,000,000 in senior notes to further diversify our funding sources and maintain optionality for capital allocation.

[Mary Whitney, Executive VP & CFO at Waste Connections]

Our weighted average cost of debt is about 4%, with an average tenure of over nine years. We ended the quarter with debt outstanding of about $8,350,000,000 about 15% of which was floating rate, and liquidity of over $1,100,000,000 In spite of acquisition outlays of $582,000,000 through Q2, our leverage ratio, as defined in our credit facility, has increased only nominally since year end to 2.69 times debt to adjusted EBITDA. As Ron noted, we have a lot of optionality in terms of capital outlays, including opportunistic share repurchases, which year to date have totaled over $240,000,000 In addition, we look forward to another increase to our dividend, which we will consider when we undertake our annual review in October. I will now review our updated outlook for the full year 2025 and provide some thoughts about what that implies for the back half of the year. 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 the Securities Commissions or similar regulatory authorities in Canada.

[Mary Whitney, Executive VP & CFO at Waste Connections]

We encourage investors to review these factors carefully. Our outlook assumes no change in the current economic environment or underlying economic trends. It also excludes any impact from additional acquisitions that may close during the remainder of the year and expensing of transaction related items during the period. Additionally, our outlook does not anticipate material impacts to our effective tax rate or cash flows as a result of the recent tax bill, except as noted. Looking first at our updated outlook for the full year, as provided for and reconciled in our earnings release.

[Mary Whitney, Executive VP & CFO at Waste Connections]

Given the strength of our performance in the first half of the year and updating for recent commodity values in RIMs and acquisitions completed to date, we are maintaining our full year 2025 outlook as provided in February as follows: Revenue is estimated at approximately $9,450,000,000 While within the range of our February outlook, this reflects a different mix of revenue. Incremental acquisition contributions are offset by reductions in commodity related revenues based on recent values, and US E and P waste and solid waste volumes based on recent trends. Adjusted EBITDA is estimated at approximately 3,120,000,000.00 or 33%. Again, within the range of our February outlook in spite of that mix shift. This reflects 30 basis points higher underlying solid waste margins, overcoming the margin dilutive impact of acquisitions and lower commodity related revenue and disposal volumes.

[Mary Whitney, Executive VP & CFO at Waste Connections]

On a year over year basis, adjusted EBITDA margin up 50 basis points reflects over 100 basis points underlying margin expansion. And finally, in the case of adjusted free cash flow at approximately $1,300,000,000 within the range of our February outlook, we expect that incremental bonus depreciation associated with the recent tax bill, which we estimate may increase cash flow from operations by about $25,000,000 would be put to work to a corresponding increase in capital expenditures. We are considering opportunistic fleet and equipment purchases to derisk potential tariff related increases, as well as CapEx for growth projects both related to recent acquisitions and at existing operations. The closing of any additional acquisitions would provide upside to our updated 2025 outlook, as would improvement in commodities and related activity and any pickup in volumes. Next, looking ahead to Q3 and Q4.

[Mary Whitney, Executive VP & CFO at Waste Connections]

As implied by our full year 2025 outlook, the adjusted EBITDA margin is expected average 33.6% in the back half of the year, up about 60 basis points year over year, driven by outsized margin expansion in Q4 from easing comparisons to the prior year for Chiquita and commodities. By quarter, adjusted EBITDA margin is expected to be roughly comparable across Q3 and Q4 due to a limited seasonal ramp in Q3. And now let me turn the call back over to Ron for some final remarks before Q and A.

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

Thank you, Mary Anne. As we have described, we are extremely pleased with our first half results, which highlight the strength and resilience of our business and specifically the outperformance of our core solid waste operations in what is arguably a volatile economic backdrop. In fact, in a more normalized environment, our strong first half performance and operating trends would have prompted us to raise our full year guidance. However, given the uncertainty of today's environment and the impact of lower commodities, we view maintaining our 2025 guidance as prudent and as a win. And while the macro environment remains dynamic, we are well positioned to navigate that uncertainty as our q two results demonstrate.

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

As we have consistently maintained, our greatest differentiator is human capital and a purposeful approach to a culture of accountability. We're most grateful for for and extremely proud of the dedication of our over 25,000 employees and the local leadership teams responsible for the consistency of operational execution. We will continue to focus on operational excellence, building on a proven track record and legacy of outsized value creation, while also recognizing the value of innovation and the opportunities from leveraging technology and new ideas. Before going into q and a, I'd like to take a moment to thank and acknowledge my Waste Connections cofounder, our executive vice president and chief operating officer of nearly twenty eight years, and one of my closest friends ever, Daryl Chambliss. Daryl has announced his retirement from his role as COO effective 08/08/2025.

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

While we're not making any other announcements at this time, they will be forthcoming over the next few weeks. Daryl can never truly be replaced. He's been the heartbeat of Waste Connections for twenty eight years. Our board of directors, our leadership team at every level, and all of our 25,000 employees owe an enormous debt of gratitude to Daryl. He will be missed every day and will never be forgotten.

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

There's not enough time on this call for me to adequately express all that Daryl has meant to everyone within the Waste Connections family or across the broader solid waste industry. I wish Daryl, his beautiful wife, Andrea, and their son, Nate, a wonderful, healthy, fun next chapter that is so richly deserved. We'll all miss you terribly, Daryl, and we all love you. Now getting back to all of you. We appreciate all your time today.

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

I will now turn this call over to the operator to open up the lines for your questions. Operator?

[Operator]

Ladies and gentlemen, at this time, we will begin that question and answer session. To ask a question, may press and then 1. To withdraw your questions, you may press star and 2. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Once again, that is star and then one to join the question queue.

[Operator]

Our first question today comes from Tyler Brown from Raymond James. Please go ahead with your question.

[Tyler Brown, AVP at Raymond James Financial]

Hey. Good morning. Can you guys hear me?

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

Yeah, Tyler. Good morning. We can.

[Tyler Brown, AVP at Raymond James Financial]

Yeah. Hey. First, congrats, Daryl. Incredible career. See you on an Arkansas lake one day.

[Tyler Brown, AVP at Raymond James Financial]

But, you know, curious if we could maybe if we could double click a little bit on capital allocation. Ron, just it sounds like the m and a pipeline is solid, but you also restarted the buyback. And I just wanna make sure that I have the message right here because I think 235,000,000 in a quarter is maybe the second largest repo in your history, and we're only twenty four days in. So just to be clear, is this you being more opportunistic versus a change in the m and a opportunities out there?

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

Yeah, Tyler. I mean, number one, it absolutely is. As we tried to say in our remarks, you know, we tried to be, opportunistic when we think that there are abnormal dislocations in either our or our sector's stock. And we feel that, as as there's been, you know, recent pullback for a variety of reasons in the sector and in us as well. We have tremendous firepower both through free cash flow and available capital.

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

As we've demonstrated, we've done a record amount of acquisitions last year. We're on pace to have an enormous year this year, and we've kept leverage flat to down. So it is not a change in capital allocation strategy whatsoever. It's just that we have the capacity to do both, and we believe the combination creates in this environment, know, even better performance alternative going forward.

[Tyler Brown, AVP at Raymond James Financial]

Okay. Perfect. And then just a little clarification. So I think you said that there was something like a 100 to 200,000,000 under LOI that could close in the second half. But was that a revenue number or an outlay number?

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

That was a revenue number.

[Tyler Brown, AVP at Raymond James Financial]

Okay. Okay. Perfect. And then just quick modeling, Mary Anne, just so we have it. But what is the expected m and a impact in '25, just basically based on what's in the guide?

[Mary Whitney, Executive VP & CFO at Waste Connections]

So the coming into the original the year, the original guidance included 300,000,000. There we'd closed about 75,000,000 in deals. And so the acquisition contribution from the previous year's rollover and deals done had been 300, and that stepped up by 75,000,000 with the incremental closing of 125,000,000 during the course of the first two quarters.

[Tyler Brown, AVP at Raymond James Financial]

Okay. Perfect. And my last one, just can we talk a little bit about E and P? I know it doesn't get a ton of airtime, but actually, if I look at the numbers, it did something like, call it, a 180,000,000 in revenue this quarter, which was which was really good. Was up something like 50,000,000 year over year.

[Tyler Brown, AVP at Raymond James Financial]

But that is kind of counter to the cautious rig count. So one, was that secured? Because I thought that we had already lapped that. So I could be wrong there. Was there another acquisition?

[Tyler Brown, AVP at Raymond James Financial]

And then two, just given the rig where the rig count is and your US drilling exposure, should we assume that that hangs around this 180,000,000 per quarter just for a little help on the model?

[Mary Whitney, Executive VP & CFO at Waste Connections]

Yes, so a couple things there, Tyler. Yes, I think that's a fair way to think about the run rate, and it reflects, to your point, not only Secure, but the subsequent acquisitions we did last year. We mentioned that we've done a couple in Canada, and we've also done some in The US. And so you're seeing the rollover contribution from those deals. And as we said on the call, what stood out in Q2 was the step down activity in The US, but that had it had been more than offset by the increases in Canada, whereas the legacy secure business, for instance, we saw growth both in price and volume during the quarter on a year over year basis.

[Tyler Brown, AVP at Raymond James Financial]

Okay. So a 180, though, roughly is a good place marker?

[Mary Whitney, Executive VP & CFO at Waste Connections]

Yeah. One you know, I think it's between one sixty and one seventy. I mean, depending on seasonality, it's I I think you gotta, you know, you know, meter that a little Okay.

[Tyler Brown, AVP at Raymond James Financial]

Alright. Cool. Thank you.

[Operator]

Our next question comes from Mae Kaplan from Morgan Stanley. Please go ahead with your question.

[Toni Kaplan, Executive Director & Lead Analyst - Equity Research at Morgan Stanley]

Thanks so much. I wanted to drill down a little bit into the volume shedding. So last quarter, you had called out a large contract from Progressive that you didn't renew in October. So I was wondering if it's fair to assume a similar drag in volume in 3Q similar to 2Q, but then maybe 4Q just gets back to sort of more normal shedding. And I know Chiquita is also sort of a factor in here.

[Toni Kaplan, Executive Director & Lead Analyst - Equity Research at Morgan Stanley]

So, like, maybe there's still a little bit below normal volume in 4Q, and then maybe maybe the normal starts in 1Q of '26. Like, just wanted to understand the dynamics of how you think about the volume.

[Mary Whitney, Executive VP & CFO at Waste Connections]

Sure, Toni. So, as you know, we think in terms of we have the shedding. Of course, we have Chiquita, which we kind of bucket separately. And that does anniversary, at the end of the year, but we started diverting tons in Q4, so the impact smaller in Q4. But when I think about the ongoing impacts, you're right, some of the shedding does anniversary.

[Mary Whitney, Executive VP & CFO at Waste Connections]

I think the way to think about it is the most negative quarter would therefore be Q3, because you have the combined impact of those ongoing impacts, plus what we talked about that lower seasonal ramp, you know, impacting the revenue growth q three versus q two. So most negative in q three, getting back to more like q two and q four. And yes, I agree with your expectation that some of those pieces anniversary as we look ahead to '26.

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

Yeah, and Tony, the one specific contract we did call out last year, former progressive contract, actually in North Texas, it does anniversary on October 1, as you as you pointed out.

[Toni Kaplan, Executive Director & Lead Analyst - Equity Research at Morgan Stanley]

Great. And I guess, maybe just longer term when you think about volumes, Ron, like, I guess you meant you made the comment that when volumes do recover, like, that will be accretive. Do you expect, like, that volumes recover in in '26? Or, like, when when does that happen? Or, you know, because of all the M and A, like, maybe it's even pushed out further than that.

[Toni Kaplan, Executive Director & Lead Analyst - Equity Research at Morgan Stanley]

Just wanted to sort of get a longer term picture.

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

Yeah. Well, I think you gotta break apart the components, Tony, of the negative volume. And and again, I'm I'm just rounding here. You know, we've said there's been about a 100 if if you take a a negative two and a half, I I'm rounding, for the quarter, was a little more than that. You you've got about a 100 price volume trade off that's been conscious.

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

So depending on how the economy is and how hard we wanna push that and where inflationary indexes are, you know, that can that can get better. You have about a 100 points from purposeful shedding. We just outlined that a lot of that will get better, specifically Chiquita and a large contract we, did not renew purposely in North Texas. However, we have done a lot of m and a in '24 and continue in '25, So some of that will continue, obviously. And then right now, I'd say you got about fifty, sixty basis points of just underlying economic activity that is soft, particularly in construction linked activities.

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

So it affects roll off, and it affects, C and D, which you saw down 9% in the quarter. So, you know, that is it's tough to say. We would we would hope now that, you know, that the the bill has been passed in congress that, you know, maybe, as in as interest rates potentially decrease some over the second half of the year into next year, these are, somewhat fuel for construction activity at all levels. And and then that you know, we see a a corresponding real time benefit from that. But, you know, we're not obviously sitting here trying to predict that.

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

You know, we've been in effectively a flat to negative, you know, take out government spending. Take out federal government spending. We've been in a flat to negative GDP environment for approaching three years now. And so, you know, is is '26 gonna break that? Well, I would hope so, but, you know, we don't know.

[Mary Whitney, Executive VP & CFO at Waste Connections]

Super. Thank you.

[Operator]

Our next question and company, please go ahead with your question. Noah, is it possible that you can hear me? Yeah. Now we can hear you now. Alright.

[Noah Kaye, Senior Research Analyst at Oppenheimer & Co. Inc.]

Thank you. Yeah. We just didn't hear our name called, I appreciate everyone taking the question. Marion, just just maybe trying to bridge from the 9,450,000.00 that you saw in 4Q on the revenue side to how you see it now, because you pointed out the mix has changed. You got the $75,000,000 higher M and A revenues.

[Noah Kaye, Senior Research Analyst at Oppenheimer & Co. Inc.]

Maybe give us the other kind of moving pieces here because I think that will help us and investors kind of understand some of the mix shift a little bit better. I mean, how much more is the impact from commodities, and, potentially kind of underlying volumes versus what you thought?

[Mary Whitney, Executive VP & CFO at Waste Connections]

Sure. So, as you pointed, so 75,000,000 incremental in acquisition contribution. A little bit of a good guide from FX because it's in our view improved by about a point, which is about 20,000,000. And then the offsets are primarily those commodity driven reductions where you've got recycled commodities down about 25,000,000, RINs down another 5,000,000, and then we have about half a point less in terms of overall solid waste volume. And so, you know, those are the moving pieces that effectively, you know, net net to neutral.

[Mary Whitney, Executive VP & CFO at Waste Connections]

But, you know, the really important part of that is the differences in the margin contributions from each of those. And the fact that what that really requires is that the underlying business improves by 30 basis points in order to offset the fact that there's a little margin dilution, sub 10 basis points, sub 10 basis points from the incremental M and A, but it's primarily the 30 basis points incremental headwinds from those lower recycled commodities and RINs.

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

And and, Noah, I would add that you also have about another approximately 20 to $25,000,000 in E and P volumes lower in the second half based on current rig count in The US versus Canada. Meaning, not not that's not happening in Canada. It is happening in the Permian and the Louisiana on and offshore.

[Mary Whitney, Executive VP & CFO at Waste Connections]

Yes. Thanks, Ron. Yep.

[Noah Kaye, Senior Research Analyst at Oppenheimer & Co. Inc.]

Yeah. To 20,000,000 to $25,000,000 lower versus what you thought in February?

[Mary Whitney, Executive VP & CFO at Waste Connections]

Previous. Got it.

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

Right. Right. $50,000,000 in your life, 25 in the second half. Yep.

[Noah Kaye, Senior Research Analyst at Oppenheimer & Co. Inc.]

Okay. And then for our, again, for our models, appreciate you giving us sort of the margin expectations for 3Q. You did also comment not much of a sort of sequential ramp expected in kind of underlying macro. So just some rough guideposts on how to think about revenue step up, because typically it is a seasonally strong quarter. But, you know, between the commodities step down and some of the other headwinds you mentioned, perhaps we don't see as big of a step up as usual.

[Mary Whitney, Executive VP & CFO at Waste Connections]

Yep. That's the right way to think about it because the the typical seasonal ramp could be as much as three to 4%, and so this would be muted, there would be that step down in commodities. So you could certainly work your way to more like one and a half percent, in terms of the the step up Q3 versus Q2.

[Noah Kaye, Senior Research Analyst at Oppenheimer & Co. Inc.]

Thank you. And just one last one. Mean, Tyler, I think, has always asked a great question earlier around capital allocation. I just want to follow-up on the buybacks. Should we think about additional buyback activity in any way to dimension that over the back half of the year?

[Noah Kaye, Senior Research Analyst at Oppenheimer & Co. Inc.]

I understand that you're being opportunistic here, but kind of given where the stock is and your view on the multiyear growth opportunity, you know, fair to think about additional buyback activity in any way to dimension it?

[Mary Whitney, Executive VP & CFO at Waste Connections]

Yeah, we always think in terms of being opportunistic, Noah, and it's, know, rather than being programmatic. And so, you know, what the way we approach it is that we have tremendous optionality given the magnitude of our free cash flow and where our leverage sits, and we'll continue to evaluate all the alternatives for capital allocation.

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

Yeah. And the only thing I would say, add, Noah, is look, you saw us in a very short period of time as we thought there was a a disproportionate dislocation spend close to a quarter billion dollars.

[Noah Kaye, Senior Research Analyst at Oppenheimer & Co. Inc.]

Yep.

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

And so we remain positioned to do that in the same manner.

[Noah Kaye, Senior Research Analyst at Oppenheimer & Co. Inc.]

Very helpful. Thank you.

[Operator]

Our next question comes from Kevin Chiang from CIBC. Please go ahead with your question.

[Kevin Chiang, Director - Institutional Equity Research at CIBC World Markets]

Hi. Thanks for taking my question. Good morning and congratulations, Daryl, echoing what others have said already. Maybe just two quick ones for me. You're obviously making great progress on your voluntary turnover and safety incident metrics and trends.

[Kevin Chiang, Director - Institutional Equity Research at CIBC World Markets]

If memory serves me correct, think that was a 100 basis point margin opportunity. I think you've achieved about two thirds of that. Just given the trends you're seeing, should we expect that additional one third or let's call it 33, 34 basis points? Does that fully materialize in 2026, just given the trends you're seeing through '25 here?

[Mary Whitney, Executive VP & CFO at Waste Connections]

Sure. So, you're right, Kevin. We've talked a lot about, as we described it, there was about 100 basis points of margin that we thought would get unlocked by these improving trends. And then we actually revisited that and said it's probably a little north of that given the magnitude of the headwinds we're still absorbing from those lagging improvements associated with risk management costs. And I think last quarter we said we're about halfway through the 100 basis points, we realized about 50, and the update is now we're north of that, maybe 60 to 70 basis points in terms of good guys that we're seeing.

[Mary Whitney, Executive VP & CFO at Waste Connections]

You know, it's interesting, we look across about 10 different cost items every quarter, and I can't remember a time where they'd all been green up until now, meaning that margin, you know, the cost as percentage of revenue was improving, and so many of them are related to third party costs, or whether it's subcontracting, contract labor, whether it's overtime compared to straight time, all the benefits, you know, third party repairs, etcetera, all the benefits that we thought over time should start to accrue to us. So what we haven't seen yet, as I said, is that risk costs, they're abating, meaning it's it's been less of a bad guy, less of a headwind on a year over year basis. It hasn't become a tailwind. So to answer your question, there's still more to come. Tough to say that we would get it all in '26 because of the way that the risk costs lag, but we expect to continue to realize the benefits and the trends we've seen make us bullish about seeing more by the end of the year than we're seeing right now.

[Kevin Chiang, Director - Institutional Equity Research at CIBC World Markets]

That's super helpful. Maybe just my second question here. Ron, you talked about the EPA taking a more active role at Chiquita and you think that's a favorable outcome or development. Just if you can maybe just provide a little bit of detail in terms of how that benefits your remediation efforts and maybe some of the challenges you have been facing, I suspect, dealing with multiple agencies and trying to deal with the ETLF issue at Chiquita?

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

Sure. Well, you know, we have been dealing with approximately 12 to 13 state and local agencies in California. Each of those have their own staffs. Each of those have their own elected boards, and and each of those have their own objectives. There is, literally no coordination amongst those agencies at any level.

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

And the objectives from them are often at cross currents with the other agencies. So trying to navigate for anyone that morass is extremely difficult and complex and slow at best. You know, you are talking about agencies who would politically and through the media like to describe things as a crisis, but have difficulty responding to an email in an under a ninety day period. I think that indicates to you what real crisis they think it is. So, you know, we really sort of need an adult in the room, and that's what the EPA will bring.

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

They have you know, one of the reasons we wanted their involvement is you know, an ETLF is not a new phenomenon in the waste industry by any means. And the EPA has quite an advanced depth of knowledge, on best practices to mitigate, remediate, and move forward in the ETLF relative to any other government agency out there. And so it was something that we look forward to and request. We believe that it will, as we said, streamline the process and help determine the prioritization of issues and allow us to make even faster progress that, quite honestly, just I don't think I have to explain. The California bureaucracy just disallows, to be very honest.

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

I mean, you know, take no look further than the 4,000 homes burned down in Pacific Palisades, and 95% of those that have applied for a rebuilding permit are nowhere. And that's a that's a housing situation. So imagine their response to a landfill type crisis. So, yeah, it it this is is this is something we have we have been, you know, seeking for quite some time. You know, the the the the California politicians and, you know, tremendous media out there will will probably spend that as a negative to to bolster their political position, but it is in all you know, we can tell you we are strongly encouraged of it by it.

[Kevin Chiang, Director - Institutional Equity Research at CIBC World Markets]

That that that's great color, Ron. Thank you. And that that's it for me. Thank you very much.

[Operator]

Our next question comes from Trevor Romeo from William Blair. Please go ahead with your question.

[Trevor Romeo, Research Analyst at William Blair]

Good morning, Ron and Mary Anne. Thanks so much for taking the questions. Good morning. I wanted to hit on price first for solid waste. So still kind of call it upper sixes range to start the first half.

[Trevor Romeo, Research Analyst at William Blair]

Anything from a regional or line of business perspective that you'd call out as kind of stronger than you expected? And then any thoughts on the trajectory or the cadence for the second half? Seems like maybe you're trending above 6% for the full year, even if you do see some deceleration, but maybe any specific thoughts on that would be great.

[Mary Whitney, Executive VP & CFO at Waste Connections]

Sure. So Trevor, as we said it coming into the year, got it to about 6% price. And then following our q one results, we talked about the fact that price retention had been a little better than we had anticipated, and therefore pricing in q one at $6.09 was a little bit higher. We've now since said that pricing effectively done for the year and maintained that it'll be above 6%. So really nothing to point out.

[Mary Whitney, Executive VP & CFO at Waste Connections]

Of course, we have our CPI linked markets, and then we've got our competitive markets. But, you know, as I said, we're trending to better than we originally anticipated. We attributed that, you know, at least a portion of it, to better pricing retention and the fact that all those trends in employee retention and open positions had all improved so well that we're not surprised that retention was a little better than expected. As we move through the year, in general, the cadence of our pricing, and really the math around what the denominator is that we're measuring the dollar amount of price increases on, by definition, that does step down sequentially through the course of the year. And that's why you started 6.9, we did point six.

[Mary Whitney, Executive VP & CFO at Waste Connections]

You're right, it implies that it steps down a little bit between now. If you are modeling it and you put it somewhere between the 6.6 and the six over the course of the rest of the year, that's probably the right way to think about it.

[Trevor Romeo, Research Analyst at William Blair]

Okay. Thanks, Mary Anne. That is helpful. And then for my follow-up, wanted to touch on, I think you mentioned with the bonus depreciation comments, maybe some opportunistic fleet or equipment purchases to get ahead of yeah, maybe potential changes with the tariffs. Could you maybe just give a little bit more color or detail on your latest thoughts, maybe on what your suppliers are telling you, what the potential impact could be with with the latest deals and and guidance in place?

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

Yes, Trevor. Well, as you know, first off, that's dynamic and could change by the end of this call. But the reality is is that right now, our suppliers, particularly on the the truck and and truck body and chassis side, which is obviously the largest part of our capital, they are expecting about a two to a 3% price increase related to the tariffs for '26 and an overall increase of four to five. So meaning just a a little bit more in addition to the tariff. So, you know, four to 5% total increase in in fleet cost is what they're telling us with about half of that, not quite half, being the tariff impact as they know it today.

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

So that is not by any means. I think we said last quarter we would expect it to be relatively de minimis in 'twenty five. That is the case. But knowing the uncertainty that still exists or potentially exists with things not yet being finalized in many places, we have looked to accelerate some fleet, as Mary Anne mentioned, which that will offset some of that bonus depreciation that we otherwise would have seen in the free cash flow line in order to sort of hedge and blend down our '25, '26 overall cost to something hopefully below that four to five percent we would have otherwise expect from the manufacturers. So, you know, a number we're very come we're very comfortable with.

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

And you have to remember, there was also somewhat of there were delays in fleet in '23 and '24 that happened. And so there's still, you know, not a catch up, but there was a little bit of a backlog that we were still taking delivery of in twenty five two. So it's a combination of those things.

[Trevor Romeo, Research Analyst at William Blair]

Yeah. That's all very helpful. I appreciate it.

[Operator]

Our next question comes from Sabahat Khan from RBC Capital Markets. Please go ahead with your question.

[Sabahat Khan, MD - Global Research at RBC Capital Markets]

Great. Thanks, and good morning. Just wanted to revisit the discussion earlier around some of the components around volume. I think before some of the Chiquita volume drag, I think we're talking about the progress or so the historical sort of volume shedding largely getting to the tail end. Can you just help us think through as you get into 2026 and beyond, putting the GDP or the economic growth aside, how's sort of the leftover shedding volumes going to look like in the next couple of years from your vantage point? Thanks.

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

Well, it's obviously a little bit hard to say because that to an extent depends on the pace of m and a. You know, as I have said or as we have said, look, you should want us to have a little bit of a higher shedding number because it it it means that the implied pace of m and a is higher. Right? We have we have said that when we do private company m and a on the solid waste side, you know, somewhere around 10, maybe up to 20% of that revenue over the first one to three years post m and a, we will look to either rebid and at a price we make money or or walk away. And and that is what that shedding is.

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

So, you know, I would tell you it has been larger to your exact point because of legacy progressive contracts, which we do believe we are effectively at the end of as of October '24 of the one we mentioned earlier in this call that will anniversary this year. And so that will you know, that has been the largest piece to answer the question. So I would tell you, I would expect it to come down some 30 to 50% on a go forward basis because that was the largest piece. That still probably leaves it in that 50 to 75 basis points on a normalized basis if we're doing quite a bit of m and a.

[Sabahat Khan, MD - Global Research at RBC Capital Markets]

Got it. And then just following up on the the E and P side of the business a little bit. You know, as you think about the sort of the volume trends and things like that there, sort of maybe just talk us through sort of the flexibility on the cost structure there. Obviously, just a small blip here this year, but just over the long run, how do you think about the cost structure there? How much of that is variable and just the ability to sort of tweak that?

[Sabahat Khan, MD - Global Research at RBC Capital Markets]

And over a more of a multiyear basis, not just in reaction to the short term blip from YCNH2 this year. Just wanted to understand sort of how you think about that business. Thanks.

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

We think of it as a very high fixed cost business. The reality is is that that is a relatively high fixed asset business, low variable business, and it is a a volume throughput business in in The US certainly as it is drilling linked, much less so in Canada where it is 85 plus percent production linked. So, you know, I wouldn't it would be misleading to tell you or anyone that in that 6% of our total revenue, which is e and p, that we are expecting margin expansion to come from cost reduction in e and p. That that would be misleading. But as that volume improves, whether it's because of crude price and drilling activity or increased production in Canada, you've obviously you see the margin contribution in that So that that's how we do think about the cost in the E and P business.

[Mary Whitney, Executive VP & CFO at Waste Connections]

And just to be to be clear, when we think about that business, as I mentioned earlier, that's part of the rationale for de risking the the business more broadly, because only about half of that six or six and a half percent is drilling oriented. It's The US piece of the business. And as we mentioned, the Canadian business is holding up fine and, in fact, was up, year over really really in line with our expectations. We haven't seen an impact there.

[Sabahat Khan, MD - Global Research at RBC Capital Markets]

Great. Thanks very much.

[Operator]

Our next question comes from Brian Bergmeier from Citi. Please go ahead with your question.

[Bryan Burgmeier, Equity Research Analyst at Citigroup]

Good morning. Thank you for taking the question. Just on the volume headwinds that are impacting your 2025 guidance, is it accurate to say that sort of really concentrated in a 3Q event, just kind of focused on construction activity? Or did you start to see slowdown in 2Q? And would you say there's any sort of meaningful difference between the activity in US and Canada? Or is it just kind of the same everywhere?

[Mary Whitney, Executive VP & CFO at Waste Connections]

Well, to give you some context, if you look at C and D tons, so that piece of our business year over year, q two was the seventh quarter in a row for those being down year over year, and it's averaged between 78%. Q one to Q2, Q1 was down 6%, Q2 was down eight and a half percent. So there was some incremental weakness, but the point is, even though the comps are easy, we're not seeing increases year over year. So, we did see what we called out as being a little different in Q2, where for that activity, and also for our roll off activity, which again, if I just look at pulls down, this was the sixth quarter in a row where pulls were down, and those have been down on the order of kind of an average of about 3% year over year in each of those quarters. So, wouldn't say this is a new trend, but what we saw during the quarter was some continued moderation, as we would say, some incremental weakness, meaning, June was tougher than April was.

[Mary Whitney, Executive VP & CFO at Waste Connections]

And we called out the fact that ordinarily between April and June, you would see more of a seasonal ramp. And the fact that that was missing is what informed our expectations for the back half of the year, specifically q three, which is typically your seasonally strongest quarter. These are the pieces business where you see it because they're more construction driven.

[Bryan Burgmeier, Equity Research Analyst at Citigroup]

Got it. Got it. Thank you. And just to follow-up, would you say there's any sort of difference between activity in between U. S.

[Bryan Burgmeier, Equity Research Analyst at Citigroup]

And Canada or just kind of the same everywhere? And then just as a follow-up, just kind of for modeling purposes, are you able to share sort of the recycled commodity price assumption that you started the year with? And then what you're kind of assuming now for the back half given the recent decline?

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

Yeah. We let's take the second part of that first, Brian. We assumed in when we started in February, we assumed a basket of about one zero five to one ten on OCC, excuse me, which is the largest piece of our basket. And we're now seeing that more in that 85 to 90, probably closer to 90 as I look down in sort of the second half in real time right now.

[Mary Whitney, Executive VP & CFO at Waste Connections]

And and shifting to your question about differences across Canada or or other regions, I'd say that, you know, if I look across, again, these more cyclically exposed pieces, the markets that are holding up a little better on a relative basis do include Canada actually being a little better, and our West Coast markets. And the softest, the the greatest weakness we saw in our Southern Region, which includes, like, Florida, Texas, Louisiana, and then also our Eastern Region, which includes the the Northeast and then some of the Southeastern markets.

[Bryan Burgmeier, Equity Research Analyst at Citigroup]

Got it. Thanks a lot for that detail. I'll turn it over.

[Operator]

Our next question comes from Jerry Revich from Goldman Sachs. Please go ahead with your question.

[Adam Bubes, VP - Equity Research at Goldman Sachs]

Hi, good morning. This is Adam on for Jerry today. I think the 2025 margin guidance implies over 100 basis points underlying margin expansion compared to 70 basis points in the first half of the year. What are some of the moving pieces driving that accelerating underlying margin expansion in the balance of the year? Is that the improvements in voluntary turnover? Any color there?

[Mary Whitney, Executive VP & CFO at Waste Connections]

Yes, thanks for pointing that out. Yes, we are bullish based on the trends we've seen. And as I described, all of those indicators trending positive for us as we move through Q2, that we see acceleration there and see the increased margin expansion. Then of course, more broadly, you'll see a bigger increase in Q4 because the comps in other areas get easier, and so the headwinds abate. But looking sequentially, we'd expect margin to continue to improve as we move through the year, primarily because of those improving trends.

[Adam Bubes, VP - Equity Research at Goldman Sachs]

Great. And then you closed on the $75,000,000 of annualized revenues incremental in the quarter, and then expect potential to close on the $100,000,000 to $200,000,000 later this or early next year. Can you just comment on the mix and margin profile of these acquisitions? And how we should think about the incremental in year EBITDA associated with the $75,000,000 in incremental revenues acquired in 2Q?

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

Sure. Let's take the first part of that first, if we could. So, the 100,000,000 to $200,000,000 that we have, you know, I'm very confident in our closing components of that in q three and q four is is all traditional solid waste. There's no E and P in that or anything else. It is a mix of transactions through several of our geographies, so relatively well dispersed.

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

You have franchises in there on the West Coast. You have competitive markets in the South, the Midwest, and the East. And you know, typically, the margin profile of that comes on, you know, nominally dilutive to our corporate average, obviously. We typically tell people to think of that as about 25% as a guideline as an EBITDA margin. You got a few that are will be higher.

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

You have some that based on, perhaps, if they're on the Eastern Seaboard with very high tip fees, they are just structurally a little lower on a margin basis. And we have a mix of all of those in there. So I think that was the first part of your question, at least. I think the second part was the incremental 75,000,000 that has been closed since we reported q one. And what we would tell you is we again, same commentary on margin.

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

We had smaller, although very nice, E and P acquisition in Canada that we did in that 75. So that was a little accretive to margins, but it was the smallest component of the 75. So again, I would tell you if you use 25 to 30% for that basket because of that E and P acquisition, that would be a fair assumption on that 75.

[Mary Whitney, Executive VP & CFO at Waste Connections]

Yeah. If you if you assume some dilution on the order of 10 to 15 basis points from incremental M and A given our size and the relative contribution, that's probably the right way to think about it.

[Adam Bubes, VP - Equity Research at Goldman Sachs]

Great. Thanks so much.

[Operator]

Our next question comes from Chris Murray from ATB Markets. Please go ahead with your question.

[Chris Murray, MD & Equity Research - Diversified Industries at ATB Capital Markets Inc]

Yeah. Thanks, folks. Good morning. Maybe I don't know who wants to take this one, but we've had a lot of discussion about volumes. But one of the things that at least we've seen is a bit of a split between kind of the construction manufacturing world of services.

[Chris Murray, MD & Equity Research - Diversified Industries at ATB Capital Markets Inc]

Just wondering if you have any thoughts about what you're seeing from some of the end markets, if you're seeing kind of some of the volume decline in in the services, like, I'm thinking, like, restaurants, different things that we're seeing just on consumer behavior versus what you've been calling out for, like, c and d and manufacturing.

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

Yeah. You know, Chris, we actually it's it's actually inverse of of that question from what we're seeing. We are we have fairly nicely positive commercial yardage across our system, commercial yardage growth, commercial customer growth on a net basis, and and fairly nice revenue growth on the commercial side. So we're not seeing it there. It is the larger manufacturing industry and and more cyclical construction activity, both commercially and residentially, that the slowing is happening in.

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

You know, we marked we noted that special waste, which is, you know, can be cyclical, was up in the quarter. But again, they don't get let that mislead you. That can be one or two big jobs that skew things. We are seeing states that are, you know, trying to get budgets passed, that have put holds on projects that had been that had been going. So some of that's just a temporary thing, but it it's more related to larger projects stalling or not getting released, than it is the what I'd call Main Street America, you know, commercial business.

[Chris Murray, MD & Equity Research - Diversified Industries at ATB Capital Markets Inc]

So I guess, you know, the reason I asked the question is if I think about, you know, kind of a volume recovery, it feels like we're kind of in a period of, you know, we get by the uncertainty the whole bit, but the underlying majority of the economy still feels like it's doing okay. Is that the right way to approach it or how you guys are seeing how this happens so that the volume recovery could happen maybe faster than we expect?

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

Yeah. I mean, you know, again, we we are we we have said for quite some time now, as as we pointed out on a few of the comments on the call, you know, it has just been flat, sort of up 1%, down 1% for ten to eleven consecutive quarters, with really the economy sort of in neutral. That and and that continues to be. We we we aren't saying there's any difference than that. You know, maybe it's down one and a half instead of one.

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

But, you know, that can also be you know, we've had pretty significant weather in the South, as an example. We pointed out that the South was weaker in an area I would tell you which has been very strong. So, I you know, we're we're just we're hesitant to make a call and what look. We have never guided. K?

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

We have never guided saying, well, our guidance assumes a dramatic recovery in the economy. That that we we don't do that. We're we're sort of telling you what we're seeing in real time and assuming it marches forward, and that if it improves, that's all upside. And and so I think we're cautious after eleven quarters of flatlined.

[Chris Murray, MD & Equity Research - Diversified Industries at ATB Capital Markets Inc]

Alright. Sounds good. Maybe one more question if you don't mind. You know, as I as I listen to the call, I listen to some of the things you talk about, in terms of turnover, in terms of technology, we really haven't talked about RNG development things like that, but you go back a few calls and we've been talking about out sized margin expansion as we went into 2026, '27. Given where you're sitting and I appreciate volumes maybe going to hurt, but I think as you pointed out, second half margin expansion is already kind of aiming at 100 basis points, which probably carries you into the early part of 2026.

[Chris Murray, MD & Equity Research - Diversified Industries at ATB Capital Markets Inc]

How should we be thinking about that margin cadence as we go into sort of the later years as you get some of the benefit of some of the investments you made over the last little while and some of the new initiatives that you're implementing?

[Mary Whitney, Executive VP & CFO at Waste Connections]

Well, we certainly think about setting ourselves to have tailwinds that would be incremental to the typical 20 to 40 basis points of price led organic growth. You know, when you look at this year delivering 50 basis points in spite of the fact that there are incremental headwinds, from commodities. And so, you know, we we talked about that opportunity for just when that normalizes for another, in this case, 50 basis points from commodities alone. So, look, we're that, you know, that is certainly the thought behind making the investments we're making now, Chris, and we do look forward to, in subsequent periods, continuing to realize those benefits. And so we're we're certainly bullish about being north of that 20 to 40 basis points.

[Chris Murray, MD & Equity Research - Diversified Industries at ATB Capital Markets Inc]

Okay. I'll leave it there. Thanks, folks.

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

Thank you.

[Operator]

Our next question comes from Konark Gupta from Scotiabank. Please go ahead with your question.

[Konark Gupta, Equity Research Analyst at Scotiabank]

Thanks, operator. Good morning, everyone. Just maybe on on the price cost spread, it seems like you guys are still hitting as an industry, maybe near the high end of the typical ranges or maybe above, maybe the 6.5% pricing and whatnot. Heading into '26, like exiting '25, do you feel like the price cost spread, you know, can potentially, you know, come down or normalize towards sort of the normal levels, or that's still kinda like a far fetched idea? And if if at all this spread, you know, narrows or or stays the same, you know, would it be more driven by the price or or the cost?

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

Well, I think I think it would be driven by both, to answer the question. I mean, look. If you go back fifteen years, so all different types of economic cycles that have happened in that, you know, we've averaged about a 150 basis points spread of our price to at least a CPI, if you wanna use that as a proxy for cost. Some years costs have been a little higher than CPI, some maybe, you know, right at, but that's a fair proxy. So as the CPI continues to step down, which it has been and is projected to continue to to do so or maybe flatten out in the two and a half to three level, coming down from, you know, nine percent twenty four months, twenty four to thirty months ago, you will see the aggregate price or reported price come down, accordingly, as you have been.

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

But I I think you will see that spread continue, because that's what we target, as a company and and have for long periods. Now I think the higher the CPI, that does help a little bit on the margin to increase that spread a bit that you have. So but I I think that's pretty de minimis, to be honest. We are seeing our costs, aggregately fall, in total, each quarter for the last, you know, year and a half. We saw it step down again in aggregate.

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

We saw our labor cost go to the sort of four two, four three level, and our total cost come in about three four to three five. So still a little bit above the CPI, but coming down. So if you use that as a proxy, you know, a 150 to 200 basis points on top of that would get you sort of five, five and a half type percent price to get you the same performance that six and a half had been getting in 2025.

[Konark Gupta, Equity Research Analyst at Scotiabank]

That's that's great color, Ron. Thanks. And just to follow-up, Shakita, you know, just kinda like understanding here. You said, you know, having the EPA as the adult in the room should help, obviously. Do do you see an opportunity to reduce your cost obligation for the next several years with with the EPA involved here, or that's pretty much a given?

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

Well, look. I I I think what we said is that we don't have any changes to the the the cost assumptions and and the cash outflow assumptions and closure assumptions that we have have provided. You know, we do a multiyear model on that. There are quarters that are higher. There are quarters that are lower, but none of the assumptions have in materially changed.

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

We just believe that look. A lot of these costs are legal and consulting, and a lot of that is driven by regulatory framework in California. So if if that alone is streamlined through the EPA, that'll get better right there, irregardless of remediation cost. So, you know, look, I would tell you we're we're cautiously optimistic on on doing better, but we're gonna fulfill whatever our regulatory, legal requirements are to whatever agency is over us. And and and we have been doing that, and we'll continue to do that.

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

So it's a little bit hard to predict, but I would tell you we feel incrementally better.

[Konark Gupta, Equity Research Analyst at Scotiabank]

Yeah. That's glad to hear. Thanks so much for

[Operator]

the time. Our next question comes from Michael Domet from National Bank. Please go ahead with your question.

[Michael Doumet, Equity Research Analyst at National Bank Financial]

Hey, good morning guys.

[Michael Doumet, Equity Research Analyst at National Bank Financial]

So obviously nice job on the employee retention improvement. I wonder on if you characterize that improvement is largely complete, obviously understanding the impact to margins is lagged. And if that's the case, what are your thoughts on some of the other, call it buckets of potential efficiencies that you can drive incremental price cost spread going forward, I think such as the AI initiative you mentioned at the top of the call?

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

Yeah. Well, you know, first, thank you for your your comments there. I appreciate it. Well, first, I'd tell you that when you when you talk about the turnover and the employee piece, it's it's never done. Obviously, you do get to a point of diminishing returns, but our objective is to drive total turnover below 20% by year end and into '26 and total voluntary to well under 10% as we go into '26.

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

So we're we're not done, but we're getting close. You know, look, I would tell you that the opportunities that we see that are the largest impact going forward are the use of technology, and specifically AI. And I wouldn't say that it's necessarily the ability to increase the price cost spread. I think it's the ability to maintain the price cost spread and reduce churn, and therefore, impact to to reported volumes. That is the opportunity.

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

And and that is, we believe, can be fairly significant, based on the the the pilots that we've been doing for the last several quarters. And so that will start to play out fully in '26 as we will be fully using it by the fourth quarter of this year. So the those are the projects like that, projects like, you know, real time routing, which think of it as sort of ways for garbage trucks, which, we really don't have the ability to do in our system today in the manner that we want, to to avoid traffic, to avoid construction, to reroute dynamically to affect productivity and incremental new stops. So those are the type of things, you know, complete digitization of our maintenance program and systems, which I think will allows for greater inventory control, greater projectability in preventative maintenance and scheduled maintenance, and a flexing of costs with projectability. These are all things we are rolling out in real time over '26 and '27 that I think are, you know, may not may not individually be the margin drivers 100 basis points that turnover reduction has, but combined, they're significant.

[Michael Doumet, Equity Research Analyst at National Bank Financial]

Really interesting comments on the on the price optimization. Mean, Ron, just to follow-up on that, does that in your opinion, could that change the calculus for the typical pricecost spread that you guys have historically had?

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

Again, I would want to say if we could maintain the typical price spread we have had, and we could reduce by 20 to 40% the churn impact of that, meaning you have to sell 20 to 50% less customers to stay neutral, I'll take that all day long.

[Kevin Chiang, Director - Institutional Equity Research at CIBC World Markets]

Got it. Thanks for the comments, Ron.

[Operator]

Our next question comes from Stephanie Moore from Jefferies. Please go ahead with your question.

[Stephanie Moore, SVP - Equity Research at Jefferies]

Hi, good morning. Just one question for me. It does appear that this current administration could potentially be a little bit more lenient in terms of large M and A than at least the prior administration. So I wanted to maybe ask a higher level thought and if the current, I guess, backdrop would make you a bit more amenable to doing maybe larger deals or anything that might be outside of the core average deals that you look at on an annual basis? Thank you.

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

Yeah. No, thank you, Stephanie for the question. Look, the first thing I would tell you is that in the course of twenty eight years, we have never been through a second request with the Department of Justice or the Antitrist Division. And I think that's indicative of our market model, number one. There is nothing that we are looking at that, or have been looking at, that we have shied away because of fears of Justice Department clearance, concentration, etcetera.

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

So I wouldn't want to say that I believe for us that a more lenient justice process is an accelerant to M and A, because it hasn't been an inhibition to M and A. Now, I I will say that I think, in general, that probably broadens the scope of things in some markets for us. You you have to remember that a you we the the filing requirement is about a $125,000,000 of purchase price, not revenue. Remember, in our sector, that could be 40,000,000 of revenue. K?

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

Depending on profitability of a deal. So, you know, that that that's what you gotta remember as far as where does this HSR requirement apply to. That's how low it that's that's what it goes down to. But I I would not tell you that it has been an inhibition for us, but it certainly we welcome the more, you know, favorable regulatory environment, I would say.

[Stephanie Moore, SVP - Equity Research at Jefferies]

Great. Thank you.

[Operator]

Our next question comes from James Shum from TD Cowen. Please go ahead with your question.

[James Schumm, Senior Analyst at TD Cowen]

Hey, good morning. Thanks. With respect to free cash flow, you mentioned you're on track to hit your Chiquita Canyon spending guidance. But can you update on your best estimate for next year spending on Chiquita? Was that $50,000,000 Where was that the last update? And can the EPA give you some relief on leachate disposal? Or does that have to come from the state?

[James Schumm, Senior Analyst at TD Cowen]

And maybe just give us a sense of the 100 to $1.50 that you spend this year. Give us a sense, like, how much is leachate or, you know, if you could bucket some of the costs, that would be super helpful.

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

Sure. Well, what I would tell you is, you know, I think it's too early to make any changes up or down to our 26, 27 estimates because it is a dynamic situation, and and we are looking at this potential sort of lead coordination change. Okay? And and so it'd be it'd be speculative, I think, to do that. To the part of your question regarding how much is leachate, you know, that's about 70% of the cost.

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

Okay? The cost of treatment and disposal and transportation. So obviously, any any impacts that we can make operationally or outlet wise or transit wise help help that. We have made some changes that have recently reduced that in real time that we will begin seeing throughout this third quarter as a somewhat of a step change for us.

[Mary Whitney, Executive VP & CFO at Waste Connections]

And they were contemplated by And and, yes, and

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

they were contemplated. That and that is not a result of anything new. That's result of ongoing, efforts. So, you know, that that that is what we can, you know, what we can tell you about that, James.

[James Schumm, Senior Analyst at TD Cowen]

And and then, Ron, just I mean, as you look for different options to, sort of ameliorate those costs, like, will you be appealing to the, EPA, or would that still have to go through the state in terms of getting some getting some?

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

You know, I think it it the answer depends on what that cost is, James. I mean, the the the the EPA is not going to come in and direct to do direct the state to do things that are against state laws or regulations or objectives. That that is not what they are intended to do. Okay? So, you you know, you we are we will still have to and still are in compliance with all of those things.

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

But there are there are things that reside under the EPA's purview that I would say it's not clear whether it is a federal, state, or local issue on some decisions. And in those areas, I think the clarity, the EPA can be helpful to us. So, you know, stay tuned for for how that that that plays itself out.

[James Schumm, Senior Analyst at TD Cowen]

Okay. Very good. And then just lastly, for recycling, what does your overall book of business look like right now? Is it majority fee for service, or are you assuming the full commodity price risk? What does what does the book look like currently?

[Mary Whitney, Executive VP & CFO at Waste Connections]

Yeah. You know, most of the recycling we do is part of a broader service provision. And so, it we have the exposure, which is why we communicate what the sensitivity is on the, you know, the total recycling basket. And you see that move through our our numbers every quarter.

[James Schumm, Senior Analyst at TD Cowen]

Okay. Thank you.

[Operator]

Our next question comes from Toby Salmer from Truist. Please go ahead with your question.

[Analyst]

Hi, all. It's Henry on for Toby here. Thanks for squeezing me in. I just have a quick one on M and A. You touched on this briefly before, but what's the typical time line we should look at for tuck ins to reach kind of company average margins?

[Analyst]

And then has that average time line changed here as as you've stepped up at these acquisitions? Thank you.

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

Yeah. Yeah. So so I I would tell you everybody's definition of a tuck in is a little different. So a little bit of, you know, commentary there. But typically, a tuck in, we're gonna be able to bring up the company margin average within a twelve to eighteen month period.

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

It's a relatively quick time frame because you are, you know, you're you're you're shutting down a facility that exists. You're consolidating routes. You're doing things that happen in relatively quick order. Now, again, that's those tend to be your very small transactions where you're just densifying a market area. You know, when you're talking about something that is more of a stand alone, and that could be something $2,030,000,000 in revenue, and and you're gonna build out around, you know, that's a that's a longer time frame.

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

Right? You you know, you're probably talking a, you know, a probably more of, a three to four year type period to move that closer to your comp to the company average. Now remember, if we're buying a company that's a 23, 24% EBITDA margin, that's a thousand basis points below our margin. So even if you're moving at 200 basis points a year, you know, you're mathematically four and a half to five years. So so it it somewhat depends on, Henry, on the your definition of what a tuck in is.

[Operator]

And our next question comes from Tammy Zakaria from JPMorgan. Please go ahead with your question.

[Tami Zakaria, Executive Director at JP Morgan]

Hi. Good morning. Thank you so much for fitting me in. I just have one quick clarification question about the opportunistic buyback. So if the 100,000,000 to $200,000,000 M and A in the pipeline closes this year, Could we still expect some opportunistic repo, or will it be sort of an either or outcome?

[Mary Whitney, Executive VP & CFO at Waste Connections]

We view ourselves as having the optionality to continue to do all aspects of capital allocation. So, we don't see it as either or.

[Tami Zakaria, Executive Director at JP Morgan]

Got it. Perfect. Thank you.

[Operator]

And ladies and gentlemen, with that, we'll be concluding today's question and answer session. I'd like to turn the floor back over to Ron Middlestad for any closing remarks.

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

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, Reg G, and applicable securities laws in Canada. Thank you again. We look forward to connecting with you at upcoming investor conferences or on our next earnings call.

[Operator]

Yeah. Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.

Participants

Executives

• Ronald Mittelstaedt, Founder, CEO, President & Director
• Mary Whitney, Executive VP & CFO

Analysts

• Tyler Brown, AVP at Raymond James Financial
• Toni Kaplan, Executive Director & Lead Analyst - Equity Research at Morgan Stanley
• Noah Kaye, Senior Research Analyst at Oppenheimer & Co. Inc.
• Kevin Chiang, Director - Institutional Equity Research at CIBC World Markets
• Trevor Romeo, Research Analyst at William Blair
• Sabahat Khan, MD - Global Research at RBC Capital Markets
• Bryan Burgmeier, Equity Research Analyst at Citigroup
• Adam Bubes, VP - Equity Research at Goldman Sachs
• Chris Murray, MD & Equity Research - Diversified Industries at ATB Capital Markets Inc
• Konark Gupta, Equity Research Analyst at Scotiabank
• Michael Doumet, Equity Research Analyst at National Bank Financial
• Stephanie Moore, SVP - Equity Research at Jefferies
• James Schumm, Senior Analyst at TD Cowen
• Analyst
• Tami Zakaria, Executive Director at JP Morgan