Waste Management (WM) 25 Jul 182018 Q2 Earnings call transcript

Company Profile

Participants

Ed Egl	Waste Management, Inc.
James C. Fish, Jr.	Waste Management, Inc.
James E. Trevathan	Waste Management, Inc.
Devina A. Rankin	Waste Management, Inc.
Brian Maguire	Goldman Sachs & Co. LLC
Hamzah Mazari	Macquarie Capital (NYSE:USA), Inc.
Noah Kaye	Oppenheimer & Co., Inc.
Patrick Tyler Brown	Raymond James & Associates, Inc.
Michael E. Hoffman	Stifel, Nicolaus & Co., Inc.
Jeffrey Marc Silber	BMO Capital Markets (United States)
Ken Wang	First Analysis Securities Corp.
Michael Feniger	Bank of America Merrill Lynch

Call transcript

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Operator

Good day, ladies and gentlemen, and welcome to the Waste Management Second Quarter 2018 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. And, later, we will conduct the question-and-answer session and instructions will follow at that time. And as a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Mr. Egl. Ed begin. may you Sir,

Ed Egl

and you, Devina Amanda. joining conference thank for Chief Chief Fish, everyone, With Executive Officer. Jim Vice Financial President Senior Good for our Vice morning, and President Jim us are earnings Officer; this and Executive second Officer; me Trevathen, and you Operating morning Thank Chief Rankin, quarter call. and XXXX President

strategic financials overview update, provide today. prepared Trevathan Jim of Fish and comments provide details high cover an will hear price a You'll cover the them level Jim and will the and and from will details financials. of cover each volume Devina operating

and get this to our website, is a Before please X-K, we that at Form www.wm.com. started, The morning have press schedules the X-K includes important the Form release and filed include information. release available we that the the on note press release press earnings

you projections differ and based could forward-looking call, to risks actual statements, uncertainties the about hear statements subject are Such to results opinions periods. or cause which will are During expectations, materially. that current on future

yield our our of to recent and of and revenue uncertainties are including and in or references internal which are XX-K. discussed and Form Some from yield results volume. discuss growth unless our in filings volume, these the Jim specifically the and SEC, today's will press Jim with or stated, more in risks release most areas IRG otherwise

Management XXXXXXX. This www.wm.com, today's form reconciliations the retransmission enter call may GAAP for address company's no addition be code reflect www.wm.com. on Waste be income, will of a and at which of operating enhance items measures our XXX-XXX-XXXX Any the Eastern earnings our comparability income Please management of will believes diluted prohibited. second refer as the been by per EBITDA not recorded a depreciation approximately from X:XX unless are expressed to EBITDA the before Management being Waste of they the XXXX Internet, a can at the quarter Time-sensitive August share, rate, These comparable Eastern earnings redistribution, beginning XX until do that of with is consent earnings income flow the information or tax call, available telephonic a To website, and call, may second be non-GAAP or and operating of otherwise time Time are measures. free they comparisons hear today effective To performance Net call the EPS, amortization is During share, and EPS on quarter and without XXXX. which discuss occurring X:XX call, and this found longer release and replay EBITDA, Jim is stated margin. schedules, operations results will also per day most July accurate rebroadcast reply. information be operations, on Jim, access reservation call certain website, from and Devina to measures or cash our excluding operating use measures. press the operations. provided the have PM which notes during to the of hear in fundamental to PM for of business Any additional dial is adjusted to replay non-GAAP in of hours XX. written refer which drastic and any XX, of XXXX, the over at Time

Now, Jim I'll President turn CEO, call the over waste and management to Fish.

James C. Fish, Jr.

morning. all you thank joining Thanks, this for Ed. us And

organic we transfer growth. strong operating X%. from flow growing address second EPS demonstrated revenue station exceptional growth the collection, once Overall, In growth. quarter the by the business XX% capital almost accelerate earnings our XXXX. each Waste once free Our a business cash execute as and growing free second strategy cash which activities and to and both increase fleet in to saw our nearly quarter needs robust XX% operations translated performance, than quarter, This and into was from generated and additional again income operating more traditional operating in and produced of flow, when $X.XX second performance, landfill than of the strong cash EBITDA Solid more again, generating spite lines spending X%, flow of Our achievement of quarter in airspace of we accommodate compared in

Solid performance to the we $X.XX $X.XX. a are adjusted lower rate, EPS our XXXX increasing and Waste than to a business of range Given in the outstanding anticipated tax guidance

We are of EBITDA flow billion to and operating of $X.XX cash billion our billion. guidance $X.X free $X.XX $X.XX also adjusted billion reaffirming to guidance

see as business is pressure line While business quarter. Recycling we from Waste our EPS in our demonstrated from strong this of performance us challenges commodity persisted traditional the propelling second guidance increase, Solid our forward to by continue market as

compared second During China's $X.XX declined a expected revised us. in lower commodity of be And believe from to for guidance to year impact for million, $XXX impact prices. the negative year-over-year commodity largely second This EPS to the Keep $X.XX is is than no half longer are year a we $XX the now of upon in impact the demand based we outlook, our ton. import of the are Based to EPS we approximately around further is full blended which which recycled per full three-fourths Recycling ban. recovery in rate operating our quarter, Recycling XXXX, a full our behind twice average to quarter recycled updating $X.XX we for that more assuming of upon the in expected EBITDA of when equates mind, to initial decline XXXX. year compared due by our materials XXXX, following

our to improve to the in expectations. steps second than We recycling headwinds take as expect is XXXX the the aside, to XXXX we business. of Recycling moderate tracking better half continue

investing couple delivering long term. our retaining for beyond to labor big industry. focused to picture shareholders We're minutes from we're of just over drivers the proactive second will careers, improve to on talent safety, performance an being the us technicians. volumes. a to in facility. and we year. and in One second to growth So and I spend early seen collection we're sustainable the and in and Obviously, this are Many technician focused training that in not their training on technicians. and and best XXXX, want a we've driver pressure with the of drivers industries focus and frontline developing delivery the the process facility shortages, attracting our workforce in regard is employees end, costs increase in are By handle our allow accelerate particularly developing seeing improvement area retention, on a To training more and

equipment future. these as a potential further we program make higher-tech, opportunity in see work currently are remotely like workers us new Caterpillar a enables the for us us our efficiently provides to operate some the and our In jobs of to In service hire fill addition, wounded our qualified landfills we military allows veterans, using the hires. that as labor-intensive less one Colorado. more Technology other in to well workers, members with technology, of up to at of piloting with for which this modernizes jobs particular, X.X%

the on area return focus disposal our is of network. maximizing big Another

stations that industry, benefits and increased in from increase sites. we've see disposal being XXXX haulers story our end network large and the leverage We believe close of investment volumes our choosing third-party strong benefits facilities. opportunity our We one. transfer an have landfills the and started the is best-positioned good network. in due close, returns to and disposed that the volume on of a logistical see at to our We a is economy To disposal to the

for expectations. not the confident detail. Solid I second of been business halfway or the outperforming could now Our can and We greatest performance to our deliver the remainder the They've in for I'm more even year. accomplish the operating the employees to financial the in our own on call and meeting our they our cover well will to this industry. execute great results that year, able Jim without way throughout in quarter are over goals to strong health, Waste At operating XXXX. exceeding we mark is turn

James E. Trevathan

good morning, Thanks, everyone. Jim, and

Our business continues Waste traditional build Solid to momentum.

X%, For the fifth us on and year exceeded to consecutive track putting pricing achieve quarter, full our growth volume both guidance. price volume and

the margins and Disposal growth strong quarter the In in in drive price from Our compared operating million growth X.X%. expanded of EBITDA despite million million decline in organic Disposal business revenue increased or a Recycling. offset and and second strong our our Collection or higher our basis operating million Collection $XXX of volume X.X%, point $XX EBITDA by Total headwind and $XX to partially business. points quarter Recycling to The business, $XX XX-basis increased helped company XXXX. revenue, XX.X% was an XX line from

Our revenue service underlying lost exceeded continue Waste for increases XXth XXth of for demonstrate metrics consecutive strength quarter. exceeded Solid new to decreases business the quarter Service business. business consecutive and our the the

was the XX XX-basis a XX.X%. Our in year-over-year point churn X.X% improved to points rate quarter, basis improvement, second rollbacks and

second revenue basis contract. the and the X.X%. of XXXX improvement due while waste point and competitor grew grew growth year to was through yield improved company X.X%, due last points. additional in internal achieved price in City X.X%, when solid a volumes from up impact disposal X.X% to the was second Transfer in growth end Traditional quarter, collection Virginia and that quarter disposal our XX the received XX-basis X.X%, of volumes landfill station despite Turning volumes favorable was a to York This year, volumes core total the primarily New we outage.

robust X.X%. the combined Collection, the through operating up $XX for core to volumes in Waste operations X.X%. line volumes X% price X.X%. XX.X%, price margins revenue-generating business, price grew Landfill EBITDA core volumes volumes the Collection X.X%, flat. The line and business. and Special volumes $XX X.X%, of again, combined and business C&D and the and go with price results core the grew with In was Industrial volume achieved growth. of growing core essentially increases line MSW we quarter, growing volumes by the increased In business, Commercial with up where line of total saw X.X%. million income X.X% X.X% from We increased price led million grew volume X.X%. of was with Landfill of was Residential Let's Cover

by income operations margin by For million operating income quarter, business Landfill our of EBITDA million second from margin while grew operating points. by the rose and $XX from XXX basis line grew and points, operations XX basis $XX EBITDA

Recycling. at Looking

further address to contamination out approach As our and first as business call, an cost we conference rolled excess to steps improve took recover the contamination. quarter discussed we on for we

the in improvement with the year. half pleased second far and are expect see We so of results the to

We will from assets continue Recycling customers in to work the invested any economic recycling a climate. shareholders and because service an appropriate it's our return deserve that desire business capital on improving our on our

Total expenses. our operating XX.X% The expenses Commercial Operating operating second quarter, to second hourly in businesses main increased to compared employees. expenses cost for labor percent and XXXX. and million the as XX Turning year. were related of a quarter basis $XX our is points over to of volume the an in last improvement bonus of Industrial driver revenue increases

per we business nature to mentioned, basis learn should new improve as our in pressures as additional by lower with do and offset routes, recycled recycling are fill we cost and drivers efficiency costs we But drivers in opportunity training cost impacts the employee short-term high-growth hourly this, commodity collection we efficiency. Labor Removing increases incur the locations. goods reduction in expense cost their which and been due volume, in XXX and When have labor new Jim historically, routes routes hiring the margin these Solid As the they increasing the lower additional points. unit. adding Waste traditional margin of sold bonus, were operating expansion for provide for of and future prices. those do improved

exceptional another shareholders. and to the focused we progress XXXX to the volume over on for to I discuss disciplined profitable our in remain pricing with pleased half results. call first of year are growth turn and will our now financial Devina our deliver We

Devina A. Rankin

and Jim, good morning. Thanks,

drove financial expected impressive EBITDA controlling EPS focus give original As guidance you've pressures is quarter guidance. working from $XXX on growth second quarter ago, Disposal to of operations second be performance our will exceed million in These more confidence quarter. cash morning, in costs cash have operations. that core results Collection heard we disciplined with our proving year best our we strong from in The and core saw ever we quarter the of achieved. than one combined free full significant in This optimizing volume price Recycling spite even drove this capital and strong the achieve just the we single Solid Waste us and that cash and results flow

We performance, the from tax expected in the cash flow operating when our markedly are you reform. strong seeing improved. that benefit combine lift results conversion And with are

flow quarter cash directly from operations of points of The last XX.X%. the a from than operations invested in XXX to the same is from grew cash continued support that will Our incremental more percentage drive being revenue as basis assets growth. and year

a million economic investments in our in capital expenditure $XXX acquisition. spend quarter, $X.XX in full growth of of businesses We've making quarter, not free capital that increase flow of to million $X.XX fleet we our allocated putting second value quarter, putting way billion, end to dividends the our years our on the over paid that $X.X Year-to-date, return million guidance return shares. high $XXX we bought of the guidance XX% from committed We investment capital accretive pace backdrop second and achieve pace many expenditures, to year million, allocation or $X.XX back and year is XX% second our of We $XX supportive a billion. for is growth, valuable our and to the half $XXX remain us prioritizes we plan through in shareholders at In year-to-date on $XXX billion to million year bringing represents to During billion XXXX XXXX. generated $X.X an billion. This in our revenue well the our the quarter, acquisition total and the growing $XXX and in million to us With first accretive to XXXX. spent flow about of million bringing acquired In completed the nearly cash of full cash in dividends to generally cash our free annualized an million. free strongest half our of share landfill. we're capital $XXX the continued seen of buyback $XXX the tuck-in first in another on million flow of $XXX of year.

period. our with Our continuous the our revenue in managing as improvement This well as the diligent the a $X the per prior percentage the X.X% the of was costs mindset revenue legal $X.XX by prices in costs. XX result as and accrual approach when is impact revenue matters. to of is decline quarter, of affected in helping for share. from quarter particularly for million in line commodity SG&A is margin basis second quarter SG&A consider which year SG&A strong This the by negatively points charge a increased EPS you

raising and strong mentioned, our is our the Jim SG&A. traditional Waste for primary As the business EPS Solid reason includes performance managing guidance of that

driving improving support continued efficiency in sure making service, customer back in focused and invested exceptional that SG&A growth function. are every revenue office on we our employees that is Our spend providing on dollar or

we good seen and continue to have invest even to in unnecessary eliminating these improve technology expect discipline our in We we benefits as business. spending

worked planning. the rate in of the Management. recognize the professionals In tax identified effective was as-adjusted our and capture for IRS, of We full benefit opportunity, worked hard win but to an a tax settlement of our that XXXX amount for want quarter, entire excluded take adjusted shareholders. planning this who job be our real tax a a They value quarter XX.X%. second from the an about with tax XXXX for generated benefit now tax recognized Waste to $X.XX XX%. and outstanding moment expect represents to adjusted We to do from audits. I we EPS, outstanding Our $X.XX our our rate year second the teams

our our at debt-to-EBITDA at based covenant at X.X end financial the metrics, on Looking second of the our ratio measured remained bank times quarter.

total and of strong. XX% of is cost Our the in the average delivered was performance of debt remainder the the quarter at outlook first about the solid for is and of X.X% variable year XXXX portfolio rates. our half weighted debt We for

waste the overcame that, team and Amanda, year. half recycling Waste the let's success second and quarter this to With once in solid performance hard generate We earnings. appreciate cash in increase continued of forward Management traditional look business headwinds both of a healthy to lines again Our the open the the questions. the work for

Operator

Thank you.

comes first question of from of Our the Maguire Brian line Sachs. Goldman

open. is line Your

Brian Maguire

Hi. Good morning, everyone.

James C. Fish, Jr.

Good morning.

Brian Maguire

on solid in Congrats the results core business. the

a that into dig to more. wanted Just bit little

results confidence the most of you the Recycling retention? any pricing, it raise surprised part Is the are despite about you Just the in business, the maybe the year comments areas surprising MSW you Just business what kind headwinds. give the the EPS so to the Landfill to about in the guidance most. of far what

James C. Fish, Jr.

We've know, quarters know this us. surprised a of I couple coming for really anything that You don't Brian, seen now.

there We have to has downturn have strong Recycling in able so we that fact Solid that period, over Waste the seen completely with if been it's was a that maybe this a short as that. it's steeper surprise eclipse been

there And every volumes. certainly to core weren't improvement. showing I would but a where call price quarter long really talked up. yield, specific bit seen script mentioned I have a that and get it Landfill as To a bit good. so, we and sure strong them they're there is about more that ago a volumes we've surprise, about has not poor been welcome that I'm of had The several individual volume been addition in well. answer pieces, business questions not any Jim years the It's my about certainly, a been surprise, but that. it's to if the we ago always

a but now pick lines time. stressed in I'm to strong. X.XX% going kind and it, maybe only been it are of So positive. those Commercial because call a If to in that surprise, X.X% – roll-off, it's fact that are Residential Residential X.X% I it's the for actually Jim that it's had It's business one of is showing these negative positive. long individual

Brian Maguire

Okay. That sounds good.

keeps of and Just to it all might ban of imports. switching news China, the they is week the coming over out or latest month obviously every every recycling changing, sort the news

you It in getting old through maybe sooner. ways guys industry to model now paper looking more looking U.S. be kind import stimulate in and the know it have idea pulp that or heard to try that be waste of look get it of we've win-win restrictions. process said I've that may to interested to at the in would everybody. business kind a and a who change the into, And they their they market guys the mills some in a calling you around or there concepts a to with they be the rumblings send I take I is pulping the that in for One by maybe some are business. some but end more here that at been paper whether some partner run First could pulp said of pulp something through heard you trying domestically some XXXX, demand it recycled or can China? either recycle and way they're industry, where develop what, and guess, by restarting the front paper of recycled some for you over Is U.S. of

James C. Fish, Jr.

Yeah.

at single the recycling is suggest, every the we fallen on little term is to a integration, I'll a facilities, and different off three here. as over period. basically or the We're going this short business our technology doing option equation you recycling looking look it down bringing way, has table vertical whether it really bit improve it we're recycling maybe radically that's boil – think a such whether what there's things I like short is, or at in to math

the in our the gave. year, And middle commodities the to obviously so, of the tune the is to fall we $X.XX we've range off seen really about which for $XX right equates of expectation

to and up XX% The costs And to other costs has really then plan. haul, China contamination is approach, going the are have not India to Vietnam, because gone importing which much we're up a places pieces longer of the phased to three length XX% anymore. which recycling been gone It's has like meet these to are processing have this improvement transportation a the short-term attempted offset year-over-year piece limits. cost and of

about solid fixes a is bit So, we're little look that to long-term going on recycling at footing. to short-term both fixes what term you're longer gets business and talking this make and sure back

Brian Maguire

Okay.

just call on implement $XX that of related out last one could that that having and customers? surcharges success fees your those recycling the to kind of me, from to you related what Just million, that to bucket fees traditional any one are you trying within

Devina A. Rankin

in is fuel. line that So related surcharge our specifically IRG table to

approach the recycling with that of mentioned included All Jim is behaviors commodity line. in associated three-phased the price a

Brian Maguire

it. Got

very Thanks Okay. much.

Operator

you. Thank

Our Macquarie. is line next from Hamzah the of of question Mazari

(USA), morning. Your you. Thank line Mazari Capital Good open. is Hamzah - Inc. Macquarie

to push The room maybe and else of first sort just their wasn't is have positioning? pricing of you could Jim, historically sort having question is better further or asset done, side. just and either anything of future bid around the where for leverage it Disposal maybe on around can to that contracts there bidding comments referring assets us, you you are best-positioned frame if the that on you Disposal

James C. Fish, Jr.

Yeah, Hamzah.

the probably accordingly. mean, it's price to certainly assets life I both. I We have think of But looking them. do a I would former. those to those a bit finite be assets certainly

the even to X% range. Macquarie I'd think Mazari price But X% And - we've to them price well for Inc. assets range. MSW kind more X% at aspirationally, When make are kind as of the we so, look pricing, that Capital (USA), us done that to Hamzah last need quarters them, like with we ours, to X%, see I the the sure as we in four of accordingly. in X% X% well-positioned our to pretty maybe

projects for structural on Maybe you just can you secondly, great. us Okay. touched take at how are you technology of to any then on stage, high your touched share the efficiency you can landfill. cost many take level, And of equipment the cost be technology, would frame pilot know at I and could out looking you how some they're that if or as either anything quantitatively And or view structure in out. much high-level autonomous qualitatively

James C. Fish, Jr.

the team a you tell would residential digital job, particularly and I just doing kind our of out cost pie. benefits – technologies are is side technology secondary competitors an Yeah. ourselves on benefits benefits open The to that fantastic about tool. we as an they've think is rolled customer-facing bigger are The of a primary us opportunity gain and a differentiating giving benefits. the market from the slice of

we I that go do. customer-facing quantified through that by a a you're think call as customer I benefits. efficient the the it as pleased a an call job the result, be will to with said, very asking second So for through about. But would are cost, to fully say more about and tool, you than mean, haven't the customer piece call we for go our that less that it's some way, process centers process app the because longer. is takes with There

in what Hamzah, that may a mentioned I the primary we've comments bigger looking is which something other customer-facing are I think heavy Colorado. us first going miles step very we'll just to the that the my turnover involve this market we're other at, our both and is side, of traditional think the excited. a very, dozer will But prepared type it way beginning share be several and equipment, in with this a about piece So be I slice of And from a we're industries, technology benefit thousand bit. getting case that I be and, the this. done partnership operating call of center, also, we're this space, talked customers we're a and technologies. that on first away is so about from remotely technologies in the to it's is believe excited mitigate pie. in but foray about, think – But the that. to landfill we excited. Caterpillar, It's And this in as for operating Caterpillar technology But into of case has Caterpillar help that that with us our

James E. Trevathan

opportunities coming the had to and few equipment would that with truck the routes about us lead as pilot also Industrial and And and years we an stuff to the or talked Residential base. reroute, customer that those first of manage last us future. helps then a increase efficiency use we've increases, I volume from have new and we've helping computers for it those us really Commercial with all on helps add onboard really technology it volume doing quarter on provide we've site The there's that are where all growth. tools service our what birth it's older the opportunities Maybe our current Hamzah. at landfill computers those done the good automated but And, just robotics heavy stage. of But we cool, sexy the on that sites,

technology and that is point from hammer but and really that want with it's the that really helping there's mentioned, home and us in that's differentiated job to today. you this, this the us Last Hamzah, operator helping I So, a to existence customer some redefine Jim perspective, quarter. said as is starts I every job on

that today. have We XX%-ish in turnover job

So that five our years. more over means, all redefine in operators theory, it. little to starts bit we turn This almost a in of than

potentially, attract sitting of a room vets, mentioned, in maybe remote interested but attract, to And of more otherwise about conditioned as equipment, of chair a folks not a that and but I that's screens joystick face think in of only we're front very in landfill, much not the may operation basically you working be different. chair. also able leather that in gaming a As kind a interested in a on they're wounded heavy operating working air piece with some a

James C. Fish, Jr.

very That's helpful.

over. it turn I'll question. last Just

the figure floor view churn side, maybe forward? going sustainable there? you. it's churn know XXbps to Thank I point, volume customer But a there's a On any the is in X%. improvement customer at some

James C. Fish, Jr.

quarters straight look result happy We're rates. very Hamzah. with if XX you that But had now in Yeah, QX. back, with single-digit churn we've

done to has it it's been We're of Part of in talked technology very that delivery Maybe regard. we've of doing And all some the service we've is further So Part focus do that expect about. well it and of to opportunity, just customer. the could on Thank can as continue number, sustainable number very well. I that's Capital improvements. Great. and that. think I Not school Macquarie seeing Hamzah to dramatically double-digit it Mazari improve. it was improve that it (USA), continue when that we as old can Inc. expect but a - you. but a

Operator

Thank you.

from Kaye is the of of Oppenheimer. line question next Our Noah

Your open. line is

Noah Kaye

ability of price, labor like get kind necessarily terms the things that expansion not are very pick highlighted gets what of the managing for and Thanks I overall perhaps over and margin best this company beginning areas at of do costs call to on just inflation cost environment question now? more you just to in continue through How well. and quarter, the of focusing the industry of of much. to employees. retaining kind the guess around see looking term? Jim, as maintenance an specialized? on is And the much And recover this to one What up and really that the but of developing the you medium

James C. Fish, Jr.

this and training turnover as to is of the of so X% sure that get the the them. more of is and we're driven Hard things stayed more has kind whether becomes there closer of closer feels like we're there's relatively closer we that still Yeah, to our that an new center the – allure whether by And that range. I'm X,XXX that in or real seeing end constant. is to bringing year, rate employees on, and know

turnover, and is we're really to big question, provide think not attractive I able that longer as we industry, think a term, But company, the have for as to we're going career tell. it and but it's not having that we that Clearly, effect would yet. actually or an whether turnover means at affecting not that is I that's job looking at an been whether effect, sure think but I I'm higher Noah, folks. do an haven't So and is start having all, only a that how seen an

really point turnover. it – first center drivers and that two when really careers. a their seen an they be of critical. to turnover us, center, couple for or in our to three, to that training first for we've technicians rolled there year had that. For And form the providing a with is through drivers their But year critical seems that's to lower years half. stay went year excellent training and seem training. us magic is means that hit markedly out the first They of year the that Once We've some

pressure for we been Caterpillar and for right bringing another recycling, local seeing now, adding doing anything some I isn't help this business just something and seeing the so By business would years. last we that. in our we on it characterize cropped and the expands way: it down additionally that network But we're to collection labor side will types the mentioned, farther think We things, several technologies that's with some pressure as we've up road in of XX not think address months. way, our the a of training locally. And bit help. This local center across but will the those little

Noah Kaye

that opportunity mid-XXs, costs be that in improving highlighted initiatives you're even lower and further seem you to processing the Right. of should then, than right, potential about that some my or around down the think the price Recycling. decrementals assuming cost there how have through Right. structure. a is we other implemented, we would ban an Because prices? then, incrementals? decrementals company you any maybe longer The were is And and rationalizing do I see peers math It think that's another reversion. no on may if the If got industry. on leg improve And

James C. Fish, Jr.

but Yeah, if would I'm place I tell not to the to I would this, tell I prognosticator, a closer a on bet bottom. that you that we're you asked were

probably more potential And so upside downside. than there's

commodity point upside end taken we We improvement a we've being through in if improvement really we're the As the into that all XXXX, Waste closer the first in because of Recycling either to has of could the didn't and and in reduction remainder could a about be be $X.XX of that remain we and out some this. us really basically of year. year. this lining upside the a here's would, And as certainly it overcome $X.XX certainly to because from not I plan three-phased May, didn't to equal, we be the in of those flatlining bottom mentioned, put this XXXX. Recycling it, this earnest we remainder any silver commodity Because all quarter in conservative with expense of May. effort year, think in rolled April much to get in completely until been things plans the the so and tailwind even are for the prices approach for to fact, if prices there the But think Solid tailwind than able

James E. Trevathan

I first might China sent our be to the And, add this just X% clear, half year in of we And than with Noah, of we're open that China. you'd the so less impact. to volume

yes, other So not the transportation and, – fact domestically and and commodity significant both impact, found is transportation the price next both we an cost outlets China what that internationally. But other we as affected found given does outlets costs. it's and

not sure that than So, to future China, of for how going huge less would months current X% be our or in fiber quarters. impact with us I'm

Noah Kaye

very for Right. color. much Thanks the

Operator

you. Thank

of Our next the Tyler question from is of Raymond line Brown James.

open. is line Your

Patrick Tyler Brown

Good morning. Hey.

James C. Fish, Jr.

Good morning, Tyler.

Devina A. Rankin

morning. Good

Patrick Tyler Brown

Hey, Devina.

are Recycling. understand correct, my in year-to-date notes to $X.XX just I But drag so seen it. want I a if So about you've make sure

like I assuming drag, sounds QX price. full current You're thought be year, in really the implies that which would aren't you're much guiding a of even prices. back though $X.XX and a to peak commodity not pain in change to any for But expecting even half at it $X.XX you

on really wrong? the softening back about So are fixes what's going all that the short-term thinking Or half, in I am drag? this the

Devina A. Rankin

got commodity it the comp of than perspective, The the piece QX a was XXXX much heavier correct and right. QX. be we XXXX that on year-over-year will is one saw pressure price basis and in basis on year-over-year would part that it a from I that a in you've So first half of

and year-to-date given think Solid the reduction of that drag, in of you that, come as already current our that some particular back year. our the less rate execution end from Solid provided. year that interest the customers, fees to tells lift Waste year. we in provide the And experienced impact of the that With picture cost So our the the have regard the you if only from of both that had impact top half Solid the those is the should $X.XX at big of of of on there of lift is on with experienced has to so to overcome and lower of impact reason above then delay much some than Waste, that Recycling more contamination than in noted what we've relative $X.XX you the $X.XX the on line high up have $X.XX we've have back we'll that that's part then, that I efforts will from there's already the lot a of business current that the in tax lift Waste of half what mentioned, from Jim year. we've had that $X.XX over And and in the incremental

Patrick Tyler Brown

Right.

then And think year? about Okay. tax on how quick, we should next real the rate

Devina A. Rankin

tell you – planning the is we had activities. continuing the $X.XX XXXX current that until that quarter that only see I our item would from I tax benefit don't

as in us XXXX. current impacts Aside roll-off reasonable those Investments Tax Income too specifically. time outlook But Renewable point that say from Low XX% Tax Credit. and XX%, Housing to for of impacts start are there about some for it's and the early we But our this Energy to Credit we're at that, looking see is at for

Patrick Tyler Brown

Service I'm then, the Trevathan, the Jim on application of Exemption. Hours about And Okay. curious

a So really can that little way reasoning behind the bit of a in cope to the move? that some you tightening with talk about labor? Is frontline

James E. Trevathan

Yeah.

the talking issue? ELD about You're

Patrick Tyler Brown

Yes.

James E. Trevathan

I Okay. less they're Most requirements is. XXX-mile are operating – It the right routes – file XX% but did of exemption. under radius. than have our less as just than mean, now we about written, been over that we're

Tyler, expect haulers. So short-term we industry, as other part that filed are sure living operating things type exemption it happens of and request, I'm standards exemption. with we there today not yet, mean, looking but are several sure kiln the it. are but good And happen, if if people whether the won't we're that the And that or I not but

Patrick Tyler Brown

margins. Okay. here And one maybe going Devina, then, my last just, the to back

this margins point in a had you XX-basis improvement So year-over-year quarter.

the that tons? XX-basis Is you some shedding was broker a I lower-margin drag. point did think of correct? mentioned that any impact And have maybe of from Recycling that the

Devina A. Rankin

XX-basis you're us impact Brokerage So, impacted of line actually That business. included recycling exactly point right. the positively. from the

Patrick Tyler Brown

Right.

Devina A. Rankin

business was MORS of basis a points XX the isolation. So, drag in

basis mix So, points and between inclusive mention brokerage business that the the XX for you Recycling is MORS. in of

Patrick Tyler Brown

Okay.

XX? So rev Solid Waste in But there was it, any benefit a, rec from was call there?

Devina A. Rankin

a which So, around as Solid a rec total changes plan, as pass-through other basis we the negative revenues takes. was and up gives some But points. had rev standard XX basis also There The hourly points. implementation, our points Waste some had by are actually. bonus was in basis well impact itself other XX of XX

Patrick Tyler Brown

Okay.

core, to at. was trying it core So was it get is core, up what I'm

Devina A. Rankin

Yes.

Patrick Tyler Brown

All cool. Okay. you. right Thank

Operator

you. Thank

Michael from of Hoffman next the comes line Stifel. Our question of

is line open. Your

Michael E. Hoffman

much. very you Thank Hi.

that beginning days this I'll where you at mix EBITDA these look recycling. approximately have I people X% probably waste X% solid really I waste-driven in Stifel. growth versus wanted a are at of looking now and today say more the the parsed Have correctly? One think, to at you a like get of EBITDA we parsed the I year as outlook in at because But a we're I with solid thought EBITDA of growth of the were if these the correctly, about year. revised the down-recycling for beginning looking

Devina A. Rankin

You have.

James C. Fish, Jr.

Yep.

Michael E. Hoffman

Okay.

the first to X% in versus better. second second half that basis it Devina, it's of the half than And that be If to, half be that acceleration So to I expecting the been just right? halves, on that's you alluded is a the that the greater half about. to talking Is than first going you're what you've does the that power half. even in second split in is

Devina A. Rankin

strong you of about is Credit. remind Tax QX I Fuel though that was the piece would The one because particularly

Waste, to detriment line $X.XX we've because level the to basis, to the EPS provide So we X% the be billion some growth, quarter. have line and growth on be $X.X full basis. from comparing which EBITDA of us somewhere an the around billion, the hit on that benefit had of we're of first that in talking should at Recycling overcome of a had about $X.XX the would on But seen $X.XXX Solid the between a billion business. consolidated of growth EBITDA confidence year $X.XX But

James C. Fish, Jr.

Michael, see better and the of the strong as what even Waste I the as that it's in sure then half Waste whether not stays back been, really I'm headwind coming think, that Solid would in as really it's moderates is. that year saying you back do than is say it we're getting I Recycling lift the Solid half.

back Solid the it's as Waste Recycling as a It's just is the that half. been get good in over easier in decade. comps

Michael E. Hoffman

Okay.

James E. Trevathan

Waste Landfill the second Recycling example, Solid the comps... while gets comps, bit volumes, in And for the a little easier half, the

James C. Fish, Jr.

storms. the we're is tougher with Yeah. Virginia you The because point some of for comps there comps middle, the the went by last of the a And plant, little tougher the in plant, there – Covanta the bit the that way, year. Landfill have of down is,

started that And beneficiary in But so, volume. were their in of some QX.

particularly we're for storm into already as that difficulty year-over-year. seeing comps QX, a So, tougher comp we'll bit we get obviously, plant, those of see

Michael E. Hoffman

again, that we're that's ex-rev up points basis is have so, rev then back analysis, I of of basis points basis around out that right margins points to what Okay. rec? it's is XX the and to Solid And business am something Solid Waste Waste rec XXX gross, XX kind seeing for going

Devina A. Rankin

that's Solid and to been basis around has year-to-date ex-rev XX the points hourly bonus. basis of growth, and Well, XX points ex-the rec Waste the

expect of that's so, as start as some gain of the the hopefully and how efficiency and upside quarter cost of saw through some And in we second we because we those then would a and expansion are on we hours of the Trevathen when year. mentioned the performance rest half the upside routes, better about in line year, we're the that to training routes we labor at back in of the that Collection Jim it think expecting continuation incremental looking see the business what inflation that as earlier, margin

James C. Fish, Jr.

you've and EBITDA But think kind bonus. for them. contributors And kind mean, mean, Rec, us the really kind of is Michael, we four against the and about else are margins of are it's working everything detractors, and with Yeah. big hourly us. Waste, on hit those a Rev the of when a I the I Solid contributors Recycling big detractors business, the small. couple big kind of couple But and working

Michael E. Hoffman

Okay.

can billion. all So of labor, in I'm efforts timing What labor past that months and billion? up we that about you direct like. $X.X that $X.X of XX these about heard next Devina's billion doing $X.X reduce retention try do XX to the I've and given on to see talk over things it you're the and following training can number the months, Talk the comment focus on if a the labor. about and you

Devina A. Rankin

us in for is Well, and we've about the focused step that business. Residential be That's particularly a big continues forward to we're fleet, automation some been what it in line of talked of something the on.

us, several provided fleet to of benefits business. and that, last and our that's addition In substantial I and our the years. for back routing computers benefits part to over in gets think structure optimization the it the efficiency us onboard of And that for

and commercial by X%, saw we quarter in as volumes. The given volume X% Collection expansion industrial And impressive volume structure which our our routes, almost route you over that up increased are take and is we've both really growth-related. second impacts

impacts that really we see as as and the ways a the costs but safety costs, working improve we automation labor impact doesn't technology focus labor environment. to we and from growth So flex management is well. find that and volume to risk direct it And use also perspective ensuring just

James E. Trevathan

And project in route of the every a the just have growth driver, at volume with that we a not our the We the street, I'm a points. tools in business agree love talked I the Collection But couple The with of but of rolled that of versus the that the of of the number year this looking on beginning impact commercial We rolled manager, I route. at time using our of lot A had our a new we come happening It's bigger seasonality as us on have routes the of help. out But X% the of just help. And, structures her and add the last about I see real the that'll for early that end May Michael, see sure, we've gains years opportunities side just at to couple middle most of did. same to period. June years. we've plan timing both over And where in QX the growth. issue that target route. a route begun that'll additional allow a completely previous in of longer-term started than project. Michael, And that given manager, some out. and efficiency is middle clearly time industrial them they came on a efficiency, Devina volume remember some that and in quarter later time. that effort the the color. items led we've the tools at a district that

with of that earlier, route lot little structures, and new new and larger-growth about, a of underway overwhelmed mentioned to bit training, with we new handle structure. with we've therefore talked volume, Jim So, of I with some overtime with a because it's districts both our it drivers,

that see and of expected you'll in that As second we manage of we expansion margin the closer year. get growth, our half business where arms Collections line the around that on to

Michael E. Hoffman

Great. operating you the was how in versus CFO leverage quickly. The working Okay. Devina, upside, of much for that And Q? then, two capital

Devina A. Rankin

slide that quarter, the We of that but $XX to benefit the got actually million and that actually a benefit in was Yeah. us. to bit actually saw Fuel capital, detriment But incremental we Credit day. the an In a second of quarter. we DPO DSO that related and for net-net On continued got to the DSO make so from got we had working of we in and most progress about Tax cash QX. DPO, on

half We pieces from the equation year there's half of that performance first continue focused and in second both upside the so of far of year. the the to the seen we've on in be

Michael E. Hoffman

Okay.

to upside the point operating That's is this other So, be XX% really made? leverage. to

Devina A. Rankin

really not say would quarter. we payment I to a XX% there the So, make tax is federal other elected the in the second thing

a XX% our we base say from moved of XXX-basis around to more the normalized, of XX%, course that the improvement So, point we year. a improvement. point look more XXX-basis to be for would like full over I should

Michael E. Hoffman

And on the change, EPS how That's much good operating $X.XX how know. to tax the much to then, leverage? is is $X.XX and incremental Okay.

Devina A. Rankin

the So, is is offsetting we leverage. really other view each and upside tax and recycling entire operating

Michael E. Hoffman

operators, last then for this the majeure, at issue Okay. is recycling And for this force an that point?

James C. Fish, Jr.

at taking that that point. not an good an we're think we option, we're approach this It's making We taking but it's progress prefer. option the

Michael E. Hoffman

Okay.

James C. Fish, Jr.

contamination most But MORS to than our the a in they if to some exposed our with news not, media issues. talked restructuring the our, we They them all in it's half clearly accept Michael, them place. that franchise it And, have and already get issues residential the from. and comes they were of more of of volume commodity whether contracts. want term largest And That very it plans whether to short of question. see is we

market not just positive that's that think always on but don't see it's option. what's We'd and in see, work approach. absolute see with going accordingly. us I through they said, an We as with Jim rather So, contracts North the the customers and they our basis our across force standpoint, of the majeure. and going a But, to change on best then clarity America, from

Michael E. Hoffman

for you questions. Terrific. Thank the taking

Devina A. Rankin

Okay.

Operator

Thank you.

Markets. Our next question comes from of the BMO Silber Capital line Jeff of

Your line is open.

Jeffrey Marc Silber

expense? to Is of Is that, included should be little And in operating bit Thank to be CapEx? guidance? this comments about from going to of your some that? If can is you an that training I seeing building. your wanted over there new timeframe something the we so on color we it get back much. facility you're go what a earlier

James C. Fish, Jr.

locations. equation all property part today capital. covers the move well of we the East Jeff, building. there got the is whether remember, looking look is we're training. going we local and at out internal But, with training center one at But do at external really and locations West. the or We're Capital We've it to in level.

rather comprehensively company message also managers route localized is do Because it full just technicians do that don't it to operation. and company, think whole of we We operating we'll the So have And we locally. also a perspective, down that of it and give efficient the over use the training. the more – do we capacity from and And more done now in I'd cost completely term than training efficiently. long and across consistent like part as right more also go an where perspective more and training. so utilize we are so get clear it we Florida we don't when training it's include well see that efficiently. do We them we and centralize as to the it think aligned a center we expects completely what this just more the

retention. So we opens. that it safety it year expect It won't next improve And improves efficiency We're it. about And as our be until to it excited well. results. improves when

Devina A. Rankin

end at outlook high billion. our in the the included $X.X is capital That of

Michael E. Hoffman

Great.

numbers cost, to appreciate wanted both side and the that. mentioned don't can I get? side. that. on that Just then And average remarks volume your think in the of percentage you the cost Is couple a I we the on questions. confirm just change something commodity

Devina A. Rankin

you. to that get We'll

Michael E. Hoffman

And that. the in then, for EPS your count year? what guidance is I Okay. adjusted share embedded appreciate finally,

Devina A. Rankin

Around XXX shares. million

Michael E. Hoffman

Okay. Thanks I so much. Thank appreciate it. Fantastic. you.

Operator

Thank you.

of Analysis. Greendale comes next from of question First line Corey the Our

line is Your open.

Ken Wang

This Thank Ken is you. for Hey. on Wang Corey.

one quick a for Just me.

at strongest free I be for years. may think few the last cash the least, quarterly flow, this

on your thoughts Just forward? any cash use going wondering in of change

Devina A. Rankin

dividend, organic to what part we committed step remain the and you We equation is And why which really buyback balance between capital tell expenditures. would you've as a committed the M&A. well, are is growth share in change to I seen of the

from you're the free we flow, and how in on And terms flow thinking we're focused of cash allocate of operations. allocate that how cash about strength cash it so free we while

And that, and in important so, growth piece too. is the organic capital an investment core of

Ken Wang

you. Thank it. Got

Operator

Thank you.

Feniger of the Our is question America. from of line Bank Michael next of

is line Your open.

Michael Feniger

strong, pricing seeing Volumes headwinds year. Yeah. Thanks Recycling are but Hey, momentum. labor up guys. for with are you're me think When squeezing XXXX costs going in. the we next anniversary pressure of

help us you to let's XXXX? XXX say can takes on you of able What the like pricing points expansion and So, puts with next about get do basis how to think need margin year? to be

James C. Fish, Jr.

you've of have for we're do come to eventually doing most pretty tailwind prices a we bottoming think as is Recycling Michael, of I on being that for the us tailwind commodity chance a hit become if them. close assume I next out, because mentioned has year then better will a everything us.

this got bonus recall $X,XXX next question out year. So, Recycling, – us we think year. you have as the Labor is we can because be for mark a tailwind there we've a

do will inflation be will some in labor we'll decided year. some that think what we next haven't there the there know We be – economy. We

takes the puts but for went of And mentioned for basically I as through we the haven't that will of on those some there's do to through push is pricing think for fully day technology. that. Jim We then quantified. of at within landfills remainder the managing improvements the we XXXX XXXX. middle things to only primarily an and all efficiency And opportunity operations, that continue labor itself think So, and particularly transfer us we not pricing

to All to to margins. the contributes and line of some and momentum ultimately bottom start those build we think

XXXX. at next look about the we're about – tell So I I and pretty encouraged if we're pretty year, would puts you, takes encouraged for

Michael Feniger

it on waste, Thanks, cycle. Jim. comments your confidence on sounds like on And just the have based you core

Now, more that sheet indicate balance is pretty different said, conservative on to sheet maybe goal could walk that understanding your just buybacks if why an of could Can us So it not part since a it's that Is through cycle? us. have kind at this get balance we a story conservative. and now the downturn balance of and more next flesh right and shift out you dividends? acquisitions fortressed sheet for towards and for overpay the for

Devina A. Rankin

really the core would I Michael, Jim on. start, then I'll say add is growth. what So balance But conservative result can that and of a sheet is strong

anything recent years And done to reduce in so our we've not indebtedness.

environment. more stance ensuring any regard for to M&A we're aggressive firmer flow committed we're potentially think the we're regard piece this overpaying going allocating fact, a continue a head buyback, or with nail to that, more share we're of M&A. to In of XXX% you cash do hit dividends on I to that in and to With on that ensuring or our free taking that stance And the not that. of combination to

sure the that greater for those continue of continue capital and to or invested over acquisitions return individually are best we'll that and return that we capital return we is the keep in look the and combination those on to also in provides whole capital that focus We long where on growth invested industry two to on greater a we than that. deliver interested is in term. we invested the have on be than pieces parts doing ensuring But

M&A. for overpay to going not we're So,

James C. Fish, Jr.

thing said in I has since she the same The think it say been I've been I XXXX. is, Michael, right. balance way, long-term the would debt Yeah. by our here only

billion $X now. had and I $X.X think we have we billion

happen that year effort cash close when any function have That we every up kind we happen the right. that. really other other when norms it really recently flow. of flow it's a said, base to happened job you So, from But dividend even in extent changes number. material it's this good really number respect that's kind a to in of as business, gone made about new and It's every seems to she's changes try up of doesn't cash and is done growth changes to free our mirror been to It with But has kind more think period we'll with leverage, every changed mirror a the we really year. that the years what again, real really believe debt. base established six although of doesn't a It that been the And X.X with free is we've do long-term dividend that itself, think of a not the – of I pretty in dramatically I X.X, over see year. a changes with in dividend. X.X to, of have

Michael Feniger

great. That's Yeah.

I trends in in even last Just the been there witnessed of step to but observed pricing, sneak that you're that second you XXXX, on what second saying on quarter? half you're you saw comments the even of in. any kind mean has volume the based change year, landfill to this not talking this compared one July and about all the and just

James C. Fish, Jr.

You mean as goes, as Michael? far volume

Michael Feniger

Yeah. Yeah.

James C. Fish, Jr.

this, here, but so small sample it's good far. Well, I'll of just a kind say and July looks so a really

talked been as good fact, forever. looking of In as July with about of Jim, maybe who's exception we've most here us, the

Michael Feniger

Perfect. Thanks, guys. it. appreciate Really

Operator

over no remarks. questions. this conference the to at I'd Jim any time, Thanks, closing And, are there you. <: to Thank Great. Amanda. like for further turn Fish

really So, our remains consistent the for theme in today theme with our closing, year.

morning. solutions new truly XX,XXX what to rolling teammates experience, technology this we excited makes as about of out of to very over storm see don't While we a we this for as the on as digital all are Waste certainly the towards for seen we a really we've for Even all well strong I'd tailwind, providing in in the in business as Recycling any next and make joining like us holds as economy on this focus as look Waste had we and overall thank them decade. Recycling, our point, who thank as horizon future Solid our our year. an our the bring and business you macro at customer And the great XXXX. again operations, itself team And possible out becomes differentiated we're strides clouds mentioned, unmatched customer-facing we Management. challenges

talk next will We quarter.

Operator

you program. today's conference. the thank does gentlemen, participation and in conclude Ladies This for your

now may great have You Everyone, day. disconnect. a

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