Waste Connections WCN Q1 2026 Earnings Transcript

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DATE

Thursday, April 23, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Ronald J. Mittelstaedt
• Chief Financial Officer — Mary Anne Whitney
• Operator

TAKEAWAYS

• Revenue -- $2.371 billion, up $143 million or 6.4%, driven by $55 million in net acquisition contribution and 3.1% organic growth in solid waste, for the fiscal first quarter ended March 31, 2026.
• Adjusted EBITDA -- $769.5 million, up 8%, with a margin of 32.5%, showing underlying expansion of 90 basis points and 50 basis points total improvement year over year, partially offset by about 40 basis points from commodity headwinds.
• Core Price -- 6% in the fiscal first quarter, positioning full-year outlook to the high end of 5%-5.5%, supported by more than 75% of increases already in effect or contractually secured.
• Solid Waste Yield -- 4.7%, reflecting ongoing churn reduction and indicating fiscal first quarter solid waste volumes down roughly 1.5% (up to half attributed to weather events), with the Western region up approximately 1.5%.
• Landfill Performance -- Total tons up 4%, driven by municipal solid waste (MSW) up 5% and special waste up 8%, partially offset by 5% year-over-year decline in construction and demolition (C&D) waste.
• E&P Waste Revenues -- Up about 4% on a like-for-like basis year over year, with nominal increases in Canada from production activity and pricing, and in the U.S. from drilling-related activity.
• Fuel Impact -- Spot U.S. diesel rose 12%, including a 35%+ jump in March, prompting $5 million in additional internal fuel expense, largely hedged (over 45% of 2026 requirements), with remaining exposure mitigated through surcharges and market mechanisms.
• Recycled Commodity Revenue -- Sequential uptick for the first time in seven quarters, led by fiber and an increase in old corrugated cardboard (OCC) prices to $89 per ton, exiting the quarter at $94 per ton, plus improved landfill gas sales partly from new RNG facilities.
• Employee Retention -- Fourteenth straight quarter of improvement, achieving voluntary turnover below 10%, contributing to record safety and operational stability.
• AI Initiatives -- AI-driven pricing tool delivered 20% enhancement in customer retention and pricing effectiveness; company targets seven major AI projects by 2027, aiming for up to 100 basis points of margin appreciation post-implementation.
• M&A Pipeline -- High visibility on transactions representing at least $100 million in aggregate annualized revenue by early Q3; year-to-date outlays of $365 million included repurchase of ~1% of shares outstanding.
• Chiquita Canyon ETLF Event -- Situation remains "stable, controlled, and decelerating," with U.S. EPA engagement progressing; 2026 free cash flow impact estimated at $100 million to $150 million, with expectations of further declines in subsequent years.
• CapEx -- Accelerated capital expenditures in the fiscal first quarter compared to prior year, largely due to quicker fleet and equipment deliveries and faster advancement of RNG projects.
• Leverage and Liquidity -- Debt outstanding at $9.1 billion (average rate 4%, over eight years tenor, ~80% fixed); $600 million note issued in March; quarter-end liquidity approximately $1 billion and net debt to adjusted EBITDA leverage of roughly 2.75x.

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RISKS

• Mary Anne Whitney said, "Q2 would be the toughest because recovery is the slowest; by Q3 you are more at that 100%, and then that continues through the year," highlighting sequential margin impact from diesel cost lags.
• C&D volumes -- Tenth consecutive quarter of negative year-over-year C&D volumes, with the fiscal first quarter down 5%, indicating continued softness in construction-related demand.
• Mary Anne Whitney stated, "I would still expect the absolute value to decrease over the course of the year," reflecting anticipated moderation despite retention gains.

SUMMARY

Waste Connections(NYSE:WCN) reported material top-line and EBITDA outperformance against its internal expectations for the fiscal first quarter ended March 31, 2026, with 6.4% revenue growth and underlying EBITDA margin improvement, driven by solid waste pricing strength and robust special waste volumes. Management reaffirmed its high-end core price outlook amid substantial progress in employee retention and AI deployment, which is already supporting customer retention and margin expansion. The company cited a robust acquisition pipeline and continued execution on capital allocation, along with stable Chiquita Canyon ETLF event management and expectations for declining free cash flow impacts after 2026.

• Employee initiatives yielded below-10% voluntary turnover and tangible improvements in safety and risk management, which contributed to margin tailwinds cited for the second consecutive quarter.
• M&A activity remains consistent with "singles and doubles" in line with historical practice, spanning both franchise and competitive "core solid waste" deals, plus incremental E&P tuck-ins, fueling above-average deal volume expectations.
• Integrated presence in New York City's newly-zoned commercial franchise waste system positions the company for full participation as that market converts by 2028, with Waste Connections holding the maximum allowed number of zones and vertically integrated infrastructure.
• Landfill internalization strategy, exemplified by Arrowhead, is increasing internalization rates into the low- to mid-60% range, with longer-term targets depending on further growth in average daily volumes and continued investments in rail and intermodal logistics.
• RNG project capital expenditures are concentrated in the current period, while EBITDA and free cash flow benefits will accrue as more of the dozen projects transition online, primarily during 2027 and beyond.

INDUSTRY GLOSSARY

• ETLF (Elevated Temperature Landfill): A landfill experiencing higher-than-normal temperatures, often requiring special mitigation protocols and regulatory oversight.
• OCC (Old Corrugated Cardboard): A recycled fiber commodity traded in the recycling sector, referenced as a key value driver for recycled commodity revenues.
• RIN (Renewable Identification Number): Credit issued for renewable energy production (such as landfill gas), tradable in energy markets, and regulated by the U.S. EPA.
• RNG (Renewable Natural Gas): Methane captured from landfills or other organic waste sources, processed for pipeline injection or vehicle fuel.
• E&P Waste: Waste generated by oil and gas exploration and production activities, including drilling fluids, cuttings, and production wastes.
• Internalization Rate: Percentage of collected waste that is transported to company-owned disposal or processing facilities, reducing reliance on third-party sites and enhancing margin potential.

Full Conference Call Transcript

As noted in our earnings release, we are well positioned for 2026 following a strong start, with upside potential from recent trends. We not only exceeded expectations for revenue and EBITDA, but delivered EBITDA margin of 32.5%, up 90 basis points year over year excluding commodity impacts, in spite of outsized weather impacts and in advance of recovering higher fuel costs. Against the volatile macroeconomic and geopolitical backdrop, our results reflect the durability of our model and consistency of execution as we continue to benefit from improved operating trends, along with recent increases in commodities and special waste activity.

To get into more detail, let me turn the call over to Mary Anne for our forward-looking disclaimer and other housekeeping items.

Mary Anne Whitney: Thank you, Ron, and good morning. The discussion during today's call includes forward-looking statements made pursuant to 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 law. Actual results could differ materially from those made in such forward-looking statements due to various risks and uncertainties. Factors that could cause actual results to differ are discussed within the cautionary statement included in our April 22 earnings release, and in greater detail in Waste Connections, Inc. 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.

There may be additional risks of which we are not presently aware or that we currently believe are immaterial that could have an adverse impact on our business. We make no commitment to revise or update any forward-looking statements to reflect events or circumstances that may change after today's date. On the call, we will discuss non-GAAP measures such as adjusted EBITDA, adjusted net income on both a dollar basis and per diluted share, and adjusted free cash flow. Please refer to our earnings releases for a reconciliation of such non-GAAP measures to the most comparable GAAP measures. Management uses certain non-GAAP measures to evaluate and monitor the ongoing financial performance of our operations.

Other companies may calculate these non-GAAP measures differently. I will now turn the call back over to Ron.

Ronald J. Mittelstaedt: Thank you, Mary Anne. On the strength of our business and consistent execution, 2026 is off to a great start, with results exceeding expectations. Despite the volatility of the broader macro environment, we have not seen anything to date that does not support our full-year outlook as provided in February. In fact, we believe we should be well positioned for incremental benefits both from external factors driving higher fuel and other commodities and also as a result of our investments in human capital and AI, which have broad implications for our operations, along with continued M&A.

In Q1, we saw improving dynamics across our business starting with better-than-expected solid waste pricing retention, resulting in core price of 6%, providing visibility for the high end of our full-year 2026 outlook of 5% to 5.5%. Next, our landfill tons were slightly stronger than expected, offsetting the volume impacts from slowdowns and closures related to severe winter weather, which persisted in several markets, most notably in the Northeast. Landfill activity was led by higher special waste tons, up 8% year over year in Q1, the sixth consecutive quarter of improving special waste. Looking next at aspects of our results related to crude oil prices and related volatility, which are twofold.

First, our E&P waste business, where revenues increased sequentially and were up about 4% year over year on a like-for-like basis. We saw increases both in Canada on greater production-oriented activity and higher pricing, and in the U.S. on drilling-oriented activity, most notably in the Gulf. To date, we have not seen a meaningful increase in rig count or pickup in drilling activity, which may be driven by sustained higher crude prices or long-term supply disruptions, and would be additive to the levels we are currently experiencing. Next, fuel and related costs. Spot diesel in the U.S. was up 12% year over year, including an increase of over 35% in March.

That surge drove our internal fuel costs about $5 million above our expectations for Q1. Our exposure to the cost impacts is limited due to hedges we proactively put in place for over 45% of our expected diesel requirements for 2026. Additionally, in certain markets, our pricing mechanisms allow for recovery of a portion of higher fuel-related costs over time through surcharges, which will step up in Q2 as a result of the incremental cost we have already absorbed.

Based on what we have seen to date, we would expect to be largely insulated on an EBITDA basis over time from most of the effects of higher fuel costs between the benefits from any pickup in E&P waste activity, the impact of hedges, and the recovery of higher diesel costs through surcharges, albeit with some lag in timing. Looking next at trends for other commodities, recycled commodity value stepped up sequentially in Q1 for the first time in seven quarters, led by improving values for fiber during the quarter. Although nominal, the increase is a positive indicator.

And landfill gas sales also stepped up sequentially, in this case due to increased volumes and stable values for renewable energy credits, or RINs. Moving next to operating trends, Q1 marked our fourteenth consecutive quarter of improvement in employee retention and the achievement of another milestone as voluntary turnover dropped to below 10%. We cannot overstate the value of human capital as a differentiator and continue to see the benefits of lower turnover throughout our operations, from our record safety levels to increased employee engagement and, ultimately, customer retention. Shifting to the subject of technology, our continued investment and focus on AI and our overall digital platform are showing promising results within pricing effectiveness, customer engagement, and asset optimization.

Specifically, our AI-driven pricing tool has yielded approximately 20% improvement in customer retention and pricing effectiveness while maintaining our core pricing strength. We are encouraged by early results, knowing our analytics and capabilities will only get better as our technology advances. Further, for the balance of 2026 and into 2027, we are excited about our continued involvement with the field to expand our AI-powered tools, reinforcing our commitment to our decentralized-first model and value-based approach to the business. These current and future tools will continue to expand our customer engagement and routing productivity, with early indications suggesting strong returns on investment. Moving next to M&A, we continue to anticipate another outsized year of activity based on a robust building pipeline.

With high visibility on a handful of deals with aggregate annualized revenue of approximately $100 million expected to close by Q2 or early Q3, we are on track for another above-average M&A year. Most importantly, we remain disciplined in our approach to acquisitions and well positioned for implementing our growth strategy while also increasing return of capital to shareholders. To that end, on year-to-date outlays of approximately $365 million, we have repurchased about 1% of shares outstanding. And finally, an update on our management of the ongoing elevated temperature landfill, or ETLF, event at Chiquita Canyon, our closed landfill in Southern California.

We continue to make progress on mitigating the reaction, which, based on objective data collected to date, is stable, controlled, and decelerating. As noted previously, we have sought out the increased involvement and oversight of the U.S. EPA in an effort to streamline the process. Over the past several weeks, the EPA has expanded its involvement at the facility, which we welcome. To date, the EPA has weighed in and provided direction on two critical issues, which we respect for their expertise and experience, and which have facilitated the development of plans to resolve these matters consistent with our expectations. We continue to work with the EPA on a long-term agreement which should provide even greater clarity once consummated.

There is no change in our 2026 outlook for Chiquita, which reflects free cash flow impacts of $100 million to $150 million. That said, we did adjust our accrual in Q1 to reflect the higher spending we saw in 2025, which was incorporated into our 2026 outlook. We look forward to being in a position to more formally re-forecast the outlays in subsequent periods once we have a roadmap for moving forward, still anticipated this year. Additionally, we continue to expect free cash flow impacts in 2027 will decline as compared to 2026, as previously communicated, and continue to step down in each year going forward.

And now I would like to pass the call to Mary Anne to review more in-depth financial highlights of the first quarter. I will then wrap up before heading into Q&A.

Mary Anne Whitney: Thank you, Ron. In the first quarter, revenue of $2.371 billion exceeded our expectations and was up $143 million, or 6.4%, year over year. Contributions from acquisitions, net of divestitures, totaled $55 million in the quarter. Organic growth in solid waste collection, transfer, and disposal of 3.1% was led by 6% core price, which ranged from about 4% in our mostly exclusive market Western region to over 7% in our competitive markets. Total price of 5.9% included a reduction of about 10 basis points in fuel and material surcharges, given the lag in recovery of higher costs.

With over 75% of our price increases already in place or contractually provided for, we have high visibility for full-year 2026 core pricing at the high end of the range we provided, or about 5.5%. Given the recent step-up in diesel cost, we would expect surcharges to increase accordingly, albeit with a lag driven not only by the mechanics of the surcharges, but also due to advanced monthly or quarterly billing for some of our customers. As Ron noted, we have hedges in place for almost half of our diesel requirements and utilize surcharges in a portion of our markets.

Yield of 4.7% reflects ongoing reductions in churn and implies solid waste volumes down about 1.5%, including up to about half a point attributable to outsized weather events that contributed to Q1 volume losses to varying degrees across all of our regions, except the Western region where volumes were up about 1.5%. Looking at year-over-year results in the first quarter on a same-store basis, roll-off pulls were down 1% on rates per pull up 3%. With the exception of our Western region, pulls were down in all regions. That said, we are encouraged by improving roll-off trends, especially given weather impacts.

As compared to Q4 year-over-year results, pulls were less negative by almost half a point and year-over-year rates per pull stepped up by 120 basis points. Landfill trends, while still mixed, are also encouraging. Total tons were up 4%, on MSW up 5%, and special waste up 8%, partially offset by ongoing weakness in C&D down 5%. Increases in MSW tons were spread across our Western, Canadian, and Central regions, while special waste activity was broad-based, driving increases in five of six of our geographic regions. Most noteworthy, though, was a 20% increase in special waste activity in our Central region, where the pickup we noted in recent quarters had been lagging other markets.

Following up on Ron's comments about improving commodity-driven activity, recycled commodity revenues improved during Q1 led by an increase in old corrugated cardboard, or OCC, which averaged $89 per ton in Q1 and exited the quarter in line with the 2025 full-year average price of $94 per ton. Additionally, our landfill gas sales increased sequentially as a result of contributions from one of our new RNG facilities currently in start-up and also from higher natural gas prices, which spiked in Q1 similar to last year. Values for renewable energy credits, or RINs, remained stable at about $2.40 following the EPA's updates for renewable volume obligations.

Adjusted EBITDA for Q1 is reconciled in our earnings release at $769.5 million, up 8% year over year. At 32.5% of revenue, our adjusted EBITDA margin exceeded our expectations and was up 50 basis points year over year, driven by 90 basis points underlying margin expansion, offset by about a 40 basis point drag from commodities. Outside solid waste, margin expansion reflected improvement in several cost items, reflecting favorable price/cost spread dynamics led by strong pricing retention and magnified by benefits from employee retention and safety. These benefits were partially offset by higher fuel and related costs.

Finally, adjusted free cash flow of $246 million was in line with our expectations and consistent with our full-year outlook as provided in February of $1.4 billion to $1.45 billion. We were pleased to see Q1 CapEx outlays outpace last year's slow start largely as a result of more expeditious deliveries of fleet and equipment and faster progress on projects, including our RNG facilities in development. Moving next to our balance sheet, we opportunistically accessed the public debt market with a $600 million note offering in early March to further diversify funding sources.

Following that highly successful offering and activities during the quarter, including share repurchases as noted by Ron, our debt outstanding of about $9.1 billion had a tenor of over eight years at an average interest rate of about 4%, with about 80% of our debt fixed. With liquidity of approximately $1 billion and quarter-end net debt to EBITDA leverage of about 2.75x, we retain flexibility for acquisitions as well as returning capital to shareholders through additional repurchases and dividends. I will now turn the call back over to Ron for some final remarks before Q&A.

Ronald J. Mittelstaedt: Thank you, Mary Anne. As we have said, 2026 is off to a great start, and there are a number of factors working in our favor for the rest of the year. The strength of our results is a reflection of the projectability and consistency that sets us apart regardless of the macroeconomic environment. Our industry-leading results are also a reminder of the importance we place on asset position and market selection, both of which are fundamental to our strategy and which we believe drive differentiation. Our results highlight the importance of discipline around capital allocation, as well as the value of human capital and culture in driving results.

These are the tenets that have guided Waste Connections, Inc.’s approach since our founding over 28 years ago, and which remain fundamental as we approach $10 billion in revenue very soon. To that end, we are most grateful for the commitment of our 25 thousand-plus employees who live our values every day, putting safety first and making Waste Connections, Inc. such a great place to work. We appreciate your time today. We will now turn the call over to the Operator to open up the lines for your questions.

Mary Anne Whitney: Operator?

Operator: Thanks, Ron. We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, please press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Tyler Brown with Raymond James. Your line is open. Please go ahead.

Ronald J. Mittelstaedt: Hey. Good morning. Hello, Tyler. How are you?

Tyler Brown: Hey. Doing okay, Ron. Hey, Mary Anne. I appreciate some of the comments on fuel, but I just want to make sure I have it. It is kind of a multipart question. First, I want to make sure that over the course of the year, you would expect fuel to be effectively a push from an EBITDA dollar perspective. Second, if we assume fuel stays where it is, we clearly need to contemplate higher surcharges, and that will be dilutive on margins. Can you size some of the dilution there? Third, for my garbage bill, I believe I pay two months in advance, so we also need to consider that there is a lag on fuel recovery.

Can you help us think about fuel dilution specifically in Q2?

Mary Anne Whitney: Sure, happy to address that. There are a lot of moving parts. First, you have fuel impacts that are direct and indirect. The direct impacts are mitigated by the hedges we have in place — we have hedged almost 50% of our fuel requirements — and then we get fuel surcharges in certain of our markets. Largely, in terms of the dollar amounts of the impact from fuel, we can recover that over time through fuel surcharges. You used the term “during the year.” I would remind that since the spike started in March, recovery goes into next year.

There is a lag driven by two things: the mechanism specified by whatever provides for the surcharge, and then, as you pointed out, we advance-bill customers on a quarterly or monthly basis. When fuel ran in March, customers we billed in January, of course, we could not have recovered that — it could take, by example, until May to get that. Quarter by quarter, Q2 would be the toughest because recovery is the slowest; by Q3 you are more at that 100%, and then that continues through the year.

There is a margin impact when you recover the dollars, so you get the revenue and EBITDA, but the margin changes, and that is a function of how big the number is. Illustratively, if we have about 50 million gallons that are not hedged, rate that over the course of three quarters of the year, and fuel is a couple of dollars higher, this could be as much as $60 million to $70 million in incremental fuel surcharges that would run through the P&L, and that would create that margin differential.

On the indirect impacts, there is an opportunity to have incremental benefits associated with higher fuel to the extent that there is an increase, for instance, in E&P waste activity. We would expect that to take longer. As strong as our E&P results were in Q1, that did not really reflect a pickup in drilling activity. We did see an improvement in commodities; you have already seen a little bit of an offset of those margin drags, and you would look to continue to see that as we move through the year.

Tyler Brown: Okay, perfect. And did you give any color specifically on Q2 around revenue or EBITDA? Is that a change? Should we think about not getting that forward-quarter look?

Mary Anne Whitney: It is consistent with the way we have been doing it since last year. We provided guardrails around the movement throughout the year, and I think we did that in Q1 when people laid out their framework for the year. Directionally, what has changed since our guidance in February: overall commodity impact has probably improved just based on where pricing has gone to date — probably a 10 basis point benefit versus where we expected things to be in February — and you would start seeing that in Q2 to the extent it does not change from here. We just talked about the incremental margin headwinds associated with fuel, which would be most felt in Q2 versus the other quarters.

Tyler Brown: Okay. Perfect. Thank you.

Operator: Your next question comes from the line of Konark Gupta with Scotiabank. Your line is open. Please go ahead.

Konark Gupta: Thanks. First, on underlying margins in Q1 if you strip out fuel and commodities, I think they were up about 110 basis points. In February, you were looking at 50 to 70 basis points for the full year. With pricing moving to the high end of the range, do you think the underlying margin expansion has potential upside to the 50 to 70 basis points you guided for the full year? And then on M&A, Ron, you mentioned another $100 million of aggregate annualized revenue expected to close in the coming months. What is the nature of these transactions — areas, asset mix, post-collection versus collection?

Mary Anne Whitney: On the first question, yes, we had a nice strong start to the year. That could arguably be another indication of a tailwind as we move through the year. We would be cautious because you have to have a lot of things go right, and we described all the things that went right in Q1. Acknowledging that the benefits we have seen, for instance, from human-capital-driven initiatives such as retention improvement, we have captured most of those, so I would not expect them to contribute at the same extent as we move through the year. You might have a little better improvement in Q1 versus the other quarters in the underlying margin expansion.

Ronald J. Mittelstaedt: On M&A, to clarify, we did not mean to imply that there was a single $100 million transaction. There is a series of transactions that equate to $100 million or more. These are consistent with our traditional “singles and doubles” core solid waste transactions, both franchise and competitive. We have some integrated transactions — collection through disposal — and a few smaller E&P tuck-in transactions as well. Everything is consistent with our existing platform.

Konark Gupta: Great. Thank you.

Operator: Your next question comes from the line of Toni Michele Kaplan with Morgan Stanley. Your line is open. Please go ahead.

Toni Michele Kaplan: Thanks so much. On volume, last quarter you talked about an expectation for the year of down 50 basis points to flattish. This quarter, we saw some nice improvement versus last year, and it was impacted by weather, so even better than the down 150 basis points. Are you still expecting flat to down 50 for the year? Does anything specific need to happen to get there, or are you running at that sort of pace? And how much visibility do you have? Also, on E&P, strong in the quarter; has your pipeline changed with higher fuel, or do you need a bit more time for prices to be higher to see any impact?

Mary Anne Whitney: We did see improvement in underlying volumes in Q1 and still delivered volumes in line with expectations despite 25 to 50 basis points of weather impact. Some of that we would attribute to improvement in special waste, which can be lumpy, though we have had multiple quarters of improvement there, so cautiously optimistic. The final piece is really construction-driven activity, which we have not seen accelerate yet. There was some improvement in underlying dynamics factored into our expectations for the full year that gets you closer to flat or even positive as you exit the year. The good news is reduced shedding or lost contracts, so directionally we are moving the right way.

Ronald J. Mittelstaedt: Also, our AI pricing tool has driven up to about a 20% improvement in retention at the same type of price, which supported slightly higher performance on price than our 5% to 5.5% guidance. That has a component to volume as well.

Toni Michele Kaplan: Understood. And on E&P?

Ronald J. Mittelstaedt: Crude ran up with the Iran crisis precipitously within days. We have not yet seen an increase in U.S. rig count, which is needed to drive incremental drilling activity to affect our U.S. volumes. If you have a sustained increase in crude price, producers will react after a mobilization period of several months, and then you will see greater drilling activity. In Canada, our E&P business is 80% to 85% production-linked, and we have seen some nominal increase in production because of crude prices and export dynamics. If sustained, we will see it, but it is too early to say producers are reacting to a four- to six-week crisis without knowing duration.

Toni Michele Kaplan: Super helpful. Thank you.

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

Faiza Alwy: I wanted to ask about yields. Beyond fuel surcharges, is there potential for underlying benefit we could see on yield alone as you look at contracts without fuel surcharges? How should we think about yield going forward, and is there room for potential upside? And, relatedly, on benefits from retention, does that show up more in volume or yield? Should yield still decelerate through the course of the year mechanically, or could we see a slight improvement as you lean into technology initiatives?

Mary Anne Whitney: Most of our price increases are in place or known. Incremental yield benefits beyond fuel recovery are more likely to be in 2027 than in 2026. In the past, with outsized cost pressures later in the year, we have revisited price increases, but at this time we think in terms of recovery through fuel surcharges we are entitled to and then incremental pricing benefits lagging into next year. On yield versus price communication, yield should follow a similar cadence to price because we are talking about the dollars associated with price increases retained, and the denominator gets bigger over the year.

Previously, volume reflected differences in mix and the price/volume trade-off from churn; now we have shifted that into the yield bucket. As customer churn improves, yield should reflect some of that, so you will see a little benefit, but I would still expect the absolute value to decrease over the course of the year.

Faiza Alwy: Understood. Thank you.

Operator: Your next question comes from the line of Adam Samuel Bubes with Goldman Sachs. Your line is open. Please go ahead.

Adam Samuel Bubes: Good morning. On E&P, on the last call you talked about expectations for E&P waste revenues flattish for the full year. In the quarter, it seems up over 20%, largely acquisition. Are you seeing outperformance on the acquired revenues, and is flattish still the right way to think about full-year E&P revenues given the better run-rate?

Mary Anne Whitney: The commentary about E&P expectations was that margin contribution was expected to be minimal and organic growth minimal. This is consistent with expectations given rollover contribution from acquisitions and the benefit of projects we have done, including bolt-on acquisitions, and reopening one of the facilities we talked about. That is why we communicate like-for-like to normalize for those benefits. Unless and until we get the pickup in drilling activity Ron mentioned, margin impact should be limited, though dollars go up due to incremental projects and rollover.

Adam Samuel Bubes: Got it. And on AI, you are targeting seven initiatives through 2027, some already showing impact. Between continued price/cost, AI, landfill gas ramping, how are you thinking about potential continuation of outsized underlying margin expansion beyond 2026?

Ronald J. Mittelstaedt: We targeted seven initial AI initiatives between 2025 and 2027. We implemented three in 2025, two in 2026, and two more in 2027. We are spending roughly $25 million to $30 million a year on those initiatives. The returns have been quite strong, most with much quicker than a one-year payback. As we roll out routing and broader digital tools, returns should meet or exceed the pricing tool. While we have not laid out a formal number, we believe as we come out of 2027 and head into 2028, it is reasonable to expect somewhere approaching about 100 basis points of margin appreciation from all seven initiatives.

This is not linear — you load the costs up initially in capital and infrastructure; we are in that phase and still delivering. Then you see improvements as things get fully implemented and deployed, which takes time to reroute 570 locations with 15 thousand trucks. We feel extremely confident and are excited about what we are seeing from AI — it has outpaced our expectations — and those seven initiatives are on pace, if anything, a little ahead. The ~100 basis points is a fair expectation as we get all seven implemented.

Adam Samuel Bubes: Great. Thanks so much.

Operator: Your next question comes from the line of Analyst with Citi. Your line is open. Please go ahead.

Analyst: Good morning. Thank you for taking the questions. Following up on E&P, is the kind of 4% like-for-like growth rate you flagged in Q1 an appropriate number for Q2 or Q3? I do not want to get ahead of myself, but any detail would be great. And then on natural gas, I think you were targeting about $30 million of EBITDA this year — is that still accurate, and did any of that come online in Q1, or is it mostly back-half weighted?

Mary Anne Whitney: The key thing is that we have not seen a pickup in drilling activity, so that is the determinant — watch the rig count. I would not encourage you to extrapolate a recent run-up to a full quarter; underlying activity is up nominally, and it is premature to take it further. On RNG, if you are referring to RNG and gas sales, nat gas is a tiny piece of it. We mentioned nat gas spiked in Q1 similar to last year. It is always good news when you get a contribution from a facility in start-up, but start-up comes with a lot of expenses.

We look forward to having more visibility in July when we revisit expectations; we are still on track to have those facilities come online as described so that of our dozen or so projects, about half were still to come, and we expect those by year end, with some a little earlier and some a little later — right in line with expectations.

Ronald J. Mittelstaedt: To reiterate, we originally outlined 12 RNG projects. Five were online by 2025. One came online at the end of the first quarter of 2026, so really de minimis contribution. We plan to bring another six online by year end, most coming online in Q4, to give us all 12 online for next year. We remain confident. CapEx on RNG will effectively end for these first 12, and EBITDA contribution will come in 2027 and beyond. You will have a double impact to free cash flow starting in 2027 from RNG.

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

John Trevor Romeo: Morning. Thank you for taking the questions. A follow-up on the E&P business: you talked about one previously mothballed facility coming back online. Do you have more mothballed facilities still offline? Any other organic project growth opportunities, and what would decisions look like on those?

Ronald J. Mittelstaedt: When we acquired, in February 2024, 30 facilities from Secure that were disposal, landfill, and processing facilities, 25 of those were operational and five smaller facilities were mothballed. Today, we have brought online two of those five. Three remain, and we will continue to make market-dynamic decisions on whether we reopen those. These tend to be smaller facilities, but contributing $2 million to $5 million in EBITDA per facility as we open them. Collectively, they are meaningful. We are evaluating, and demand will determine whether we open one in the latter part of this year or not. I would not expect it to be meaningfully contributive this year, but they aggregate and the rollover is meaningful as we go forward.

John Trevor Romeo: Thank you, Ron. And switching to New York City, there was some reporting about timelines on waste zones and rollout shifting. You have added to your presence there with acquisitions. Could you give an update on the rollout and your positioning and strategy?

Ronald J. Mittelstaedt: New York City is implementing a nonexclusive franchise system from an openly competitive system with hundreds of smaller carters for commercial waste. The city is divided into 30 commercial zones among the five boroughs, with three franchise haulers per zone, and no hauler allowed more than 15 zones. We have the maximum at 15, mostly in Manhattan, Queens, and the Bronx. We have a fully integrated position with multiple transfer stations in our zones and MSW and C&D landfills we are feeding volume to or can feed to over the coming years. We are really the only fully integrated company in those zones, and we are very excited about the opportunity.

The city is going through leadership changes, with no impact to the franchise system other than slowing implementation a bit in some zones because it is such a change. Implementation is pushing back six to twelve months in some zones. The city hoped to have everything implemented by 2027; now we are hearing that plan is 2028 by the time everything is implemented.

Operator: Your next question comes from the line of Jerry Revich with Wells Fargo. Your line is open. Please go ahead.

Jerry Revich: Hi. Good morning. Ron, I wanted to circle back to performance at Arrowhead. You have ramped that operation nicely this year. Last quarter, we spoke about internalization rate approaching 60% for the company, with Arrowhead a contributor. What can that look like on a multi-year basis as you deliver higher capacity? How much higher could you take volumes at the landfill over the next couple of years, and where could internalization go as you continue to ramp up?

Ronald J. Mittelstaedt: We are running between 7.5 thousand and 8 thousand-plus tons a day at peak this year at Arrowhead. We plan to get that to 8.5 thousand to 9 thousand as we roll into 2027 for the year. That takes incremental step changes in trackage both at Arrowhead as well as at intermodal facilities along the East Coast, which are being implemented with Norfolk Southern. The facility’s permit cap is 15 thousand tons a day on a seven-day, 24/7 basis, so there is still a lot of room.

I am not going to say we get to that in five years, but I do believe we will get north of 10 thousand tons a day somewhere in the two- to three-year mark from now. As we continue to grow, that will move internalization into the low- to mid-60% level. In our competitive market footprint, that means we are more than 80% internalized, which is very high. It is playing out about as we hoped.

Jerry Revich: Impressive pricing in the quarter — good margins even with the diesel headwind. How did pricing cadence play out? To what extent did that reflect managing pockets of inflation or other drivers of outperformance?

Mary Anne Whitney: The outperformance came from many places. Pricing retention was a little stronger than expected, and we would attribute some of that to the AI price optimization tool. Human-capital-driven initiatives and being fully staffed to provide service that allows us to defend price increases have continued to be additive. When I look through what drove the 110 basis points of underlying margin expansion, it is pretty much every line item with the exception of fuel and related costs, which were about a 20 basis point drag. That was augmented by strong special waste volumes and better-than-expected landfill volumes, plus commodities improved over the quarter. All those pieces together drove the margin expansion.

Jerry Revich: Thank you.

Operator: Your next question comes from the line of Seth Weber with BNP Paribas. Your line is open. Please go ahead.

Seth Weber: Hey, thanks. Good morning. Another margin question. Your SG&A was basically flat year over year with higher revenue. Was there anything unusual in that number, and is there any reason why you cannot continue to keep SG&A flattish year over year going forward with these initiatives? And on volumes in the West Region, can you add color on what is driving that and which markets?

Mary Anne Whitney: There can always be some noisy items, whether it is incentive comp or other pieces. We have hired and incurred some upfront costs for AI initiatives to drive the benefits we are seeing, and that would be a contributor, but nothing specific to call out. There are always moving pieces quarter to quarter.

Ronald J. Mittelstaedt: On the West Region, which is mostly our franchise region, the benefit is we get 100% of all volumes wherever they are generated at the guaranteed franchise price. It shows the model’s strong volume and stability benefit. We had strong landfill and special waste growth in our Eastern Oregon landfills and some Northern California landfills, and improvement in roll-off volumes. In the West you do not have the price/volume competitive trade-off, which reflects the underlying economy at maybe a 0% to 1% type real GDP right now. That was the point of the commentary.

Seth Weber: That is helpful. Thank you.

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

Shlomo Rosenbaum: Good morning. On the cyclical parts of the business, special waste continues to be strong; C&D was down 5% versus down 4% last quarter; pulls are getting less negative. Are you seeing improvement or flattening out? Where do you see the trajectory of the business and the economy into year-end?

Ronald J. Mittelstaedt: Special waste being up for the sixth consecutive quarter is traditionally a leading indicator. It is predominantly speculative cleanup for development of commercial or residential real estate, which usually precedes infrastructure and construction. C&D being down 4% to 5% is a real-time indicator of construction activity. You do not do a lot of construction in Q1 due to winter weather, so it is hard to say if that is an indicator of the economy. We feel like there is pent-up demand starting to come; we are not seeing negative indicators in our business.

If the Iran situation drags on and fuel remains elevated, that could pinch the economy, but assuming it is relatively short-lived and fuel retreats by the second half, we think there is positive momentum that should start to come through. So we would say flat to improving.

Mary Anne Whitney: Also, that was our tenth consecutive quarter of negative C&D volume, so this has been around for a while. Roll-off pulls similarly. At some point, the comps get easier, so you should see it get better. Q1 is probably not the right time to look for it, but that is how we think about trajectory.

Shlomo Rosenbaum: Thank you. And on rail and internalization, as you ramp tons, is it primarily internalization or are you also seeing third-party at the landfill contributing? And strategically, how is pricing for rail versus local landfill?

Ronald J. Mittelstaedt: At this point, most rail volume is internalized tons. Purposefully, over the last year and a half we took tons going to third-party sites on the Eastern Seaboard and internalized some of that volume. We have not yet aggressively pursued third-party volumes into our intermodal transfers because we have had capacity constraints at some Northeastern landfills. We pulled down some volume there and internalized it on rail to take customer volumes into those landfills. As that alleviates over the next one to two years at a couple of sites, we will be able to pursue more third-party rail volume — that will be incremental. On competitiveness, the longer the distance, the more competitive rail becomes, especially with increasing fuel surcharges.

Our rail is going 1.5 thousand to 1.8 thousand miles from the Eastern Seaboard to Alabama, so it is quite some distance. For shorter distances, trucking is more cost effective; for longer distances, rail is more cost effective.

Operator: Your next question comes from the line of Noah Duke Kaye with Oppenheimer and Co. Your line is open. Please go ahead.

Noah Duke Kaye: Thanks. On yield and price, the 130 basis point spread between core price and yield is quite tight in a positive way. That spread probably tightened year over year given moderating intentional shedding and AI and turnover/safety initiatives. Can you dimension or confirm the improvement year over year, and how should we think about that spread for 2026 as a whole? Also, risk management as a percentage of COGS improved 30 basis points year over year. You have talked about risk management as a lagging benefit of improved safety. Was that a positive surprise, and how are you thinking about risk management as a benefit to margins for 2026?

Mary Anne Whitney: Looking back apples-to-apples, churn was probably running more in that 150 to 200 basis point range for several quarters, and we have seen tightening there. It gets trickier because mix and seasonality factor into it. For instance, selling in the Northeast, rates per yard can be twice as much as in our Mid South or Southeast region; that influences the amount, which is why we thought it was good to get it out of volume because it overstated negative volumes in a punitive way. We are trying to achieve comparability with peers, acknowledging it is still imperfect. On risk management, we called out in Q4 that it was the first time it flipped from a headwind to a tailwind.

It is encouraging to see the trends materialize; two quarters is good to see. We came into the year expecting this to be the final piece of human-capital-driven benefits — the lag benefit of risk — and it is generally in line with what we were hoping for this year. It will vary quarter to quarter, but it is a good guide and was factored into expectations.

Noah Duke Kaye: Perfect. Thank you.

Operator: Your next question comes from the line of Kevin Chiang with CIBC. Your line is open. Please go ahead.

Kevin Chiang: Hi, thanks for taking my question, and congrats on a strong start to the year. On special waste as a lead indicator, when you look back historically, what type of lead is typical — six months, a year? And on yield/core price over a longer period, as AI revenue management gains traction, how might that spread change? Do you reduce churn and help yield, or do rollbacks improve such that numerator and denominator impacts offset?

Ronald J. Mittelstaedt: It is a bit anecdotal, but generally special waste leads by six to twelve months. This is property being cleared by developers who have pulled permits to do speculative construction or development — shopping centers, infrastructure, apartments, homes, etc. Lot clearing and cleanup goes on for three to nine months, then construction begins. Special waste has improved for six consecutive quarters, so it is reasonable to expect that by this summer and through it, you should see some pickup in C&D and flow-through into solid waste.

Mary Anne Whitney: On yield versus core price, the absolute value depends on what our costs are doing. To the extent we are seeing cost benefits and need less price, that will factor into both price and yield. Specifically for yield compared to core price, we expect to need to put less price on the street but to retain more because of these tools — that is a benefit we are already seeing. Ultimately, keeping the customer longer is the greatest benefit. I would expect some improvement in yield, tempered by the need for less price overall.

Kevin Chiang: Very helpful. Thank you.

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

Tobey Sommer: Thank you. A follow-up on rail. Over a long stretch of time, how do you see volumes shifting towards rail, and what are your plans to help drive that change beyond Arrowhead?

Ronald J. Mittelstaedt: Today, rail is predominantly a Northeastern Seaboard modality due to very high tip fees and landfill scarcity; you are not building new landfills in the Northeast, and it is difficult to expand them. As landfill airspace scarcity gets tighter in other parts of the country, such as along the lower East Coast into Florida and the Carolinas, you will begin to see similar things at smaller levels next. There is still a large amount of airspace available in the Southeast, Midwest, and Rocky Mountains at relatively inexpensive cost versus the Northeast, so it is less conducive to rail in those geographies.

On the West Coast, the Pacific Northwest has used rail for quite some years in Washington and Oregon; not really in California, and I would not expect it there anytime soon. You need to be moving volumes probably north of 300 to 400 miles for rail to make sense in most economic or tip-fee environments. Over five to ten years, with continued landfill consolidation and increasing tip fees, you will see more rail as waste moves economically farther. Stay tuned — for us, you will see an incremental rail opportunity happen in 2026. Across the industry, it will continue to develop, slower, but follow landfill fees and the price of crude — as they move up, rail becomes more economical.

Tobey Sommer: Thank you very much.

Operator: We have reached the end of the Q&A session. I will now turn the call back to Ronald J. Mittelstaedt for closing remarks.

Ronald J. Mittelstaedt: If there are no further questions, on behalf of our entire management team, we appreciate your interest in the call today. Mary Anne and Joe Fox are available to answer any direct questions we did not cover that we are allowed to answer under Regulation FD, Reg G, and applicable securities laws in Canada. Thank you again, and we look forward to connecting with you at upcoming investor conferences or on our next earnings call.

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

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