Waste Connections, Inc. Stock

Hello, everyone. Thank you for joining us, and welcome to the Waste Connections, Inc. Q3 2026 Earnings Call. [Operator Instructions] I will now hand the call over to Ron Midelstad, President and CEO. Ron, Please go ahead.

Thank you, operator, and good morning. I would like to welcome everyone to this conference call to discuss our third quarter results and increased outlook for 2026, along with some thoughts about the setup for 2027. And I am joined this morning by members of our senior management team, including our CFO, Mary Anne Whitney, who will first provide our forward-looking disclaimer and other housekeeping items.

Thank you, Ron, and good morning. The discussion during today's call includes forward-looking statements made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including forward-looking information within the meaning of applicable Canadian securities laws. Actual results could differ materially from those made in such forward-looking statements due to various risks and uncertainties.

Factors that could cause actual results to differ are discussed both in the cautionary statement included in our October 21 earnings release and in greater detail in Waste Connections filings with the U.S. Securities and Exchange Commission and the Securities Commissions or similar regulatory authorities in Canada. You should not place undue reliance on forward-looking statements as there may be additional risks of which we are not presently aware or that we currently believe are immaterial, which could have an adverse impact on our business.

We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change after today's date. On the call, we will discuss non-GAAP measures such as adjusted EBITDA, adjusted net income on both a dollar basis and per diluted share and adjusted free cash flow. Please refer to our earnings releases for a reconciliation of such non-GAAP measures to the most comparable GAAP measures. Management uses certain non-GAAP measures to evaluate and monitor the ongoing financial performance of our operations. Other companies may calculate these non-GAAP measures differently.

I will now turn the call back over to Ron.

Thank you, Mary Anne. We are extremely pleased to deliver third quarter results above expectations, setting up another increase to our full year outlook and demonstrating once again the durability of our model regardless of the macroeconomic environment. Most notably, underlying margin expansion of 50 basis points drove adjusted EBITDA margin of 34% despite surging diesel costs late in the quarter.

Solid waste organic growth in Q3, including core pricing of 5.5% plus fuel and material surcharges of 1.3% on average yield of 4.3% and unit volumes declined, eased to 1.2%, a sequential improvement of 70 basis points from Q2, primarily as a result of a pickup in more cyclical landfill volumes. With Q3 special waste up 7% year-over-year and construction and demolition degrees up 5%.

We are also encouraged by trends in our other lines of business. We saw continued strength in E&P waste revenue, up another 6% sequentially and in certain recycled commodities, including OCC, where values have improved in each of the past 3 quarters to now up 35% from year-end levels. Additionally, we are benefiting from increased renewable natural gas generation from the new facilities we have brought online as we have discussed earlier this year.

Moving next to M&A. Year-to-date, acquisitions of $130 million in annualized revenues include 2 West Coast solid waste collection franchises closed during Q3. The pipeline remains robust with dialogue ongoing that will result in the closing of additional transactions later this year or early in 2027. With liquidity of over $1 billion and leverage remaining at about 2.75x debt-to-adjusted EBITDA, we continue to have capacity for outsized acquisition activity while funding our growth strategy, sustainability-related projects and expanding our return of capital to shareholders.

As announced yesterday, our Board of Directors authorized a 10% increase to our regular quarterly per share cash dividend. Our 16th consecutive double-digit increase since the initiation of our dividend in 2010. Year-to-date, we have completed record levels of share repurchases totaling over $1 billion or 2.5% of shares outstanding. As we have and will continue to take an opportunistic approach to buybacks.

Additionally, as highlighted in our recently released 2026 sustainability report, we remain on track to achieve our long-term aspirational sustainability-related targets. Since 2018, we've invested over $500 million in sustainability-related projects and are benefiting from the expansion of our network of renewable natural gas facilities and the introduction of enhanced automation in new and existing recycling facilities. Moreover, we continue to enjoy the results from 3 years of improvement in employee retention and most importantly, record safety performance.

Our continued progress and ongoing investments in sustainability-related projects reflect our commitment to the environment, our employees and the communities we are truly privileged to serve. We consider these efforts and enduring part of our corporate culture rather than in a program with at a fine endpoint as we've used sustainability as integral to our strategy for long-term value creation.

And now I'd like to pass the call to Mary Anne to review more in depth the financial highlights of the third quarter, our increased full year 2026 outlook and what that implies for Q4. And I will then provide some preliminary thoughts about 2027 before heading into Q&A.

Thank you, Ron. Third quarter revenue of $2.638 billion exceeded our expectations and was up $180 million or 7.3% year-over-year. Contributions from acquisitions net of divestitures, totaled $53 million in the quarter. Organic growth in solid waste collection, transfer and disposal was led by 5.5% core price which range from below 4% in our mostly exclusive market Western region to above 6% in our competitive regions.

Fuel and material surcharges of approximately $30 million or 1.3% and stepped up sequentially from Q2 by about 20%, reflecting higher diesel costs in Q3, and they will continue to be impacted by the pace and magnitude of changes in diesel pricing. Yield of 4.3% on solid waste unit volumes down 1.2% reflect the following year-over-year results in the third quarter on a same-store basis. Roll-off pulls were down about 2.5% on rates per pulp up 5.5%. Consistent with activity in recent quarters, pulls were down year-over-year in all regions, except in the Western U.S., where pulls were up 2.5%.

Landfill tons were up 3% on rates per ton, up about 4%, and Q3 reflects a step-up from Q2 when landfill tons were effectively flat year-over-year, and it represents the first quarter in the past 2 years during which all 3 waste types showed year-over-year improvement, MSW, C&D and special waste. Activity was led by strong special waste and C&D tons, along with a nominal increase in MSW. Special waste was up 7% in Q3 on multiple jobs across many geographies ranging from New York and Pennsylvania and the Northeast to Oregon in our Western region. C&D tons were up 5% on similarly widespread increases, most notably in our Southern region, led by Texas and in California and the West.

Looking at other lines of business. As Ron noted, E&P waste revenue continued to ramp during Q3. Year-over-year organic growth of about 5% was led by a 9% increase in the U.S., most notably in the Permian where rig count has increased by about 10% since early this year. Activity in Canada, while more production-oriented and therefore considered less sensitive to crude values remained about flat year-over-year when normalized for an outsized remediation project in the prior year.

Moving to other commodity-related revenues, Recycling revenues were up about 12% year-over-year, driven by higher OCC values, particularly offset by ongoing weakness in plastics. Landfill gas sales were up 35% year-over-year due to the combination of higher volumes from new R&D facilities and higher values for RINs, up about 10% and year-over-year to an average of about $2.50.

Adjusted EBITDA for Q3, as reconciled in our earnings release, was $895.8 million, up 7.9% year-over-year. At 34% of revenue, our adjusted EBITDA margin was up 20 basis points year-over-year. Excluding a margin drag of about 30 basis points for higher fuel costs, underlying adjusted EBITDA margin was up 50 basis points. Said another way, adjusted EBITDA margin would have been 34.3% excluding fuel impacts. Once again, our outside underlying solid waste margin expansion reflected favorable price/cost spread dynamics, magnified by benefits by -- from employee retention and safety, most notably, savings and risk management costs.

And finally, year-to-date adjusted free cash flow of $1.09 billion was in line with our expectations, and we remain on pace for full year 2026 outlook of at least $1.4 billion. Given our outperformance in Q3, along with higher fuel costs and expected recovery thereof as well as incremental contributions from acquisitions and commodities we are increasing our full year 2026 outlook as reconciled in our earnings release to revenue of approximately $10.09 billion and adjusted EBITDA of approximately $3.345 billion or 33.2%. This implies Q4 revenue of about $2.2 billion and adjusted EBITDA margin of 33.3%, up 20 basis points, excluding fuel, about as expected in what we knew would be our toughest quarterly comparison versus the prior year period.

Our outlook assumes no change in underlying economic trends. The closing of additional acquisitions would provide upside to our increased 2026 outlook as with further improvement in commodities and related activity. Further movement in fuel prices and the timing of recovery of higher fuel costs will also continue to impact results.

With that, I will turn the call back over to Rob to provide some preliminary thoughts about 2027 before we head into Q&A.

Thank you, Mary Anne. As we've said, we're extremely pleased once again to raise our outlook on the strength of our operating and financial results in spite of the magnitude of unexpected headwinds from record diesel rates and ongoing daily macroeconomic uncertainty. The consistency and visibility of our results, most notably in a challenging year like this 1 are a validation of the differentiated market selection strategy that has guided Waste Connections since inception 29 years ago, along with our decentralized operating philosophy. We're most grateful for the commitment and dedication of our over 25,000 employees as we recognize that superior execution by empowered local leadership has been and will continue to be a true differentiator.

Given the level of engagement of our workforce, we're excited by the early indications from AI-driven applications focused on our operations recognizing that these returns on these technology investments will be most fully realized by teams knowing how best to put them to use. We're proud of the results we've delivered to date in 2026 and our positioning as we exit the year. In fact, from an operational standpoint, we feel about as good as ever.

We've recovered higher fuel costs faster than expected and delivered outsized underlying margin expansion on record safety performance while also managing the reaction at Takeda as we expected, bringing new RNG facilities online and integrating another $130 million in acquisitions year-to-date. We've also returned record amounts of capital to shareholders through opportunistic repurchases and continued double-digit per share dividend growth, all while maintaining low leverage, setting up for continued growth and free cash flow generation.

In short, we've honored our commitments. And regardless of market sentiment, we will maintain our focus on what ultimately drives value creation as we continue to lead the industry in adjusted EBITDA margin and true free cash flow generation. To that end, although we will not provide our formal outlook for 2027 until February, we are able to provide a high-level framework, assuming no change in the current economic environment.

On that basis, we should be positioned for mid- to high single-digit revenue growth in 2027 from the combination of about 1% combined rollover from acquisitions already completed and RNG facilities brought online in 2026, price-led organic growth in solid waste, ongoing fuel and material surcharges and higher commodity related revenue from E&P waste and recycling. Along with acquisitions that we will complete during the remainder of '26 and throughout 2027.

Adjusted EBITDA margin expansion in what we would consider a normalized range from solid waste, with outsized impacts from higher fuel costs at recent levels, expected to be largely offset by increased commodity related tailwinds depending on the timing and extent of surcharges and double-digit growth in adjusted free cash flow per share, reflecting the continued declining impact from spend on Takeda and the substantial completion of our RNG CapEx outlays.

These expectations will be impacted by the pace and magnitude of ongoing acquisition activity in '26 and expected to grow during 2027 as we complete additional M&A. To the extent that we see further improvement in commodity values, those impacts would also be additive to these preliminary thoughts as would ongoing share repurchases. We look forward to providing more detail when we report Q4 and give our formal outlook for 2027 in February. We appreciate your time today.

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

[Operator Instructions] Your first question comes from the line of Kevin Chiang with CIBC. Please go ahead.

Good results there team. Thanks for the framework for 2027 there, Ron. I was wondering if we can get a little bit more color on how you think the cadence of free cash flow conversion trends as we look out maybe into '27 and beyond. You talked about some of the things that have burdened that free cash flow conversion in the last couple of years and some of that some of that does get released in 2027. So if we look at the conversion in '26 is -- and ultimately getting to like a high 40% number, is there a way to frame kind of how 2027 might look as we progress along with that journey?

Kevin, it's Mary Anne. In terms of free cash flow, obviously, the piece that we haven't gotten specific on is the extent to which the Takeda outlays decline, which, of course, we'll provide in our February outlook. But what we do know and made clear is that the R&D spend is substantially complete. So if you think about that, we said we'd be spending about $75 million this year. And so that largely doesn't repeat. That's 1 bucket. And then again, we'll get specific with Caqueta. But we're looking forward to being able to communicate what the expected decline is in '27 versus '26, the same way we communicated the decline in '26 versus '25. So Stay tuned for that. As you said, we think longer term, we ultimately get back to that 48% to 50%. We're around 42%, so you start bridging that gap. But a little too early to get really specific about where we fall in that range.

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

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

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

Your next question comes from the line of Noah Kaye with Oppenheimer & Co Inc.

Maybe just looking at 4Q, it looks like in the guide, the revenue growth would decelerate sequentially by about 1 point. And so I guess, between the higher surcharges, better commodities and other trends, maybe just understand why 4Q top line growth wouldn't be comparable to 3Q, any offsets we should be thinking about just conservatism?

Yes. I'd say no, we enjoyed the benefits of that sequential improvement in volume all waste streams at our landfills being positive for the first time in several quarters. So a little too early to assume that, that continues. So that would just, I guess, to your word, maybe a little conservatism there. You also know that there's always anomalistic differences year-over-year. And although you didn't specifically ask about margin, a reminder that last year's Q4 was our -- it will be the toughest quarterly comparison and it was strong on a relative basis.

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

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

Just a quick 1 on '27 margin expansion. I think Ron said a normalized for solid waste. And of course, for perspective, I mean, the solid waste margin expansion in the business on an underlying basis has been outstanding the last several years. A lot of that has been driven by the safety gains, the retention improvements. You've talked about the AI initiatives, maybe providing some additional fuel for better margins going forward. And so I was just wondering how much is baked in for margin expansion underlying in '27 from AI versus sort of normal course WCM Blueprint? .

Sure. Yes. No, I mean, in that commentary on normalized underlying, we have assumed no benefit or no incremental benefit in '27 is baked in from AI at this point. That's not saying some cannot happen. As you know, we experienced some in '25 and '26 from our initial initiative, which was a pricing initiative, and that has exceeded our expectations. We will -- the main 3 initiatives that tie together that we are working on throughout this year and in through next year will really not be fully deploy a couple of them until the end of '27 and 1 of them until the middle of '28. So the real beginning impact of the AI initiatives, margin-wise, we'll start to see in '28 and not really realize still fully until probably '29.

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

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

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

Your next question comes from the line of Adam Bubes with Goldman Sachs.

On the M&A front, I think you've acquired $130 million of revenue year-to-date. More broadly, if we look at years prior to 2026, say, the 5 years prior, is characterized by really outsized acquisition activity. Is this sort of $100 million, $200 million annual acquired revenue contribution a more reasonable assumption going forward? Or do you see potential to return to the higher levels of activity seen in prior years? .

Yes, Adam. Well, historically, number one, as you know, we don't guide the acquisition revenue and have it for 2 decades now. But $150 million to $200 million was sort of a historical probably 5 to 10 year ago average. We have stepped that up as the size of the company and the geography has changed in 2 countries, et cetera. So I would tell you that $200 million is sort of probably a more normalized low watermark now, whereas before, it might have been more of a high watermark -- and no, you're going to -- there's nothing has changed in the strategy or the opportunity. Acquisitions are opportunistic and timing and sellers really control that, not us as acquirers. So it will be very likely as you look out over a 3- to 5-year period, that it will look much more similar to the pick at the '22 through '25 time frame, then different from that.

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

Yes. I mean, number one, Adam, the remediation at Chiquita is following what we would tell you, and I think experts in the field would tell you, including the EPA, a typical curve of a decelerating ETLF. Okay? And there's a lot of statistics that support that and those go into what we know about the cost structure. Obviously, as the reaction pools with time, you get less leachate generation. Therefore, you have less leachate disposal cost and you have less infrastructure such as wells to do cover to put down over the reaction area, et cetera.

So we began by covering some 41 acres with a geosynthetic membrane. We've expanded that and buffer what we call the West to of the landfill this year. That doesn't repeat as an example, going into '27. So that's an example. We don't drill additional wells per se. We've drilled some 300 wells. I'm not saying that can't go up 5, but it's not going to go up 100. So those are the things that inform our thinking about why it continues to decelerate. So really, the main costs are related to leachate management, and as that continues to come down in volume, the costs come down, put very simply, and that has happened in '26 over '25, and it will continue to step down in '27.

Your next question comes from the line of Toni Kaplan with Morgan Stanley.

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

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

Sure. So special waste, I mentioned in the prepared remarks that they were broad-based and called out the Northeast Oregon, Texas, California in terms of volumes more broadly. And looking -- digging into the types of projects we've been seeing, it's not 1 particular thing. It's everything that ranges by geography, but what's going on there. So you've seen highway projects, infrastructure projects remediation, data center and chip plants, yes, in some markets like in Texas and commercial projects. So it really, really runs the gamut.

What's encouraging is that broad-based nature of it and the fact that, for instance, 60% of our locations had positive special waste tons in Q3 and 4 of 6 of our regions were up. And that's in comparison or in contrast to last quarter, only 2 of 6 were up. So that's the way I would characterize it. That's the incremental color I can provide, Tony.

Yes. And Tony, only last thing I'd say on that is on the C&D front and the commercial front, look, historically, in our industry, it's taken about 1.5 million to 1.8 million new housing starts to create organic volume in that business which then converts to permanent volumes. As you know, this week, that number has been announced, it stepped down to 1.2 million new housing starts and expect it to go lower with current interest rates into '27. And -- so I think there is 1 economy going on with things like Mary Anne just outlined, infrastructure, data center, et cetera, and then there's a residential construction, that is just really is sort of struggling with what's going on with interest rates and fuel costs and the other thing that affect consumers and contractors.

And on E&P, just high energy prices for a little while now. How are you thinking about the upside there maybe going into year-end as well as potentially next year as well? .

Yes. Well, look, I mean, as we said, E&P continued to step up sequentially once again after stepping up in the second quarter again. So it has continued to improve in both the U.S. and Canada, more so in the U.S. because it is more drilling oriented in the business versus production in Canada. But I think you have to understand that producers are not going to react to what they believe is a short-term stimulus. And we have an on again, off again hourly war in Iran and the Straight and that is a short-term believe phenomenon.

So you've seen about a 10% increase in drilling activity this year. Some people would think with a 70% increase in crude, you'd see a like increase in drilling, you would if it was believed that was a permanent scenario. That is not the belief of most of the producers at this point in time. If it becomes 6 months from now, it's sustained now it's going on 1.25 years, that could change that dynamic.

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

[Operator Instructions] Your next question comes from the line of Jerry Revich with Wells Fargo. Please go ahead.

I'm wondering if you just talk about -- I'm wondering if you could just talk about the internalization rates, nice to see that. 58% in the quarter, you've made good progress on Arrowhead. Can you just update us on where volumes are tracking on rail for you now? And looking ahead over the next 12 months as we exit '27, obviously, a range of possible outcomes, but can you talk about where volumes before the landfill had head to and what that means for your internalization rate 12 months from now?

Sure. I mean, you're referring, Jerry, I believe, fully to our Arrowhead infrastructure, ahead landfill and our rail infrastructure. Look, we're peaking right now between 7,000 and 7,500 tonnes a day, which is triple where we started less than 3 years ago, 2.5 years ago. So we're very, very pleased with that. We have continued to work on infrastructure at our intermodal facilities, which is some of what's required to step that up again. We believe that as we look out over the next 24 months, it's reasonable for us to step barrel head up to 8,500 to 9,000 tons and ultimately, at some point, get that number higher.

But that's obviously -- that takes incremental track and other facility enhancements at both the transportation and intermodal and the landfill in. So -- and then as we mentioned, we began a rail project in the end of the second quarter in the Miami-Dade County area going into 1 of our Florida landfills that stepped up in the quarter nicely and will continue to ramp into '27. So we definitely have more volume moving on rail in the third quarter than we've ever had and we expect that to make incremental improvements as we go forward. Again, as we've mentioned, rail is a sort of a unique geographical modality. It's not something I think you're going to see in most parts of the U.S., but in the upper northeast and a few places like Southern Florida, that's where you're going to see this grow.

And Jerry, if I could just add 1 more comment about internalization because you started there, just more broadly. You should think in terms of -- we're at 58%. I know last quarter, we were at 60%. The difference there is just the mix of business. And so you should expect us to stay in the 58% to 60% range that's really no change in internalization. And to that point, our Eastern region has actually increased its internalization. So it's not -- there's nothing else going on there.

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

Just wanted to get back to the 2027 margin outlook. I understand you'd probably provide some more color in February on that. But directionally, Mary Anne, if I'm thinking this right around, let me know, please. So for '27, I mean, usually, you guys see 20 to 40 bps of underlying you've talked about in the past. And this year, we have seen that trend to the low end on a net basis because of fuel, I think, probably though we saw some commodity price rebound.

So but next year, I mean, if the expectation from the market is less fuel to kind of normalize to some degree. Should that be a small tailwind maybe and then commodity prices the way they are tracking up now should that also be a tailwind and then your RNG EBITDA dollars will likely ramp up, which are higher margins. So I'm just thinking the 20 to 40 is your standard normal range of margin expansion? Should we be thinking more towards the higher end of the range? Or should we be somewhere in between because of some other factors?

Sure. So it's early days, but we would consider a continuing to be a headwind. And that's why we're saying, look, underlying cost pressures we feel comfortable thinking in terms of ex fuel that 20 to 40, as you said, is the right way to think about it, but we continue to see headwinds from fuel and the expectation is that to the extent they do persist, that there should be some correlation between those commodity-driven revenues, which would absorb some of those incremental pressures. If it fuel breaks and it's lower then it could be a tailwind. But again, what do those other commodities do. So that's why we framed it this way that the expectation that 1 would support the other.

Your next question comes from the line of James Schumm with TD Securities. Please go ahead.

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

Yes. First off, let's break that apart. It has nothing to do with any change or approach to uses of capital. We have adequate plenty of capital access and liquidity to do both to almost any degree we want. So no 1 should read into stepping on the buyback with the stock dislocation has a reason that M&A is slower because that is inaccurate.

Look, the reality is we are disciplined buyers. It would be great if all the strategics and nonstrategics were that way, but that's not necessarily the case. So look, not all solid waste is created equal, not all EBITDA is created equal. There's all kinds of what we would consider poor assets that some companies are scooping up. That's not something we're interested in. And we're not out trying to outpay private equity who has more money to put to work on any deal so they don't have to return it to LPs and continues to be undisciplined.

So when we spend -- when we do less M&A the market should be happy because that means we were disciplined in that period when others were not. So there's no change to the strategy. The opportunity remains significant. There are timings, M&A ebbs and flows, and you can be sitting here in a quarter or 2, and we're on track for what could be a record '27 and you wonder what happened. What happened was just timing and opportunities and discipline. So that is what I'd tell you. But we have ample capital to do everything we've said we're doing.

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

Yes. So just to clarify, we didn't give guidance. What we gave was a framework for thinking about how next year we'd expect it to play out. And so I think thinking about a normalized amount of acquisition contribution, is included in that. So yes, if you think of it as kind of that 1% to 2%, which would be normalized amount of contribution, that's in that number.

Your next question comes from the line of Chris Murray with ATB Cormac Capital Markets. Please go ahead.

Maybe just turning back to the energy business and thinking about this a little bit broadly. Ron, you made the comment that there's still a little uncertainty about what the path of energy prices is going to be like, but there is some discussion around the fact that there's been a lot of infrastructure broken in the Gulf, which could see this be kind of longer. I'm wondering, as you're thinking about the energy business and maybe taking half a step back, and your positioning in it? I know in recent years, you've added to Canada. You've got the traditional more landfill oriented business in the U.S. South.

You've added just kind of thinking about as we think over the next 2 to 3 years, what's your perspective on either growing the energy business or changing the mix in the portfolio? And how do you think about the opportunity set around that because it -- while it is all a piece of revenue, it is a pretty high incremental and decremental margin.

Yes. Well, look, Chris, I think, look, First and foremost, in both the U.S. and Canada, we are a disposal-oriented E&P company. We don't do transportation. We don't do field services, we're not interested in low-margin, highly competitive pieces of the business. We're predominantly a landfill and processing company in both countries. Canada is production oriented. The U.S. is drilling oriented. The reason we did that 2 years ago was to balance that portfolio.

Right now, in Pay is -- again, I'm rounding is going to be 6% to 7% of revenue, a little higher than that because of the margins in EBITDA that that will continue to grow. We'll continue to do tuck-in deals in both the U.S. and Canada, but it will actually come down over time as a percentage of revenue. because the corpus of the other 93% is so large and there's so much opportunity there that it will just naturally come down.

And look, we are comfortable with the size of it. If it didn't come down will be below 6%, 7%. We're also okay with that. It is a great business, as you said, it's an excellent cash-on-cash return business. But look, while it's great on the margins, it does have volatility. We acknowledge that. That's why we think that's the right size for it. Right? And it can move with crude. So it's again, why we like balancing it to 50-50 with the Canadian business we did on the production side.

So it's a long-winded answer to your question. I'm sorry, but we're not out there looking for some outsized deal in E&P and we're not looking to diversify what we do in E&P at this point.

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

I was hoping you could maybe go back to volume for a second and dig into the data center opportunity just because I think Mary Anne called it out as being a boost in areas like Texas. So just curious, I mean, is there any way to think about maybe quantitatively how much of a boost data center construction is giving you at this stage? And then just thinking about the growth of data centers that could happen in the next several years, maybe how meaningful that could be for volume growth in the future?

Yes, Trevor. First off, whatever we would tell you, it would be a guess, and it's probably best not to do that. I mean, as you know, while a data center is a huge capital investment no matter what the size and has a lot of activity during construction. But once it's actually constructed, they probably produce an 8-yarder of trash a week because they got 10 people. So it's not something that converts into some big commercial or industrial waste or recycling opportunity. It's more of a front-end construction opportunity.

So in markets like Texas, in markets like Virginia, Utah, which we're actually not in, where we're seeing Oklahoma, Tennessee, we're seeing some of this construction of these sites, it is a boost it comes in sometimes as some special ways but more as C&D waste on the construction side. But I -- we would just be guessing to try and tell you what that could be. Could it be 20 bps of volume or something? I mean we don't want to sit here and say it's 1% of volume growth or something. If it is, that would be great. But I'd expect it to be more 20 to 40 bps of volume growth.

Your next question comes from the line of Jon Windham with UBS.

Perfect. Congratulations on the result. You touched on interest rates a little bit earlier, maybe Mary Anne around -- at least on my numbers, you don't have a lot of refinancing in 2027, but can you talk about the debt maturity profile and just your approach to refinancing on the debt side?

Sure. So we're about 80-20 fixed to floating are with a weighted average tenor of about 8 years and an average cost of debt of about 4% and no near-term maturities, we'll continue to look. I mean we had good timing this year, last year when we put issued notes, and we'll continue to try to be opportunistic but don't have a lot of exposure.

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

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

Sure. So we're certainly sensitive to the fact that we've talked about the direct impacts of higher fuel that we are buying and third-party fuel surcharges like third-party brokerage. But Shlomo, we're certainly watching carefully and have seen some cost creep that we believe is related to higher fuel. I mean everything that's delivered to us has a slightly higher sticker price now, whether it's parts of material, building and property, our CapEx, repairs, we are seeing that. And the good news is we came into the year well positioned for our outsized underlying margin expansion, so that hasn't been an issue we've highlighted.

But it certainly informs our thinking about how much price we need going into next year. And that's why over the next few months, that will really crystallize for us. And then to your question about sensitivity, we've talked about that, depending on the market, we believe there is some sensitivity especially given the fact that smaller players may not have imposed fuel surcharges, for instance, and the good news is we've seen better-than-expected retention and lower rollbacks as a result of our pricing tool. So it's helpful to have smart of more selective price increases that can make a difference as well. but we're absolutely mindful of the incremental pressure that's out there.

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

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

Your next question comes from the line of Tammy Sakarya with JPMorgan India Private LTD. Please go ahead.

So 2-part question. I think I heard Mary Anne say that maybe next year, E&P growth should correlate with increased drilling activity. So should we expect E&P to outgrow the mid- to high single-digit enterprise growth framework you mentioned for next year? And then related to RNG, given most of the investments will be largely done by this year, could you remind us what revenue and EBITDA accretion you would expect incrementally in 2027.

So as you can appreciate, Tammy, we've provided a framework for next year. So we're really not getting specific on that. The comment about the correlation to higher fuel was really to make 2 points. One is even though E&P has been up this year, we'd say it doesn't reflect $100 crude. We've seen some increase in rig count, but again, whatever the reason that there's an expectation that it's not sustained or whatever that reason is, we would argue that we really haven't seen a material increase and the observation would be that as we think about next year, we don't know exactly what fuel is going to do, but what we're seeing is that we would expect when we gave that framework it has an expectation that there is a higher correlation.

But again, I wouldn't read through that to say that runs contrary to expectations about what percentage of the overall mix it is, et cetera. It's just too early for any of that discussion.

And about RNG related revenue and EBITDA for next year.

Again, what we said was that there would be about a 1 point associated with the rollover contribution from acquisitions and those new R&D facilities. So that implies somewhere around the $40 million type of range on RNG. And I'd say the margin contribution will be a function of where we really are in start-up and shake down on any of those newer facilities and to the extent to which costs have normalized. But again, early days to be getting too granular on outlook we haven't yet provided.

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

I wanted to ask you a question about Takeda, but not sort of the near term. But with your experience that you've gained over the last 3-plus years. How would a future event perhaps be different in scope and or cost as a result of changes you put in place and the learnings that you've accumulated.

Well, first, I think the answer to that is 2 different things. Number one, it would be different in a material way because it would not be in California. And so that will drop the scope and cost 90% to 95%. So let's just full stop with that. That's why you don't hear about these anywhere else in the country through the public companies while they're going on in real time in many locations because they're not material. So this is material because of where it's at.

Now what did we learn through this? That would also help drive down the cost of any future ETLFs should we have them wherever they would be because we've learned things through this 3-plus year process that we have put in place through centralized well monitoring incremental, more rapidly that extraction, incremental gas well installation as temperatures rise to a lower level. And by the way, temperatures rise at landfills for dozens and dozens of reasons that have nothing to do with an ETLF. So the reality is the learnings would drive down the future. But the main driver, if anyone were to happen anywhere, it would be de minimis relative to Takeda because it wouldn't be in California.

Your next question comes from the line of Bryan Burgmeier with Citi.

Mary Anne, maybe just on guidance for '26. So EBITDA guidance, I think, is up maybe $30 million or so since the start of the year, but free cash flow guidance, I think, is mostly unchanged. Is there just an easy way to kind of explain maybe some of the moving pieces around cash that prevented that flow through. I'm not sure if there's some bigger items or some kind of smaller nickels and dimes along the way.

Yes. I mean certainly, the biggest change would be interest since we bought $1 billion -- you spent $1 billion on share repurchases. So our interest expense has gone up by about $40 million.

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

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

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

Hello, everyone. Thank you for joining us, and welcome to the Waste Connections, Inc. Q2 2026 Earnings Call. [Operator Instructions] I will now hand the call over to Ron Mittelstaedt, President and CEO. Ron, please go ahead.

Okay. Thank you, operator, and good morning, everyone. I'd like to welcome everyone to this conference call to discuss our second quarter results and increased outlook for 2026. I'm joined this morning by members of our senior management team, including our CFO, Mary Anne Whitney, who will first provide our forward-looking disclaimer and other housekeeping items.

Thank you, Ron, and good morning. The discussion during today's call includes forward-looking statements made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including forward-looking information within the meaning of applicable Canadian securities laws. Actual results could differ materially from those made in such forward-looking statements due to various risks and uncertainties. Factors that could cause actual results to differ are discussed both in the cautionary statement in our July 22 earnings release and in greater detail in Waste Connections' filings with the U.S. Securities and Exchange Commission and the Securities Commissions or similar regulatory authorities in Canada.

You should not place undue reliance on forward-looking statements as there may be additional risks of which we are not presently aware or that we currently believe are immaterial, which could have an adverse impact on our business. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change after today's date. 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.

Okay. Thank you, Mary Anne. We are extremely pleased by the strength of our first half performance, which positioned us for an increase to our full year 2026 outlook with momentum for upside from improving trends in commodities and ongoing acquisition activity. Q2 growth of over 6% in both revenue and EBITDA exceeded our expectations in spite of the macroeconomic effects related to ongoing uncertainty in the geopolitical environment. Our results reflect continued benefits from both multiyear improvements in employee retention and record safety performance and more recent investments in AI technology, all underpinned by disciplined operational execution.

Most notably, adjusted EBITDA margin expanded to 32.8% on a 70 basis points of underlying margin expansion, overcoming cost pressures primarily from rapidly spiking fuel and related costs in addition to ongoing drags from lower commodity values compared to last year's Q2. Solid waste organic growth from total price of 6.7% in Q2 included core pricing of 5.6% plus fuel and material surcharges of 1.1%, which outpaced our expectations. On average yield of 4.6%, volumes were down 1.9%, reflecting the ongoing macroeconomic uncertainty, which has limited growth in the solid waste activity. Further, recent elevated fuel costs have impacted the pace and magnitude of construction-related activity, some of which was paused during Q2.

In addition, customer sensitivity to higher overall pricing resulting from fuel-related surcharges likely exacerbated churn in certain markets. Acknowledging these dynamics, while special waste tons were down year-over-year in Q2, we have been impressed by activity in July, which may be an indication that the slowdown was temporary. Additionally, we were encouraged to see C&D tons up year-over-year in Q2 for the first time in 10 quarters, with some projects continuing thus far in Q3. Looking at other lines of business, we saw a slightly elevated seasonal ramp in E&P waste revenue in Q2, up 12% from Q1 and up 18% year-over-year.

Organic E&P waste growth was led by the U.S., up 7%, following a nominal pickup in rig count. Activity in Canada, while more production-oriented and therefore, considered less sensitive to crude values was down nominally, but about flat year-over-year when normalized for an outsized remediation project in the prior year. Looking next at trends for other commodities in Q2. Recycled commodity revenues stepped up sequentially for the second consecutive quarter with the overall basket up 10% to 15% from year-end. Landfill gas sales have also improved, stepping up sequentially by 15% from Q1 as a result of both higher gas generation and higher values for renewable energy credits or RINs.

Looking at our renewable natural gas projects, we're pleased to report progress ahead of our expectations on the remaining development projects in 2026. Coming into the year with about 1/3 of our RNG portfolio already operational, we have come through start-up and ramp production at several other projects, including one owned facility brought online in July. RNG capital outlays are on track to be essentially complete by year-end, and we expect that all plants will be operational by early next year. We're also tracking in line with our expectations with respect to the impacts from managing the elevated temperature landfill or ETLF event at Chiquita Canyon landfill.

As we described last quarter, we continue to make progress mitigating the reaction, which is stable, controlled and decelerating. There is no change to our projections regarding related free cash flow impacts to 2026 or our expectations for a sequential decline in impacts in '27. Moving next to M&A. As expected, year-to-date, we have completed acquisitions totaling approximately $100 million in annualized revenue, and we have another $30 million of exclusive model franchise transactions anticipated to close very soon during Q3. With almost half the year still ahead of us and dialogue ongoing, we remain on pace for what we would call another above-average M&A year.

We've also remained active buying back our own shares in what we consider an opportunistic environment. In our busiest year ever, we've deployed approximately $692 million year-to-date and bought back over 1.5% of shares outstanding pursuant to our normal course issuer bid, which authorizes the repurchase of up to 5% of shares annually at which we will be renewed in August. Following an active first half of the year, our leverage remained virtually unchanged at 2.76x debt to EBITDA. As such, we retain flexibility for acquisitions and returning capital to shareholders through additional repurchases as well as another increase to our dividend, which we will consider when we undertake our annual review in October.

And now I'd like to pass the call to Mary Anne to review more in depth the financial highlights of the second quarter to review the elements of our increased full year 2026 outlook and what that implies for the back half of the year.

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

Thank you, Ron. In the second quarter, revenue of $2.562 billion exceeded our expectations and was up $155 million or 6.4% year-over-year. Contributions from acquisitions net of divestitures totaled $46 million in the quarter. Organic growth in solid waste collection, transfer and disposal was led by 5.6% core price, which ranged from about 4% in our mostly exclusive market Western region to 7% in our competitive regions. Total price of 6.7% included 1.1% in fuel and material surcharges or approximately $25 million. which represents the majority of the incremental direct costs in the quarter.

We remain on track for full year core price at or above 5.5% with pricing for 2026 largely complete or otherwise known and expect to fully recover higher fuel costs over time through surcharges with the timing determined by the pace and magnitude of changes in diesel pricing. Yield of 4.6% was consistent with Q1 levels and continues to reflect the benefits from our AI price optimization tool deployed late last year. And solid waste volumes were down about 1.9%, reflecting the following year-over-year results in the second quarter on a same-store basis. Roll-off pulls were down 2%, similar to recent quarters on rates per pull up 5%, which is about 150 basis points higher than in the past several quarters, primarily resulting from surcharges.

With the exception of our Western region, pulls were down in all regions on sluggish construction activity and likely reflect some price volume trade-off following increased surcharge activity, a trade-off we're comfortable taking. Landfill tons were essentially flat, reflecting flat MSW and special waste down nominally on tough comparisons with C&D tons up 1%, halting the downward trends we've noted and led by a 10% increase in our Central region, where we highlighted strong special waste activity in Q1.

Adjusted EBITDA for Q2, as reconciled in our earnings release, was $840.1 million, up 6.8% year-over-year. At 32.8% of revenue, our adjusted EBITDA margin exceeded our expectations and was up 10 basis points year-over-year, driven by 70 basis points underlying margin expansion, offset by about a 40 basis point drag from fuel and another 20 basis points drag from lower commodity values. Our outsized underlying solid waste margin expansion reflected favorable price/cost spread dynamics in spite of additional cost pressures indirectly related to fuel and was magnified by benefits from employee retention and safety, most notably savings and risk management costs, which accounted for about half of our underlying margin expansion.

And finally, year-to-date adjusted free cash flow of $703 million was in line with our expectations and consistent with our full year 2026 outlook for double-digit growth in adjusted free cash flow per share. Year-to-date capital expenditures of approximately $600 million, up more than $100 million year-over-year, were also in line with our expectations. CapEx outlays to date are following a more normalized cadence than last year when the pace of spending reflected slower progress on RNG projects and delayed fleet deliveries. I will now review our updated outlook for the full year 2026 and provide some thoughts about what that implies for the back half of the year.

Before I do, we'd like to remind everyone once again that actual results may vary significantly based on risks and uncertainties outlined in our safe harbor statement and filings we've made with the SEC and the securities commissions or similar regulatory authorities in Canada. We encourage investors to review these factors carefully. Our outlook assumes no change in the underlying economic trends. It also excludes any impact from additional acquisitions that may close during the remainder of the year and expensing of transaction-related items during the period. Looking first at our updated outlook for the full year as provided for and reconciled in our earnings release.

Given the strength of our performance in the first half of the year and updating for recent values for recycled commodities, RINs and fuel as well as acquisitions completed to date, we are increasing our full year 2026 outlook as provided in February as follows: Revenue is now estimated in the range of $10.02 billion to $10.05 billion, up $100 million to $120 million from February. Adjusted EBITDA for the full year is now estimated in the range of $3.33 billion to $3.34 billion, up from a range of $3.30 billion to $3.325 billion. putting full year margin in the range of 33.2% to 33.3%. As Ron noted, there is no change to our expectations for adjusted free cash flow for 2026 in the range of $1.4 billion to $1.45 billion, including impacts related to closure at Chiquita Canyon landfill in the range of $100 million to $150 million and capital expenditures of $1.25 billion.

The closing of additional acquisitions would provide upside to our increased 2026 outlook as with further improvement in commodities and related activity. Further movement in fuel prices and the timing of recovery of higher fuel costs will also continue to impact results. Looking next at the quarterly margin cadence. Adjusted EBITDA margin in the second half of the year is expected to average about 33.7% as implied by our full year outlook and could exceed 34% in Q3, depending on fuel and other commodities in the quarter. As noted earlier this year, the toughest quarterly comparisons are in Q4 when we would expect a more typical seasonal step down in margin than we experienced in 2025.

And now let me turn the call back over to Ron for some final remarks before Q&A.

Thank you, Mary Anne. As we have said, we're extremely pleased with our first half results and our increased outlook for the year. We believe the most challenging quarter for fuel recovery is behind us, and we see potential for upside ahead from improving commodity-related trends and incremental acquisitions. Along with the benefits we've enjoyed from improved employee retention and record safety performance, we're already seeing the potential to unlock opportunities in AI-driven projects impacting our operations. And we're reaching the inflection point on the outlays impacting our free cash flow conversion, most notably our RNG facilities moving from a CapEx headwind this year to a tailwind from contributions from operations next year, along with a continued decline in cash closure outflows at Chiquita Canyon landfill.

In short, we're set up for double-digit adjusted free cash flow per share growth in 2026 and already looking ahead for more of the same in 2027. The consistency and projectability of our industry-leading results despite the macroeconomic backdrop reflects our differentiated approach and is ultimately a testament to operational excellence and fundamentals that define us. Safety, integrity and customer service all make Waste Connections a great place to work. And we are most grateful for the dedication of our 25,000-plus employees, which is what truly sets us apart. We appreciate your time today.

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

[Operator Instructions] Your first question comes from the line of Tyler Brown with Raymond James.

Ron, I want to maybe pack a couple of questions into one. But first, I just want to kind of come back to the competitive landscape. So I'm just curious, is the move in fuel causing some increases in churn? And what I mean by that, are the smaller haulers who maybe don't have sophisticated surcharge mechanisms using your move in surcharges maybe as a pathway into new customers? And is that frankly different than what you've seen in the past? Or is there any bigger changes in the competitive landscape? And then two, Mary Anne, just what is the rollover impact from M&A in '26? And would there be any lingering leftover in '27 based on what's closed?

So Tyler, I'll take the first part. Tyler, number one, I would say that we're not seeing anything different than historical with regard to fuel surcharges and churn activity. There's probably some nominal increase in the competitive activity because of the pace of this increase in fuel. We went from $60 to over $120 a barrel in a very short period of time, time that would typically take 6 to 8 months, took 4 to 6 weeks. And so the strategics, the public companies reacted very quickly, as I think you see and will see. And the private companies react slower.

They'll take 3 to 9 months and eat it and use that as some competitive inroad. So I would say it's just that this was such a fast spike is what probably makes it look a little different. Longer this wears on, the less difference between those public and private companies will happen. So it's not anything material, but it probably accounted for an additional 10 to 15 basis points of volume churn in the quarter related to that.

And then in response to the second question, even though you're violating the rules, Tyler, I'll be brief. But acquisition contribution, the rollover contribution to next year would be about $30 million. The increase to our full year outlook included an increase of about $50 million associated with '26.

Your next question comes from the line of Kevin Chiang with CIBC.

Just one on -- we're hearing a lot more on -- in Canada up here, nation building projects, more energy infrastructure projects. And I guess when I think of your R360 Canada operation, just how you think that might benefit from this increased CapEx? And maybe how many idle facilities do you have today that maybe could be reopened if activity does pick up in Western Canada here?

Sure. Well, Kevin, we -- to the second part of your question first, there's still 2 to 3 idle facilities that could be reopened of the original 5 from when we acquired the Secure divested assets up there in February of '24. We -- and so that would be the first part. And look, we -- there's a lot of discussion, as you know, better than we in Canada of increased energy production, various export pipeline construction from the country and throughout the country. And obviously, we think we're extremely well positioned to benefit from that if and when it happens and from all the operations that we've got there. But we have not yet seen that. As we said in our comments, it's been -- Canada was relatively flat, but coming off a very strong comp in Q2 of last year.

Your next question comes from the line of Faiza Alwy with Deutsche Bank.

Ron, you made some comments around the macro environment and the fact that you've been impressed with activity in July, indicating that the slowdown is temporary. So maybe talk a little bit more about that. Is it -- did you see a broad-based pickup? Did the competitive environment improve? So just give us a little bit more perspective on what you saw different -- what you're seeing differently in July versus what you saw in 2Q.

Yes. Well, first off, I mean, we don't want to overgeneralize. We had 3 weeks or so of July so far. But we have seen some continued pickup in both special waste and in several of our regions of C&D. MSW has been up nominally so far for the last 4 consecutive weeks. which is an improvement relative to the May, June time frame. Some of that can be timing. It's hard to understand. I mean, as you're hearing from other industrial service providers and equipment providers, there does seem to be an accelerating pickup in rental equipment and construction-related equipment demand and activity, which would indicate that, that is coming.

We tend to probably lag because it takes time for that to happen to start generating weight. But we're cautiously optimistic, but we have not baked any of that into our guidance that we just provided for the second half of the year.

Your next question comes from the line of Jim Schumm with TD Cowen.

Could you just help me with the Chiquita accounting? You had a $58 million impairment there. Is that -- like I thought Q1 was sort of the true-up and then -- so is that impairment reflective of the 2Q spend? And could you just give us an update on where you are in the Chiquita spend year-to-date versus your guidance?

Okay. So I'm happy to take that, Jim. So first off, no, that is not indicative of the Q2 spend. What this is, is the matching of the closure accrual liability to the projected run rate cash flow outflows, okay? So as we move along, we true that up, but there is no change at all to our $100 million to $150 million of cash outflows in 2026 and the stepping down of those in '27 and again into '28. This is purely the matching of the liability to the run rate is what that is. It's the difference between cash and GAAP accrual accounting.

Got it. Okay. And Ron, would you be able to say where you're tracking year-to-date versus the $100 million to $150 million guidance?

Well, we're tracking probably somewhere between the middle $125 million and $150 million at this point in time, but comfortable in that range for the full year.

Your next question comes from the line of Konark Gupta with Scotiabank.

Mary Anne, just wanted to dig into the underlying margin trends for you guys. I understand, obviously, the comps are changing every quarter. But just seeing this trend where your underlying margin, I think, expanded about 150 basis points in Q4 of last year. And then we saw 110 in Q1, now 70 in Q2. Is this deceleration in underlying margin expansion purely on the comps? Or is there something else we should be thinking about as well as we look into the second half?

Sure. It really is about comps and what we've communicated with respect to the benefits from the employee retention and safety-related margin drivers that we said there'd be about 100 basis points, and then we came back around and said it's probably even north of that. And that the final piece would be the risk component, which would lag. And you've now seen 3 quarters of 30 to 40 basis points benefit from risk. In addition, you saw the benefits from internalization last year. We talked about the benefits at Arrowhead. For instance, we were internalizing more tons and our disposal costs were going down.

So it really is just that we are now lapping or anniversarying those. And as you point out, Q4, I would argue, was anomalistic because you had such -- you had 100 basis points benefit just from -- between disposal and risk in Q4 last year. And so that's why when we describe the more typical step down, it really is with seasonality, and that will impact Q4. As we expected when we gave our guidance at the beginning of this year, we're just reminding folks of that sequential decline that you'll see.

And also last year in Q4, you anniversaried the closure of the Chiquita landfill. So that was a sequential step as well. So again, it is just comps, as Mary Anne has said.

Your next question comes from the line of Toni Kaplan with Morgan Stanley.

I was hoping you could talk about free cash flow and the investments that you're making into fleet and landfills, RNG and also whether the Chiquita outlays are relatively straight line across the quarters or if there's more sort of seasonality on some of the quarters versus others?

I would say, first of all, with respect to the second part, I wouldn't place too much emphasis on exactly what outlays are in a given quarter. It can be lumpy for a variety of reasons. For modeling purposes, probably fine to do it kind of straight line with respect to the Chiquita piece. More broadly, to your question about CapEx, as we noted in our prepared remarks, our spending is trending in line with our expectations in terms of CapEx. We just pointed out that it's up year-over-year largely because of delays last year. And I'd say it's really ordinary course where you'd expect us to be -- you'd expect us to be investing in fleet and building out our landfills, which are always the bulk of CapEx in any given year.

Beyond that RNG, which you asked about, we've mentioned that there were $75 million in RNG that we expected this year and the update is we expect to spend that amount. And therefore, we expect that what's left on RNG in '27 would be de minimis. We're essentially done with those CapEx outlays that we've talked about over a multiyear period. And it's what is one of the drivers to the inflection in free cash flow in '27, the absence of continued CapEx in RNG and the benefits from those projects coming online, which we've mentioned we've already started to see this year. which we factored some of that into our expectations coming into the year, and it's exceeded that, which is, again, one of the other drivers for the pickup in EBITDA over -- from our previous guidance.

And Toni, I would just add that, look, you're always going to have in the second and third quarter, you're going to have your landfill construction projects capital and your facility construction project capital because you cannot do that in the winter months. And so we're going to put more truck purchases in the first, second and beginning of the third quarter to offset and manage that flow more evenly and to get the trucks delivered early in the year to our field to impact the P&L in variable and safety. So that's sort of how we think through how CapEx flows.

Your next question comes from the line of Bryan Burgmeier with Citi.

Just on the updated outlook for 2026. I was just wondering if you can maybe frame your expectations for cost inflation just for wages, maintenance, repair, other items. Just maybe what do you expect now versus the original guide in February? Just kind of thinking about that net price-driven margin expansion and how we should be modeling that in the second half.

Sure.

Sorry, the observation that I'd make -- so first of all, in our guidance, we've maintained the underlying solid waste margin expansion in the range of 50 to 70 basis points. There's no change to that expectation. Really, all that changed is we're acknowledging that fuel is a little more punitive than certainly we knew coming in, in February. It's down 20 to 30 basis points, and commodities are offsetting a portion of that because they've improved.

So what that tells you about the underlying margin expansion is I would say that we're actually outperforming our original expectations because we'd acknowledge that there's cost creep in a number of areas indirectly related to fuel. Anything that's being delivered to us is more expensive than it was before you saw that spike in fuel.

So broadly speaking, we came into the year thinking that cost pressures are kind of in that 3.5% to 4% range. And the primary driver, of course, is wages, but these other pressures have creeped a little. And I'd say wages have behaved in line with our expectations, which is that the year-over-year increases were moderating slightly as we move through the year.

Your next question comes from the line of Jerry Revich with Wells Fargo.

This is Andrew Azzi on for Jerry. I just wanted to start off maybe with if we can outline some of the AI initiatives that are running through '27. Would you be able to walk us through where each of the initiatives are kind of sitting in their life cycle now and EBITDA contribution captured to date?

Yes. Well, I'll take them in some broad buckets for you, Andrew. In '25, we fully deployed our AI-linked, what we call pro pricing -- commercial pricing tool, and that is fully deployed by the fourth quarter of '25 and has yielded about $20 million of EBITDA improvement on a run rate basis at this point through '26. So that's number one.

We are putting in what I would call a dynamic real-time AI-driven algorithm for routing. And we began beta testing or pilot testing that in late Q2 of '26, and that is not set to be fully deployed until the end of '27. So really not impactful to the P&L until '28. And as we go through '28 and '29, we expect roughly $40 million, maybe up to $50 million of route-related savings from that initiative as we come through '28 and '29.

And then we are beginning in the end of Q3, beginning in Q4 of this year, '26, what we -- is some AI technology. We are putting in some agentic AI into our customer service approach and a mobile application for customers, particularly residential customers. And that will not be again being deployed until the second quarter of '27 and will be fully deployed as we come through the early part to the mid part of '28. And again, we're expecting probably somewhere in that $20 million to $35 million initial cut is the impact from EBITDA. As we said, we're investing about $100 million in the AI-related technologies across 7 programs, and we expect about $100 million or 100 basis points, which is about the same of improvement in EBITDA as we come through '28 into '29.

I really appreciate all that quantitative breakout. That's great to hear. I guess, secondly, on special waste tons, we've seen a lot of improvement as of late. Can you talk about some of the verticals that are driving that strength and how you think about the durability of the contribution to both volume and margin into '27?

Well, what I'd say is that we mentioned last quarter that we saw a pickup in special waste. We mentioned this quarter that there was actually a slowdown, which is a reminder that it can be lumpy. And that as we've said, perhaps that the spike in fuel put a little pause on some projects, but that the demand is out there. And ultimately, it will come to market.

I'd say keep in mind that it's a very small piece, a couple of points of revenue is what special waste is, but it's more about the indication of the underlying economy and the fact that there's some cyclical growth, which we just really haven't seen. And then similarly, C&D tons, as we said, they were positive really for the first time in a couple of years, and that's encouraging. And it's not a surprise that it's in our Central region where we saw high special waste in Q1, which should be an indicator of construction and demolition debris in subsequent periods.

Your next question comes from the line of Chris Murray with ATB Cormark Capital Markets.

Maybe just taking a stab at thinking about cash flow conversion as we go into 2027. And you referenced the fact that you've got some normalized spending coming lower, RNG, maybe Chiquita rolls off. How should we be thinking about between the margin improvement that will start to develop? And some of these things coming off, how do we think about the cash flow conversion? Is there anything unusual to be thinking about as we start entering that period?

Chris, obviously, it's early days to be talking with any specificity about '27. We'll look forward to giving guidance. But what we know now is that we have visibility on the RNG spend. And so that's $75 million. And so that informs our thinking. And we also have reiterated that the Chiquita outlays will be less in '27 than they were in '26. So again, that -- those 2 pieces on their own, certainly take us north of the 41% to 42% free cash flow conversion you see in the current period and gets us more in the direction of where we'd expect to land, which would be in that 48% to 50%, which is historically where we've been. But for some periods where we were anomalistically higher, we've gotten as high as 52% or 53%, but we would encourage people to think of more normalized being 48% to 50%.

Okay. And so there's no real expectation for special spend or anything like that. In fact, kind of it feels like '27 is shaping up to be the first of a normal year and maybe a few in a row. Is that the right way to kind of frame it or think about it?

That's fair. I mean, we've mentioned the AI spend continues. Again, that's not a big number, but ongoing spending there. But no, I think your observation that the lumpier piece, which was specifically RNG is behind us.

Your next question comes from the line of Trevor Romeo with William Blair.

I just had one on PFAS. I think there was a recent announcement about a new treatment facility you're working on at one of your landfills in North Carolina. I think you have a few other treatment plants that are at other landfills, too. So question is, how are you thinking about being proactive and getting ahead of regulations versus being reactive? And can you just talk about the economics of building an on-site treatment plant versus sending leachate elsewhere and kind of the return on that capital?

Yes. Well, Trevor, I mean, I think the opening of a treatment plant in the Carolinas that we talked about and that you're referencing is an example of trying to be proactive versus reactive. It is an example of rising leachate costs at POTW related to PFAS and other requirements that are being put on by state and federal regulators. And so knowing that this is something we've been doing for 4 to 5 years, quite honestly. We deploy multiple mobile, relatively inexpensive technologies that depends on which one we use basically separates the PFAS and solidifies it through a foam fractionation process, allowing us to ultimately bury it in the landfill and clean the leachate to a point of acceptable discharge.

So this is an internal -- these are internal projects. We're not out there marketing this to third parties. We will send landfills in surrounding areas that we have to this one and use it sort of as a hub to treat PFAS. And it's ultimately sort of a hedge against a rapidly rising leachate treatment cost at POTWs that is going on everywhere. We recognized this many years ago and started investigating and investing and deploying these technologies. So we have these at several of our sites. You'll see them continue to come at several more. They're sort of a normal course of CapEx at this point in time for us, and they drop that treatment cost relative to third party quite significantly.

Your next question comes from the line of Sabahat Khan with RBC Capital Markets.

This is Bhaven on the line for Saba. My question was more related to M&A activity. You already noted that you're going to have an outsized year. Can you talk a little bit about the type of assets that are in your pipeline, kind of what's in the market today and what the cadence is for the back half of the year?

Sure. Happy to. I mean, obviously, the cadence will be determined by seller timing and getting through consents and the other typical closing procedures. But I think if you imagine that we've already talked about there's an additional $30 million that we'll be closing here over the next few weeks of exclusive franchises. There'll be additional that close throughout Q3 and then a normal course that will close in Q4, getting us to north of our sort of outsized year or minimum year, I would say. These are all typical singles and doubles Waste Connections deals in solid waste.

There may be some 1 or 2 small E&P deals in there in either Canada or the U.S., but these are traditional solid waste deals, nothing varying from that. They are in both our competitive and our exclusive footprint. They are collection and transfer and processing and in some cases, disposal. So what I would just sort of call down the middle of the fairway M&A deals for Waste Connections that is, we believe, compounds and creates the most value over time. So nothing abnormal coming in the pipeline the balance of this year or in the foreseeable future.

Your next question comes from the line of Tobey Sommer with Truist.

I wanted to get your perspective on rail opportunities and how that integrates into the network. You've got experience in that arena, and I wanted to get sort of your near-term and longer-term perspectives for how much that is going to grow as a component of your business?

Sure. Happy to, Tobey. Well, first off, as we've said for quite some time, rail is today a fairly geographic-centric modality that is being used predominantly off the upper Northeastern Seaboard due to both limitations of available landfill capacity and expansion and the economics of higher tip fees in that region. So that continues to be the primary driver. We've grown our Arrowhead Landfill rail network over the last 2 years by effectively 300% now. And all of that is moving off the Eastern Seaboard from sort of New Jersey north through our intermodal facilities, and we'll continue to grow that as we go forward.

I mentioned on the last quarter's earnings call that we would begin a rail project in the Southeast. It is specific to Florida. It's specific to some disposal incineration issues that happened down in Miami-Dade County and us and one of our public peers have been awarded long-term agreements to take volumes north of Miami into North Central Florida on rail at our landfills. We began that in mid- to late Q2, and it's continuing to start to ramp in Q3 as we speak, and we'll continue to do so throughout the balance of the year as that operation becomes smoother and the customer receives more and more railcars from the supplier.

So it's an opportunity that's now in the lower Southeast due to a unique situation. We don't really see it being an opportunity in other geographies today. It has been an opportunity in the Pacific Northwest for a long time, for about 25 years now. 1/3 of the waste in the upper Northwest moves via rail. That will continue to expand over time. So this is never going to grow to be an enormous portion of our business, but it certainly is a small portion that is growing nicely at this time.

Your next question comes from the line of Aadit Shrestha with Stifel.

Just on the core pricing yield spread, I think that improved again like sort of 30 bps from 1Q. 1Q was around 130 bps and this quarter was around 100 bps. I understand there could be a mix kind of factor impacting that. But could you just talk about maybe like the spread going forward, if this is sort of a reasonable expectation? And what makes your business so unique that so -- and the spread being so much better than your peers, which who usually report closer to 200 bps?

Sure. So with respect to the sequential differences, I would attribute those to mix. I would say that what you have always in the -- of course, the difference between core price and yield will be mix and not just mix by line of business, but also mix by geography, dramatically different wins and losses in different markets, for instance, in the Eastern part of the country versus the Southeast.

The other point being churn, which we said churn is an impact. And so I wouldn't encourage you to think that something improved in Q2 versus Q1. In fact, we pointed out that we think the introduction or the increase in fuel surcharges has probably increased or exacerbated the churn we were seeing in the business. And I really can't speak to our peers and what they see in their business, but we would always remind folks that our strategy is purposeful in thinking about the competitive intensity of markets and the ability to retain price. And so you would expect that as it has historically to impact how much price we keep, which is what you see in yield.

Your next question comes from the line of Christina Bettink with BNP Paribas.

This is Christina on for Seth Weber. So I just have a quick one for you guys. Could you update us on the Seneca Meadows expansion that was filed recently earlier this month? And where you guys kind of see the permitting time line from here? And how you guys are thinking of managing the airspace and volumes at the site in the meantime, whether it be by rail or truck?

Sure. Let's take the second part of that first. We are managing the airspace there to make certain that we have adequate airspace for customers, external as well as internal until we are able to get the expansion permit and construct the first expansion airspace. We are doing that both by rail and truck. We're moving some of our volumes out of Seneca down by rail through our network to Arrowhead and elsewhere to help manage those time lines. And so most of the volume into Seneca, of course, is all by truck.

Secondly, the process is moving along well. We've had some very important recent legal victories and rulings and regulatory rulings in our favor, in fact, all of them at this point in time. And so we feel very good about it. But we're still working our way through a state technical process on the permit. And we would expect that relatively soon, but you're probably looking at somewhere closer to the end of this year or thereabouts for final achievement of that is our current expectations.

There can be nothing guaranteed about this. This is a technical process. It is also -- there's a political process involved in it. But the vast majority of the political and legal process we are through at this point in time.

Your next question comes from the line of Jon Windham with Union Bank of Switzerland.

Generally referred to as UBS. Nice result, nice raise on the guidance. My question is around interest rates. The 10-year has been sort of steadily trending upwards. The way I've thought of a rising interest rate in the past is it further enhances your funding advantage compared to private players, which could be helpful to both pricing and to M&A. Ron and Mary Anne, I would love your thoughts on the impact of a rising rate environment.

Jon, yes, I wouldn't disagree with you that we always feel good about being well positioned with respect to our balance sheet, our access to low-cost capital. We do think it is a differentiator. And certainly, as between publics and privates, privates are more impacted when you see rates rise. And so I would agree with that. So it is a competitive advantage to us.

But the other factor that I'd point out is what interest rates do. For instance, to the more cyclical component of the business and the fact that, that could be something discouraging growth and development, which leads to more volumes. So there, we'd be like everyone else and that the overall macro is arguably impacted by interest rates as well. So a double-edged sword.

Yes. And I would say, Jon, to your comment, you are accurate. Look, we have always talked about there are at least 3 factors outside our control that help improve or decelerate external M&A from private companies. Rising interest rates help, but they help for reasons different than you might think. They help because sellers perceive they can take their after-tax proceeds and reinvest in low-volatility investments and derive the same or better lifestyle than taking it from their company. They can't do that in a low-interest-rate environment. So it helps in that way.

Secondly, a rising tax rate helps because sellers fear of sitting in neutral on a net basis even after they grow their business several years. So that's an accelerant. Dropping -- lowering taxes is the reverse. And then the third is the macro economy. Sellers want to sell in a rising macroeconomic environment when they believe their business has fair and full value. So those are 3 things outside our control, and that's how it affects M&A.

Your next question comes from the line of Noah Kaye with Oppenheimer & Co.

Just going back to capital allocation. You spent, I think, $51 million on undeveloped land near existing facilities. That's the first time in 6 years. Anything strategic associated with that, that you could help us understand with that for landfill expansion or something else? Maybe just give a little color there. And then the follow-on was just the incremental RNG contribution next year since you're already pacing ahead of your expectations for this year?

Sure. So I'll start with the undeveloped land. No, that is strategic and it's opportunistic. Episodically, we have the opportunity to buy something for future development. And it's an example, in this case, of future development for facilities as opposed to landfills in a market in Florida that's been growing as a result of acquisition and other impacts. And there's a unique opportunity real estate-wise, so an expensive real estate market with limited opportunities. And so that's what you saw in the $51 million purchase there.

Secondly, with respect to RNG, the way I think about it is we've talked about this $100 million to $150 million in contribution and kind of bucket it in third and that we're on the second of the third. So kind of 2/3 of the way in this year is what we're expecting. And so when we communicated in our outlook for the full year, we stepped it up partly because we're getting a little more, call it, on the order of $15 million to $20 million more in contribution from RNG this year than we had factored into our full year guidance. And so the way we think about it, it leaves the final 1/3 next year. And I would also say final 1/3 with a little better margin contribution because we're absorbing a lot of the start-up costs this year, and so it's less impactful from a margin standpoint.

Your next question comes from the line of Stephanie Moore with Jefferies. [Operator Instructions]

Sorry about that. I was indeed muted and then my headphones died. Welcome to the beginning of earnings season. I think one question I think we keep getting quite a bit would just be on underlying volume performance. I think there's a lot of moving pieces when you think about just what the overall health of the economy is doing, maybe even just industrial economy. And then also, I think what is the industry's actions to be really concerted about which type of volumes you bring on? So maybe just to level set, how should we think about just the underlying volume growth of the industry with all those things and taking into account as we think over the next several years?

Sure. Well, I mean, there's a lot of parts to that question you answered -- asked. I'll try to answer them as clear as we can. First off, historically, Stephanie, I would tell you that, look, there's only 2 things that affect the underlying volume growth since everybody has what our industry does, whether they be commercial, residential or otherwise. And that is true GDP spending, nonfederal government spending in GDP and population growth. So where are we in that cycle right now?

Population growth is effectively 0, actually perhaps negative. And GDP in Q2 nongovernment spending was about 1.3%. So you start with -- you can't be much better than 1% in total volumes if you're -- with that, if there's a little bit negative population growth. If you look at our Western region, remember, that's 100% exclusive. We get every drop of waste in our franchise. A customer cannot use anyone else residentially, commercially, industrial, manufacturing and construction. We had 1% volume growth in Q1. So that's about as good as it gets in this economic environment. Last year, that region had growth of 2.5% to 3%. So it did step down some, at least as that as an indicator from last year at this point. That region typically runs between 2% and 3.5%.

So if you're getting everything, which doesn't happen in competitive markets, that's where your cap is. The public companies, the strategic companies have been very consistent on price/cost spread and not being all things to all people. There are segments of this business that the privates are very good in. They live on a 5% to a 10% EBITDA margin. That is not a margin the public companies are looking at. And so the public companies are not pursuing residential subscription. They're not pursuing low-price HOAs and municipal residential contracts. That's where the privates are getting a lot of their growth, both small privates and private equity companies.

And we're happy to let them have that. That's not a business that we can convert to a 30% to 35% EBITDA business. So you're going to see that volumes are going to be somewhat flat to negative unless there is a macro change. And I think the market would see that's okay. If margins are moving up and volumes are nominally negative, you should be happy. If margins are moving backwards when volumes are negative, well, then there's some trade-off happening that's not worth it. That's not where we're at as a company or as an industry on the publicly-traded side, I would argue. So again, not all EBITDA is created equally and not all volumes are created equally, and we don't want all volumes. And I think that's really important to understand.

There are no further questions at this time. I will now turn the call back to Ron Mittelstaedt for closing remarks.

Well, if there are no further questions, on behalf of our entire management team, we appreciate your listening to and interest in the call today. Mary Anne and Joe Box are available today to answer any direct questions that we did not cover that we're able to cover under Regulation FD, Regulation G and applicable securities laws in Canada. Thank you again, and we look forward to connecting with you at an upcoming investor conference or on our next earnings call.

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

Hello, everyone. Thank you for joining us, and welcome to the Waste Connections, Inc. Q1 2026 Earnings Call. [Operator Instructions]. I will now hand the conference over to Ron Mittelstaedt, President and CEO. Please go ahead.

Thank you, operator, and good morning. I'd like to welcome everyone to this conference call to discuss our first quarter results. I'm joined this morning by Mary Anne Whitney, our CFO; as well as several other members of our senior management.

As noted in our earnings release, we are well positioned for 2026 following a strong start with upside potential from recent trends. We do not -- 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 a 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 increase in commodities and special waste activity.

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

Thank you, Ron, and good morning. The discussion during today's call includes forward-looking statements made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including forward-looking information within the meaning of applicable Canadian securities laws. Actual results could differ materially from those made in such forward-looking statements due to various risks and uncertainties. Factors that could cause actual results to differ are discussed in the cautionary statement included in our April 22 earnings release and in greater detail in Waste Connections' filings with the U.S. Securities and Exchange Commission and the Securities Commissions or similar regulatory authorities in Canada.

You should not place undue reliance on forward-looking statements as there may be additional risks of which we are not presently aware or that we currently believe are immaterial, which could have an adverse impact on our business. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change after today's date.

On the call, we will discuss non-GAAP measures such as adjusted EBITDA, adjusted net income on both a dollar basis and per diluted share and adjusted free cash flow. Please refer to our earnings releases for a reconciliation of such non-GAAP measures to the most comparable GAAP measures. Management uses certain non-GAAP measures to evaluate and monitor the ongoing financial performance of our operations. Other companies may calculate these non-GAAP measures differently.

I will now turn the call back over to Ron.

Thank you, 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 haven't seen anything to date that doesn't 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 ongoing 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 the 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 haven't 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 impacted is limited due to the 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 costs 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 benefit from any pickup in the 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 values stepped up sequentially in Q1 for the first time in 7 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 on stable values for renewable energy credits or RINs.

Moving next to operating trends. Q1 marked our 14th consecutive quarter of improvement in employee retention and the achievement of another milestone as voluntary turnover dropped to below 10%. We can't 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 '26 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 and building pipeline with high visibility on a handful of deals with aggregate annualized revenue of approximately $100 million expected to close by the end of 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 a year-to-date outlays of approximately 365 million, we've 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 2 critical issues, and we respect their expertise and experience, 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 reforecast the outlays for subsequent periods once we have a road map 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'd 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.

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%. And given the recent step-up in diesel costs, 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 had hedges in place for almost half of our diesel requirements and utilized surcharges in a portion of our markets. Yield of 4.7% reflects ongoing reductions in customer churn and implies solid waste volumes down about 1.5%, including up to about 0.5 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%. And 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 0.5 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 5 of 6 of our geographic regions. Most noteworthy, though, was a 20% increase in special waste activity in our Central region, where the pickup in activity we noted in recent quarters had been lagging other markets.

And 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 startup 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, as reconciled in our earnings release, was $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 40 basis point drag from commodities. Outsized 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.

And 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 outpaced 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 tenure of over 8 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.

And now let me turn the call back over to Ron for some final remarks before Q&A.

Okay. Thank you, Mary Anne. As we've 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 positioning 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' 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're most grateful for the commitment of our 25,000-plus employees who live our values every day, putting safety first and making Waste Connections such a great place to work.

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

[Operator Instructions]. Your first question comes from the line of Tyler Brown with Raymond James.

Mary Anne, so I appreciate some of the comments on fuel, but I just want to make sure that I've got it. So sorry for this, it's kind of a multipart question. But number one, I just want to make sure that it's clear that kind of over the course of the year, you would expect fuel to be effectively a push from an EBITDA dollar perspective. But then two, if we assume where fuel is and it stays where it is, we clearly need to contemplate higher surcharges, and that will be dilutive on margins. So I assume that needs to be considered. Can you maybe size some of the dilution there?

And then three, for my garbage bill, I believe I paid 2 months in advance. So we also need to consider that there is a lag on fuel recovery. So can you help us think about fuel dilution specifically in Q2? So I know there's a lot there. I'm sorry about that, but just some more color on fuel.

Sure. Happy to address that. And there are a lot of moving parts. And so here's how I'd approach it. First of all, you have fuel impacts that are direct and indirect. And what we know is that the direct impacts are mitigated or impacted by, first of all, the hedges we have in place. So we've got hedged almost 50% of our fuel requirements and then we get fuel surcharges in certain of our markets. And as you said and as we said in the script, 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'd just remind that since the spike started in March, it goes into next year in terms of the recovery. To your point, there is a lag. The lag is driven by -- it's twofold. One is the mechanism specified by whatever the -- what limits it provides for the surcharge. And then secondly, as you also pointed out, we advance bill customers on a quarterly or monthly basis. And so you can appreciate that when fuel ran in March, customers who we had billed in January, of course, we couldn't have recovered that. We hadn't anticipated it, so it could take, by example, up until May to get that.

So then that brings you to the question of how quickly we recover and to think about it quarter-by-quarter, Q2 would be the toughest, right, because it's the slowest recovery because we're late to the game. By Q3, you're more at that 100% level, and then that continues through the year. So of course, again, as you pointed out, there's a margin impact there when you recover the dollars. And so you get the revenue and EBITDA, but the margin changes. And obviously, that's a function of how big the number is.

Illustratively, if we've got about 50 million gallons that aren't hedged, you then rate that over the course of 3 quarters of the year, you could see how with a couple of dollars higher fuel, this could be as much as $60 million or $70 million in incremental fuel surcharges that would run through the P&L, and that would create that margin differential.

So then I think about the other bucket, which is indirect impacts. So moving to indirect impacts, it then says there's an opportunity to have incremental benefits associated with the higher fuel to the extent that there is an increase, for instance, in E&P waste activity. And that, again, we would expect to take longer. We haven't seen it yet as strong as our E&P results were in Q1 that really didn't reflect the pickup in drilling activity. We did see an improvement in commodities. You've already seen a little bit of an offset of those margin drags. And then you would look to continue to see that as we move through the year.

Okay. Perfect. And then I know I'm sometimes a bit spacey, but maybe I missed it, but did you give any color specifically on Q2 around revenue or EBITDA? And is that a change? Should we think about not getting that forward quarter look? Or how should we think about that?

No. Actually, it's consistent with the way we've been doing it really since last year. And we certainly give guardrails around the movement throughout the year, and I think we did that in Q1 when people laid out their framework for the year. And so I now think about directionally to provide what's changed since our guidance in February.

And of course, as I mentioned, when I look overall at the commodity impact, that's probably improved just based on where the pricing has gone to date, it's probably a 10 basis point benefit versus where we expected things to be in February, and you'd start seeing that in Q2 to the extent it doesn't change from here. And we just talked about the incremental margin headwinds associated with fuel, which would be most felt in Q2 versus the other quarters.

Your next question comes from the line of Konark Gupta with Scotiabank.

The first one, Mary Anne, the underlying margins in Q1, if you strip out the fuel impact, I think they were up 110 basis points, excluding commodities as well. I think in February, you guys were looking at 50 to 70 basis points for the full year. I'm just trying to understand like with the pricing moving to the high end of the range, do you think the underlying margin expansion has potential upside to the 50 to 70 bps you said for the full year?

Obviously, we're excluding fuel in this conversation. But yes, with respect to the fact that we just said we had a nice strong start to the year, that could be arguably another indication of maybe a nice tailwind as we move through the year. We'd always be cautious because you have to have a lot of things go right, and we described all the things that went right in Q1 and acknowledging that those benefits we've seen, for instance, from the human capital-driven benefits as we described with respect to retention and the improvement we've seen there, we've gotten most of those benefits. So I wouldn't think that they continue at the same extent as we move through the year. So you might have a little better improvement in Q1 versus the other quarters and the underlying margin expansion.

Okay. That makes sense. And on the M&A side, I think, Ron, you were mentioning about another $100 million acquisition worth in the coming few months. I just wanted to understand the nature of these transactions. What kind of areas are you targeting? And what kind of assets are these mostly post collection or collection?

Yes, sure. Well, first, and I was a little -- you broke up just a little, but didn't -- we didn't mean to imply that there was a $100 million transaction. There's a series of transactions that equate to $100 million or more, just to clarify. These are all consistent with our traditional, what I'd call singles and doubles, core solid waste transactions both franchise and competitive, both -- we have some integrated transactions in that, meaning collection through disposal and a few smaller E&P tuck-in transactions as well. So everything that's consistent with our existing platform.

Your next question comes from the line of Toni Kaplan with Morgan Stanley.

I wanted to talk about volume. I think last quarter, you had talked about for the year an expectation of down 50 to flattish. This quarter, we did see some nice improvement versus last year, and it was impacted by weather, so even better than the 150. And so my question is, does anything need to happen specifically to get to -- are you still expecting a flat to down 50 for volume for the year? And does anything sort of special need to happen? Or are you running at that sort of pace to get to that level and how much visibility you have in that?

Sure. So I guess a couple of observations. We did see improvement in underlying volumes, as you point out, in Q1, and we're still able to deliver the volumes in line with our expectations in spite of, call it, 25 to 50 basis points of weather impact. Some of that, we'd attribute to that improvement in special waste, which you never -- you try to hesitate to generalize from that because it can be lumpy, and we've had multiple quarters of improvement in special waste. So I'd be cautiously optimistic there.

And then, Toni, the final piece of the puzzle is really that construction-driven activity, which we haven't seen accelerate yet. And so there was some improvement in the underlying dynamics factored into our expectations for the full year that got you closer to that flat or even positive as you exit the year to deliver those numbers as you described. But the good news is that we are seeing that reduction in the shedding or lost contracts. And so that is directionally getting us in the right -- we're moving in the right direction.

The last thing I'd comment on that, Toni, is -- and I think we commented on this in our remarks was that we -- with our AI pricing tool, we've seen perhaps up to almost a 20% improvement in retention/churn on the same type of price, which led us to a little bit higher performance on price than our 5% to 5.5% guidance. And so that has a component to volume as well.

Terrific. And then I wanted to ask about E&P, strong in the quarter, I think up sort of modestly organically, but a nice quarter there. And also, you had sort of mentioned if the fuel prices continue to be high, that could be even more of a tailwind for you. Just wanted to understand, has your pipeline changed? Has it gotten better? Or is this sort of you need a little bit more time for prices to be at a higher level in order to see any sort of impact to the pipeline and future deals?

Yes. I mean, as you know, Toni, the crude ran with the Iran crisis so precipitously within a matter of days to let alone a week. We have not yet seen any increase in rig count in the U.S., which is what would be needed to drive incremental drilling activity to affect our volumes in the U.S. Now if you have a sustained higher price in crude, you will absolutely see -- there is a mobilization period that takes place that takes time and it takes several months. And producers aren't just going to react on a 4- to 6-week price increase in crude.

But if you have a sustained increase in crude price, they will react, and then you'll see a mobilization of rigs, and we will see greater drilling activity and then that will have an impact. And then, of course, in our Canadian E&P business, that is 80% to 85% production linked. And we have seen some nominal increase in their production because of what's going on with the price of crude in Canada as well, as well as their ability to export or their desire to. So certainly, if this is sustained, we will see it. But I'd say it's too early to say that producers are reacting to a 4- to 6-week crisis and not knowing if that's -- how long that is going to go on.

Your next question comes from the line of Faiza Alwy with Deutsche Bank.

Yes. I wanted to ask about yield. And you've been -- we've been talking about fuel surcharges, but I'm curious if there is sort of this potential for underlying benefit that we could see on yield alone as you look at your contracts where you may not have fuel surcharges, for example. Just curious how we should think about yield going forward from here and if there's room for potential upside.

Sure. So most of our price increases, as we described, are in place or known. And so when I think about the benefit in yield, that could be in '27 more so than in '26. That doesn't mean that there haven't been situations in the past when there's been outsized cost pressures or inflation later in the year, and we've revisited our price increases. But at this time, we think in terms of the recovery through the fuel surcharges that we know we're entitled to and then incremental pricing benefits lagging and into next year.

Okay. Understood. And some of the benefits that you've been talking about as it relates to retention, just because this is a relatively newer metric you've historically given us core price. Just help us think through like does that show up more now in volume or in yield? And sort of how should we think about that? Does yield still sort of decelerate through the course of the year mechanically? Or should we see, again, like a slight improvement as maybe you lean into some of your technology initiatives a little bit more?

So yield, you should expect yields to follow the similar cadence to what price did because really, what we're talking about is always the dollars associated with the price increases that we've retained and the denominator gets bigger, right? So most of the price increases are done early in the year. So that's a consistent numerator on a denominator that's getting bigger.

What's changed in the way we're communicating it is that arguably before our volume was reflecting any difference in mix and the price volume trade-off, the customer churn that was inherent in delivering the price increase. And so now we've just really shifted it to the yields bucket. So it's a function of those 2 pieces. So of course, as customer churn improves, the yield should reflect some of that. So you will see a little bit, but I would still expect the number, the absolute value to decrease over the course of the year.

Your next question comes from the line of Adam Bubes with Goldman Sachs.

I have a follow-up on E&P. I think on the last call, you talked about expectations for E&P waste revenues flattish for the full year. And in the quarter, I think it was up over 20%. It sounds like that was largely acquisition contribution, but are you seeing outperformance on the acquired revenues? And is the right way to still think about E&P revenues for the full year as flattish because the run rate looks much better right now?

Sure. So I think the commentary about E&P expectations is that really not much margin contribution was expected. And on an organic growth basis, it was expected to be pretty minimal. And so this is really consistent with what we expected given the fact that we had rollover contribution from acquisitions, but also have the benefit of projects we've done, including at bolt-on acquisitions recently, but also, for instance, reopening one of the facilities we've talked about reopenings. That's why we tried to communicate like-for-like basis to normalize for those benefits.

So I'd say, overall, I still think the margin impact, again, unless we -- or until we get that pickup that Ron was just talking about in terms of drilling activity where it could be more meaningful, I think that would be pretty limited. But yes, the dollar amount would go up because of those incremental projects on the rollover.

Got it. And then I think you're targeting 7 AI initiatives through 2027. It sounds like some of those are already having a real impact. I understand you're going to lap some of the strong margin tailwinds from voluntary turnover, but between continued price cost, the AI initiatives, landfill gas ramping, just at a high level, how are you thinking about potential for continuation of outsized underlying margin expansion beyond 2026?

Yes, Adam, I mean, you're correct. We've targeted 7 initial AI initiatives between 2025 and '27. We implemented 3 of those in 2025. We're implementing 2 in '26 and 2 more in '27. We are spending roughly $25 million to $30 million a year right now in each year on those initiatives. If you put them all together, the returns have been quite staggering, to be honest. Most of them much quicker than a 1-year payback. As we roll out our routing and other broader digital tools, it really suggests that the returns will meet or exceed the pricing tool return.

I know others in our space have talked about fairly significant margin contribution, and we have no reason to believe it looks any different. We haven't laid out a formal number. But look, we believe as we come out of '27 and head into '28, it is reasonable that through all 7 of those initiatives to expect somewhere approaching about 100 basis points of margin appreciation as we head into '28. So this doesn't just come linearly. Obviously, you load the costs up initially in terms of the capital and the infrastructure. We're in that phase and still delivering what we're delivering and then you see those improvements as things get fully implemented in the field and deployed, which takes time.

It takes time to reroute 570 locations with 15,000 trucks. That's going to take all the way through the majority of '27 as an example. So we feel extremely confident and are very excited about what we're seeing from AI. It has outpaced our expectations in virtually every manner, but it is a complex implementation. But those 7 initiatives are all on pace. If anything, we think we're a little bit ahead. But I think that 100 basis points is a fair expectation as we come through getting all 7 implemented.

Your next question comes from the line of Bryan Burgmeier with Citi.

Maybe just following up on E&P. Just curious if you think the kind of 4% growth rate that you flagged in 1Q is an appropriate number for 2Q or 3Q. I'm not sure if maybe that 1% number only captured 1 month of improvement, so maybe 2Q could be even better. Also, I don't want to kind of get ahead of ourselves. So any detail on that would be great.

Well, I think the key thing is that we haven't seen a pickup in the drilling activity, frankly. So really, that would be the determinant. So I would say watch the rig count, and that will be the leading indicator that, that could improve. I wouldn't encourage you to think that there's been a recent run-up and that you should then increase that for a full quarter. As we've said, we really haven't seen it yet. Underlying activity is up nominally is the way we described it. And so I'd say it'd be a little premature to go that far.

Okay. That makes sense. And last question, and I can turn it over. I think we're targeting like $30 million of EBITDA from natural gas this year. I guess, a, is that still accurate? And then, b, did any of that sort of come online in 1Q? Or do we think about that being mostly kind of back half weighted?

Yes. So I think you're referring to the RNG or landfill gas sales where nat gas is a tiny piece of it, and we talked about that spiking in Q1 as it did last year. But what I'd say is it's always good news when you get a contribution from a facility in start-up. A reminder that start-up comes up -- comes with a lot of expenses. So you're working through that as you start these facilities. But we look forward to having more visibility. And certainly, we'd expect in July when we revisit all of our expectations, we'll have a little better visibility on our RNG projects.

But we still are on track to have those facilities come online as we have described, so that our or a dozen-or-so, about half of them were still to come that we'd expect that by year-end. And so maybe some are a little early and some are a little later, but it's right in line with our expectations.

Yes, Bryan, just to reiterate on Mary Anne, we originally outlined 12 RNG projects, 5 were online by the end of '25. One came online in the first quarter -- the end of the first quarter of '26. So really no contribution or very de minimis. And we plan to bring another 6 online by year-end, most likely most of those coming online in the fourth quarter to give us all 12 online for next year. We remain confident in that. And so the CapEx on RNG will come to effectively an end for these first 12 and then the EBITDA contribution from those will come in '27 and beyond. So you will sort of have a double impact to free cash flow starting in '27 from the RNG.

Your next question comes from the line of Trevor Romeo with William Blair.

I had one more follow-up on the E&P business. I think, Mary Anne, you talked about one of the previously mothballed facilities coming back online. So can you just remind us, do you have more of those mothballed facilities kind of still off-line at this point? Or just sort of any other organic project growth opportunities or anything like that, that could still happen in the future and what the decision would look like on those?

Sure. Trevor, this is Ron. So when we acquired in February of '24, 30 facilities from Secure that were disposal, landfill and processing facilities, 25 of those were operational. There were 5 smaller facilities that were mothballed. To date, we have brought online 2 of those 5 facilities. So there's 3 that we will continue to make market dynamic decisions on whether we will reopen those or not. These tend to be smaller facilities, but contributing $2 million to $5 million in EBITDA per facility sort of as we open them. So collectively, they're meaningful.

And as I said, we've opened 2. We are evaluating. And of course, demand will depend on whether we open one in the latter part of this year or not. I wouldn't expect it to be meaningfully contributive. But as I said, the aggregate and the rollover is meaningful as we go forward.

Okay. That's really helpful. And then maybe just switching over to the New York City market. I think there was some reporting recently about time lines on some of the waste zones and the rollout kind of shifting around a bit. I know you've also kind of added to your presence there with acquisitions in the market or in the region kind of the last several quarters, let's say. So all that said, could you maybe just give us an update on how the city rollout and your kind of positioning and strategy is going there?

Sure. Happy to. So the New York City market is going through the implementation of a nonexclusive franchise system from an openly competitive system where there were hundreds of smaller in this term called carters or haulers in the city for the commercial waste. They have divided the city into 30 commercial zones amongst the 5 boroughs. And they have awarded 3 franchise haulers per zone. No hauler is allowed to have more than 15 zones.

We have the maximum at 15. We have -- most of our zones are in Manhattan and Queens and The Bronx. We have a fully integrated position. We have multiple transfer stations in our zones. And we also have 5 MSW and C&D landfills that we are feeding that volume to or can feed it to over the coming years. I think it's safe to say we're really the only fully integrated company in New York City in those zones.

So it is an opportunity that we are very excited about. It is coming along. But the city is going through some changes, as you know, in leadership, et cetera. No impact to the franchise system other than they are slowing the implementation a bit in some of the zones just because it is such a change. And so it's pushing back between 6 and 12 months, the implementation of their original zone scheduling. So it's sort of -- they hope to have everything implemented sort of by the end of '27. And now we're hearing that plan is sort of the middle of '28 to the end of '28 by the time everything is implemented. So no other change than a 6- to 12-month delay on the full implementation of the zones.

Your next question comes from the line of Jerry Revich with Wells Fargo.

Ron, I just wanted to circle back to the performance at Arrowhead. So you folks have ramped that operation up really nicely over the course of this year. Last quarter, we spoke about internalization rate approaching 60% for the company. That's one of the contributing factors. What can that look like on a multiyear basis now as you folks have delivered on the higher capacity? How much higher could you take volumes at the landfill over the next couple of years? And where could internalization rate for the company go as you continue to ramp that up?

Sure. Well, I appreciate the kind words about the achievement of that, Jerry. It's been a lot of work by our team to get there. Look, we are right now or this year running between 7,500 and 8,000-plus tons a day at our peak when we add Arrowhead. We have a plan to get that to 8,500 to 9,000 as we roll into 2027 for the year, then this takes a number of incremental step changes in trackage, both in Arrowhead, at the landfill as well as at the intermodal facilities along the East Coast.

And so that is in the process of being implemented and laid by Norfolk Southern. So we have a cap, if you want to use that word, of 15,000 tons a day is what the facility is permitted for and that's on a 7-day, 365-day year, 24-hour a day permit cap. So there's still obviously a lot of room. So I'm not going to sit here and tell you that in 5 years, we're going to get to that. But I do believe that we will get north of 10,000 tons a day, it's somewhere in the 2- to 3-year mark from now as we sit here.

As we continue to grow, that will move the internalization on that objective into the low to mid-60% level, which, as you know, and those that follow us know, it means we're really actually more than 80% internalized in our competitive market footprint, which is where it really matters. And when you compare it against competitive market models, that's very, very high. So it is something we're focused on, but it is playing out about as we had hoped.

Super. And then just a shorter-term question. Impressive pricing in the quarter and so you folks were able to put up really good margins even with the diesel headwind. Can you just talk about how pricing cadence played out over the course of the quarter? To what extent did that reflect you folks managing the business for these pockets of inflation? Or any other comments that you would make on the outperformance in the quarter?

Sure. Well, what I'd say about the outperformance in the quarter is that what's really great about it is it came from so many different places. And I will say that pricing retention was a little stronger than expected, and we'd attribute some of that to the success of rolling out that AI price optimization tool that we've talked about. So we've continued to see benefits there. We'd also say that our human capital-driven initiatives and being fully staffed and providing the level of service that allows us to defend those price increases has continued to be additive.

And then again, as we've said, all these initiatives have driven small improvements in a number of areas. And so when I look through what drove the 110 basis points of underlying margin expansion, it's pretty much every line item with the exception of fuel and related costs there, which was about a 20 basis point drag that as we've described. So I would say, Jerry, that's how we think about the outperformance.

Now that was augmented by the fact that we had strong special waste volumes. And so landfill volumes were a little better than expected. So that's a good guy. Commodities improved over the course of the quarter. So that's a little good guy. So all those pieces working together helped to drive the margin expansion.

Your next question comes from the line of Seth Weber with BNP Paribas.

Just another margin question. Your SG&A was basically flat year-over-year with higher revenue. I just -- was there anything unusual in that number in either number year-over-year? Or is there any reason to think why you can't kind of continue to keep SG&A flattish year-over-year going forward with all these initiatives you're talking about?

Yes. There can always be some noisy things, whether it's incentive comp or other pieces. We certainly -- and that always hits in Q1. We certainly have talked about the fact that for our AI initiatives, we've hired, we've incurred some upfront costs in order to drive those benefits we're seeing. So that would be a contributor. But really nothing to call out there. Just a reminder that there's always a lot of moving pieces quarter-to-quarter.

Okay. And then just in your prepared remarks, you talked about strength in the volumes in the Western region. Can you just put any more color behind that? What's driving that? Which areas, in particular, which markets?

Sure. Seth, this is Ron. Yes, I think one of the reasons we point this out, and again, for those that have followed us for quite some time, the West region is what we call our exclusive region and our franchise region. And the benefit of that is that we get 100% of all volumes wherever they're generated, and we get them at a guaranteed price of the franchise. So I think it just shows that, that model derives a very strong volume and stability benefit, which is why we like it.

We had strong landfill and special waste growth in our Eastern Oregon landfills as well as in some of our Northern California landfills, as an example. So -- and we saw consistency and as Mary Anne noted, improvement in roll-off volumes in our West, again, because we get everything. So not only was our price per pull up there, but if our pulls actually per day were up there as well.

So you do not have that price/volume competitive trade-off in the West, and I think that was what we were trying to note more than anything. And so that probably more reflects the underlying economy at -- maybe a 0% to 1% type real GDP going on right now. So that was really what the commentary was about.

Your next question comes from the line of Shlomo Rosenbaum with Stifel.

Ron, I just wanted to ask you a little bit more about what it looks like in terms of the cyclical parts of the business? It seems like special waste continues to be strong. C&D was down 5%. I think last quarter, it was down 4%. Maybe it's bouncing around a little bit. You noticed the pulls getting less negative. Are we -- are you seeing this as an improvement? Are you seeing this as kind of a flattening out? Like where do you see that we are? And where do you think that we're going to end the year in terms of overall economic activity? And where do you see the trajectory of the business in that way?

Well, obviously, if I understood that, we'd be in a different business. But I'll give you what we believe, how is that? Look, special waste being up for the sixth consecutive quarter. In our industry, special waste is traditionally a leading indicator. So -- and the reason is it is predominantly speculative cleanup for development of commercial or residential real estate. That is predominantly what special waste is. So that usually precedes infrastructure and construction development of some point -- at some point. So that's a positive.

Now C&D being down 4% to 5%, that's a real-time indicator of what activity is predominantly in construction, okay? Now you don't do a lot of construction in Q1 because of the winter weather. So that's a little hard to say, is that an indicator of the economy or not. I would tell you it's probably not. I think we feel like there's pent-up demand starting to come. We're not seeing any negative indicators in our business.

Obviously, if the Iran situation drags on and fuel remains elevated for consumers and businesses, that could be a pinch point in the economy. But assuming, hopefully, that this is a relatively short-lived situation and fuel retreats by the second half of the year, we think there's a lot of positive momentum in the underlying economy that should start to come through. So I would tell you to your comment, we would say flat to improving was how you asked the question, and that's where we would say it is.

The other observation from it would be that, that was our 10th consecutive quarter of negative C&D volumes, right? So clearly, this has been around for a while, roll-off pulls similarly. At some point, the comps get that much easier, and so you should see it get better. And so that was kind of the expectation going into the year that maybe things became less negative. As Ron said, Q1 is probably not the right time to look for it, but that's how we're thinking about the business trajectory.

Okay. And then just shifting back to a question you touched on in rail and how you're continuing to internalize more over there. I just wanted to ask, is there -- in terms of what's going on to the rail as you're ramping up the tons, is it primarily internalization? Or are you seeing some also at the landfill third-party contributing to some of the growth in the tons there as well? I'm asking that both kind of strategically and then also just in terms of where the pricing is for rail versus kind of the stuff that is landfilled more locally?

Sure. So at this point, Shlomo, most of what is going on the rail, our rail, at least in our situation, is a greater amount of internalized tons. Now that has been very purposeful. We've taken tons over the last 1.5 years that were going into third-party sites on the Eastern Seaboard. Some of those our sites, some of those third parties, and we've internalized some of that volume. We have not yet pursued aggressively third-party volumes into our intermodal transfers on the Eastern Seaboard because we have had some capacity constraints at some of our Northeastern landfills.

So we have pulled down some of our volume there and internalized it on the rail so that we could take customer volumes into those landfills. And so as that alleviates itself here over the next year to 2 years at a couple of our sites, we will be able to pursue more third-party volume onto our rails, and that will be incremental to us. But we have not yet done that. So this has been mostly internalized volume at this point in time.

Look, as far as the competitiveness of the rails, look, the longer you go, the farther you go, in our case now, rail is going 1,500 to 1,800 miles from the Eastern Seaboard to Alabama. So it's quite some distance, you start becoming more competitive with an increasing fuel surcharge than you do on over the road. If you were going a shorter distance, trucking would be more cost effective. But when you start talking longer distances, rail is more cost-effective than trucking.

Your next question comes from the line of Noah Kaye with Oppenheimer & Co.

Great. The first one is on yield and price. I would just observe that this 130 bps spread between core price and yield is already quite tight in a positive way for this industry. And so I'd guess that spread probably tightened year-over-year given the intentional shedding moderating and some of the AI and turnover and safety initiatives. But is there any way to dimension or confirm what kind of improvement in the spread might have been year-over-year? And how should we be thinking about that sort of spread for '26 as a whole? How should we be modeling that?

Sure. So when I look back and try to do apples-for-apples in prior periods, I'd say I agree with you overall that, that churn was probably running more in that 150 to 200 basis points for several quarters. And so some of what we've seen is a tightening there. What gets a little trickier, as you can appreciate, Noah, is that mix factors into this and so does seasonality, therefore.

And it's a reminder that when we look at, for instance, selling in the Northeast and that rates per yard can be twice as much as they are in, say, our Mid-South or Southeast region, that is another factor that's influencing what that amount is, which is frankly why we thought it was good to get it out of volume because it was overstating the negative volumes in a way that felt punitive.

So what we're really trying to do is achieve some parity with our peers or comparability with our peers, and we're going to acknowledge that it's still imperfect, but I think that's another consideration to have, which could cause a little variability.

Okay. And then related, it looks like risk management as a percentage of COGS improved 30 bps year-over-year in the quarter. You've talked in the past about risk management as a lagging benefit of improved safety rates. Was that in any way a positive surprise? And how are you thinking about in the guide risk management as a benefit to margins for '26?

Yes. As you'll recall, we called it out in Q4 that, that was the first time we'd really seen it flip from being a headwind to a tailwind. And so was it a surprise? Look, it's always encouraging when you see the trends that you've expected to see in the business materialize in the numbers, you're always cautious because you can't generalize. But 2 quarters is certainly good to see.

And yes, we came into the year, Noah, as you'll recall, we've talked about the fact those drivers for outsized margin expansion, we said this was really the final piece of those human capital-driven benefits, the lagging benefit of risk. So is it generally in line with what we were hoping for this year? Yes. It will vary quarter-to-quarter, but this is the right way to think about it. It's a good guy that was factored into our expectations.

Your next question comes from the line of Kevin Chiang with CIBC.

Congrats on a strong start to the year here. Maybe just a follow-on on, I guess, a number of questions that were asked along the same vein. Just on the special waste, I appreciate a lot of the moving parts in Q1 can be a little bit noisy with weather. But I guess when you look back historically, what type of lead indicator is special waste to total volumes? Like does it typically lead total volume inflection by like a year, 6 months, 18 months? Is there any like rule of thumb that we can point to when you see this type of special waste improvement over such a long period of time?

Yes. I mean I think, Kevin, it's a little anecdotal, but I would tell you that generally, it's certainly in that next 6 to 12 months. I mean, look, this is property being cleared by developers who have pulled permits to do speculative construction or development. So that's shopping centers, infrastructure, apartments, homes, et cetera. So you're probably talking that, that goes on for that lot clearing and cleanup goes on for 3 to 9 months and then construction begins.

So we've talked about it, it's improving for 6 consecutive quarters now. So I think it's reasonable to expect that by this summer, as we go into the summer and through it, you should see some pickup in C&D and flow through into the solid waste business. I mean that would be a traditional pattern.

That's helpful. And maybe if I can ask the yield and core price question over a longer period of time. You're definitely gaining traction with some of your AI revenue management strategies here. Like when you look at -- whether it's a ratio or a spread, does that change over time as you look at some of the benefits from this AI tool? Like do you reduce churn and so it helps the yield or maybe the rollbacks also improve, so maybe the net impact on the numerator and denominator are kind of equal? Just wondering how that ratio may or may not be impacted as you gain momentum on some of these revenue management initiatives driven by AI.

Sure. So as you know, Kevin, first of all, of course, the absolute value of whatever this number is, is a function of what our costs are doing. So to the extent that we're seeing benefits in costs that say we need less price, that will factor into what you see, whether it's price or yield. Now specific to yield as compared to core price, I would expect, and we look forward to, needing to put less price on the street, but to retain more because of these tools.

And as we've said, that's one of the benefits we're already seeing. And ultimately, as we've described, it's really keeping the customer longer that's the greatest benefit. And so I would expect there to be some improvement in yields, but that would be tempered by the need for less price overall. So I'm not -- we'll take both of those things into consideration in terms of expectations for what those numbers look like.

Your next question comes from the line of Tobey Sommer with Truist.

If I could ask a follow-up question on the rail point. As you look at the business and the industry over a long stretch of time, how do you see the volumes shifting towards rail? And how -- what are your plans to help drive that change beyond Arrowhead? I imagine with the success you've experienced, you're looking at other ways to drive that change.

Yes. Tobey, I mean, obviously, look, today, rail is predominantly or almost exclusively a Northeastern Seaboard modality for waste because of very high tip fees in the Northeast because of landfill scarcity. You're not building new landfills in the Northeast, and it's obviously difficult to expand landfills in the upper Northeast. So the combination of all of that is ripe for rail to take waste out of the geography. As landfill airspace scarcity gets tighter in other parts of the country, such as along the lower East Coast Seaboard, as an example, down in through Florida and the Carolinas, I think you will begin to see similar things happen at smaller levels there next.

You still have a very -- a large amount of airspace available in the Southeast and in the Midwest and in the Rocky Mountains at relatively inexpensive cost relative to the Northeast. So it's not as conducive in that geography for rail. And then on the West Coast, in the Pacific Northwest, you do have rail as a very large modality that has been in place for quite some years in Washington and Oregon. You do not have it really in California, and I would not expect it there anytime soon. So look, you really need to be moving the volumes somewhere probably north of 300 to 400 miles for rail to make sense in most -- or tip fee environment.

So as you go forward 5, 10 years and you continue to see consolidation of landfills and increasing airspace rates or tip fee rates, you will see more and more rail as waste moves economically farther. So look, without divulging to the last part of your question, let me just say, stay tuned. And I think with -- for us, you will see an incremental rail opportunity that will happen in 2026, and I'm quite confident in that. So it will continue to develop throughout the industry. It will be slower, but follow landfill tip fees and the price of crude because those are the 2 things that as they move up, rail becomes more and more economical.

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

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

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

Hello, everyone. Thank you for joining us, and welcome to the Waste Connections Q4 2025 Earnings Call. [Operator Instructions].

I will now hand the call over to Ron Mittelstaedt, President and CEO. Please go ahead, Ron.

Okay. Thank you, operator, and good morning. I would like to welcome everyone to this conference call to discuss our fourth quarter 2025 results and our outlook for 2026. I'm joined this morning by Mary Anne Whitney, our CFO; and several other members of our senior management.

As noted in our earnings release, adjusted EBITDA margin expanded by 110 basis points in Q4, capping a strong year for Waste Connections, driven by price-led organic growth, solid waste and continued operating improvements. For full year 2025, we delivered an industry-leading adjusted EBITDA margin of 33%, up 100 basis points year-over-year, excluding lower commodities. We also completed approximately $330 million of acquired annualized revenue and returned over $830 million to shareholders through share repurchases and dividends while preserving flexibility for continued growth and return of capital.

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

Thank you, Ron, and good morning. The discussion during today's call includes forward-looking statements made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including forward-looking information within the meaning of applicable Canadian securities laws. Actual results could differ materially from those made in such forward-looking statements due to various risks and uncertainties. Factors that could cause actual results to differ are discussed both in the cautionary statement included in our February 11 earnings release and in greater detail in Waste Connections' filings with the U.S. Securities and Exchange Commission and the Securities Commissions or similar regulatory authorities in Canada.

You should not place undue reliance on forward-looking statements as there may be additional risks of which we are not presently aware or that we currently believe are immaterial, which could have an adverse impact on our business. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change after today's date.

On the call, we will discuss non-GAAP measures such as adjusted EBITDA, adjusted net income attributable to Waste Connections on both a dollar basis and per diluted share and adjusted free cash flow. Please refer to our earnings releases for a reconciliation of such non-GAAP measures to the most comparable GAAP measures. Management uses certain non-GAAP measures to evaluate and monitor the ongoing financial performance of our operations. Other companies may calculate these non-GAAP measures differently.

I will now turn the call back over to Rob.

Okay. Thank you, Mary Anne. We're extremely proud of our accomplishments in 2025, led by disciplined execution to deliver better-than-expected operating and financial results. For the third consecutive year, employee turnover and safety incidents rates declined, exiting 2025 at multiyear lows. In fact, building on a well-established track record for better than industry average performance, in 2025, we reached historic company record levels in safety, our most important and impactful operating value.

Moreover, that momentum has continued into January when safety-related incidents were down almost 20% year-over-year to another record low. Additionally, we saw a multiyear improvement in employee retention to achieve our 2025 targeted voluntary turnover level of 10%, and we're continuing to raise or, in this case, lower the bar as we see momentum for continued gains. As expected, these ongoing improvements have driven cost savings, productivity gains and improved customer service.

As we had indicated would be the case, we are realizing related reductions in operating costs throughout the P&L, most notably in labor, repairs and maintenance and most recently, risk management. Moreover, we've seen incremental benefits from pricing retention as a result of the enhanced employee retention and customer satisfaction. In fact, solid waste core pricing of 6.5% in 2025 exceeded our original expectations for the full year, further expanding an outsized price/cost spread and contributing to underlying margin expansion of 100 basis points in solid waste.

This outperformance enabled us to overcome incremental pressure on reported margins related to a second consecutive year of declines in value for recycled commodities and renewable energy credits associated with landfill gas sales as well as continued sluggishness in underlying solid waste volumes. Not only did we report our expected adjusted EBITDA margin expansion to an industry-leading 33%, but we did so in spite of recycled commodity values at multiyear lows and without contribution from operations at Chiquita Canyon landfill, which we closed at the end of 2024.

On the subject of Chiquita and the closure-related outlays, we continue to make progress on managing the elevated temperature landfill or ETLF event. The technical aspects of that process are moving forward, largely as expected, subject to some timing differences on outlays as we have made better-than-expected progress in some areas. On the other hand, the political challenges of resolving this situation continue to exceed our updated expectations primarily because of related regulatory, permitting, legal, consulting and other unanticipated requirements that have dragged out an inflated an already burdensome and dysfunctional process.

As we have indicated previously, to address these regulatory challenges, we have sought out and we welcome the involvement of the US EPA and constructive efforts to streamline processes, remove regulatory impediments and enable a more effective and efficient response. We are encouraged by recent meetings we have had with top officials at the US EPA about their further engagement at the site. US EPA has indicated they are finalizing next steps for both short- and long-term solutions to assist Chiquita in further mitigating and managing the reaction and streamlining the regulatory oversight at the landfill.

Moving next to acquisitions. During 2025, we closed approximately $330 million in annualized revenue from 19 acquisitions, ranging from West Coast franchises to competitive markets including integrated businesses, new market entries and a number of tuck-ins to existing operations. Our expected 2026 rollover revenue contribution of approximately $125 million reflects a few additional deals already completed this year and is expected to grow with our active pipeline.

As always, we'll stay selective about the markets we enter and disciplined about the amounts we pay and we would consider any additional deals as upside to our full year 2026 outlook. Our focus has been and will continue to be a solid waste, and we look forward to building on a model that has consistently delivered value creation. Following multiple years of outsized acquisition activity, we remain well positioned for future growth. With leverage of 2.75x debt-to-EBITDA, our strong balance sheet and free cash flow generation allow for continued investment in acquisitions, along with other opportunities, including growing shareholder returns.

To that end, during 2025, we increased our quarterly per share dividend by 11.1% to return a record amount to shareholders, including over $330 million in dividends and over $500 million in share repurchases. We have taken an opportunistic approach to share buybacks and intend to continue to do so. We recognize that market sentiment and capital flows may shift over time, but that doesn't change the fundamentals of our business or the durability of our model, which makes buybacks compelling in the current environment.

Additionally, we are reinvesting in the business and positioning ourselves for further growth and value creation through both sustainability-related projects and artificial intelligence or AI technology-driven initiatives.

Looking first at sustainability. We continue to make progress developing our portfolio of renewable gas or RNG facilities, including 5 already online, with the remainder expected to be operational around year-end. We have also broken ground on an additional state-of-the-art recycling facility expected online in '27.

Looking next to AI and our multiyear rollout, which began in 2025, these investments are aimed at enhancing efficiency and boosting productivity by further digitizing and automating our operations and improving forecasting through data analytics. At the same time, we're focused on service and customer experience for improved transparency and mobile connectivity. What's exciting is that we're just getting started and are already seeing positive outcomes as we expand the utilization of AI and data analytics across multiple platforms.

For instance, we've enhanced our dynamic routing platform to further optimize asset utilization and performance. Promising early indications show direct and indirect benefits beyond cost reductions, ranging from improvements in safety and employee engagement to enhance customer satisfaction and retention. We're excited to build upon these efforts as we deploy additional applications and expand our development in 2026 and 2027.

And now I'd like to pass the call to Mary Anne to review more in depth the financial highlights of the fourth quarter as well as provide a detailed outlook for the full year 2026. I will then wrap up before heading into Q&A.

Thank you, Ron. In the fourth quarter, we delivered revenue of $2.373 billion. Acquisitions completed since the year ago period contributed about $58 million of revenue in Q4, net of divestitures, bringing full year net acquisition contribution to $377 million. Q4 pricing accelerated sequentially to 6.4% and range from about 3.7% in our mostly exclusive market Western region to over 7% in our competitive markets.

Reported volume down 2.7% was in line with prior quarters and continued to reflect the combined impacts of intentional shedding, price volume trade-off and ongoing weakness in the more cyclically driven elements of the business. Looking at year-over-year results in the fourth quarter on a same-store basis, roll-off pulls were down 2% and total landfill tons were up 3% on MSW and special waste both up 4%, while construction and demolition debris or C&D was down 4%.

For the full year, C&D tons were down 5% year-over-year, bringing tons down about 15% from 2023. Special waste on the other hand was up 7% for the full year 2025, following declines in 2 of the last 3 years. And finally, full year 2025 MSW tons were up 3%, in part as a result of our purposeful increase internalization in the Northeast and in certain Texas markets.

We are encouraged by the consistency of results in 2025 and macro indicators that suggest improving underlying dynamics in the broader economy, but haven't factored in a material pickup in our expectations for 2026. Adjusted EBITDA for Q4, as reconciled in our earnings release, was up 8.7% year-over-year to $796 million or 33.5% of revenue, up 110 basis points year-over-year. In Q4, we lapped the initial wind down of operations at Chiquita Canyon landfill as well as the toughest year-over-year commodity comparisons, both of which had masked the strength of underlying margin expansion on a reported basis.

As anticipated, the outside benefits from operational improvements that had been contributing all year were more visible in Q4. Along those lines, we are encouraged to see benefit from risk management costs which up until Q4 had been a headwind to reported results. Looking at the full year 2025, adjusted EBITDA of $3.125 billion was up 7.7% year-over-year with adjusted EBITDA margin of 33%, up 50 basis points.

Normalizing for Chiquita and lower commodities, adjusted EBITDA margin exceeded 33.6% as expected. Moving next to adjusted free cash flow. Our 2025 adjusted free cash flow of $1.26 billion was largely in line with our expectations and reflects underlying conversion of adjusted EBITDA of approximately 50%. The strength of our free cash flow generation largely overcame higher-than-expected cash flow impacts from Chiquita, which totaled approximately $200 million.

Capital expenditures of $1.194 billion were in line with our expectations, including R&D project spend of about $100 million. Our R&D spend for the projects noted will be completed in 2026, and Chiquita outlays are expected to step down, setting up higher free cash flow conversion, which has been factored into our 2026 outlook, which I will now review.

Before I do, we'd like to remind everyone once again that actual results may vary significantly based on risks and uncertainties outlined in our safe harbor statement and filings we've made with the SEC and the Securities Commissions or similar regulatory authorities in Canada. We encourage investors to review these factors carefully. Our outlook assumes no change in the current economic environment. Our outlook also excludes any impact from additional acquisitions that may close during the remainder of the year and expensing of transaction-related items during the period.

Revenue in 2026 is estimated in the range of $9.9 billion to $9.950 billion. For solid waste collection, hauling and disposal, we expect organic growth in the range of 3.5% to 4%, driven by core pricing of 5% to 5.5% with expected yields of approximately 4%, implying volumes flat to down about 0.5 percentage point. Acquisition revenue contribution of about $125 million reflects deals closed to date. Commodity-related revenue reflects recent values and E&P waste revenues are expected to be flattish year-over-year.

On that basis, adjusted EBITDA in 2026 as reconciled in our earnings release is expected in the range of $3.30 billion to $3.325 billion. Adjusted EBITDA margin in the range of 33.3% to 33.4%, up 30 to 40 basis points year-over-year reflects the commodity-related drag of 20 to 30 basis points. As noted, incremental acquisition activity, any improvement in the underlying economy or increase in commodities would provide upside to our 2026 outlook.

Depreciation and amortization expense in '26 is estimated at about 13.1% of revenue, including amortization of intangibles of about $195 million or $0.57 per share -- per diluted share net of taxes. Interest expense is estimated at approximately $330 million, and our effective tax rate for 2026 is estimated to be approximately 24.5% with some quarterly variability. Adjusted free cash flow in 2026, as reconciled in our earnings release, is expected to increase by double-digit percentages to a range of $1.4 billion to $1.45 billion.

CapEx estimated at $1.25 billion includes an aggregate of about $100 million for RNG and recycling projects. And our adjusted free cash flow outlook also reflects $100 million to $150 million impact from closure-related outlays at Chiquita Canyon. Normalizing for both noncore impacts, 2026 adjusted free cash flow reflects conversion of approximately 50% of EBITDA or approximately $1.7 billion. While not providing specific expectations for revenue and EBITDA by quarter, we would offer the following high-level framework.

In solid waste, we would expect a typical seasonal cadence and related margin progression in 2026, keeping in mind the recent outsized weather events across several geographies impacting Q1. Looking specifically at Q4, we would note the toughest year-over-year comparisons given our outperformance in 2025. And finally, for recycled commodities, a reminder that the toughest comparison would be in the first half of the year.

Thank you, Mary Anne. Coming into 2025, we emphasized excellence with humility, recognizing our ongoing commitment to a proven strategy for delivering industry-leading results while acknowledging the benefits of new ideas, innovation and technology. We're excited about our progress in 2025 and the momentum in 2026 for another year of outsized solid waste margin expansion along with double-digit adjusted free cash flow growth. Moreover, we're positioned for upside from any pickup in the economy or commodities as well as additional acquisitions.

We're excited to win from within in 2026 and are grateful for the dedication of our 25,000 employees who set us apart by putting our values into action every day. We also appreciate your time today.

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

[Operator Instructions]. Your first question comes from the line of Saba Khan with RBC Capital Markets.

Maybe just starting with, Mary Anne, the free cash flow commentary that you shared. Just wondering if you can just delve a little bit more into sort of the sustainability CapEx, where that's going? And then just on the Chiquita as well, it sounds like $100 million to $150 million. If you can just talk about the cadence of that spend? And then more importantly, as we think about free cash conversion in this year into '27, just how should we directionally expect those 2 incremental amounts to evolve through '26 and more so into '27?

Sure. Well, high level, to be clear, we'd expect them both to step down '26 to '27. So first of all, in terms of sustainability-related outlays, the $100 million includes the final $75 million that we've been talking about for the large slug that dozen or so RNG facilities which, as Ron mentioned in his remarks, almost half of which are online and the balance are expected by around year-end. So that's done there.

And then the incremental $25 million that we mentioned is part of our efforts longer term, as we've described, to really derisk recycling and take advantage of the incremental technology that provides benefits, as I said, of derisking, reducing our cost to third parties and also improving the quality of the recyclables coming. So that's just -- you should think of that as there is this opportunity. It's a little outsized slug. We're always spending a little, but it's part of the $100 million this year. And again, I wouldn't say that repeats going forward.

With respect to Chiquita Canyon outlays, as we described, some of what was the outlays in 2025 reflect getting more done than we had anticipated. So there's some of that, that continues to decrease as we move through that process. And then there are other pieces that we hadn't expected the pace or the type of outlays that we're seeing. And so we certainly -- when you say the cadence during the year, I wouldn't put too much premium on how quickly those outlays are. Just as you know, CapEx and free cash flow, in general, is always lumpy during the course of the year. So I'd encourage you to just think about it in totality for '26.

Great. And then maybe just stepping back on the broader guidance. I think the commentary indicates not a lot of aggressive assumptions, at least on the macro and the commodity prices. Maybe you can just share some thoughts around sort of what you baked in, in terms of the macro environment? We're hearing some commentary on some of the sector calls around green shoots. If you can just comment on where you see potential sources of upside, whether that's on maybe the cyclical volumes getting a little bit better, whether that's maybe another above-average year of M&A? Just what have you baked in? And where do you think upside could come from if there is for the rest of the year?

Sure. So as we've said, I mean, I'd say there's 3 key things that we haven't baked in. One is any improvement in commodity values. And so you see that, that headwind over the course of the year, which, as I noted, in terms of quarterly cadence is strongest, the largest headwinds are a lot like Q4 when it was 40 basis points headwind, that's how to think about the first half of the year and then those abate just as comps get easier. So to the extent that there's any pickup in commodity values, you'd see a benefit there.

Next, you heard us talk about with yield of about 4% that margins are kind of in that flat to down 0.5 point, that's not materially different from what we've been seeing in terms of that piece of the business that's somewhat cyclically exposed where you've had lower roll-off in C&D tons. And so to the extent that those improve or that there's incremental improvement in special waste, which we described being up year-over-year, that would be incremental.

And we certainly agree with the characterization that others have made about green shoots in the economy from certain macro indicators, we'd point to within our business, we see the special waste pipeline firming. I'd note that, that was -- Q4 is our fifth consecutive quarter of improvement. And I look at the recent trends just in January and weekly trends, I continue to see those up in the most recent weeks.

Next, commercial service increases are outpacing decreases with overall net new business up. So that's encouraging. And while C&D is still down over the year, we have seen the declines moderating. You look back earlier in the year, in Q2, we were down about 9% year-over-year, and we exited the year down more like 3.5% to 4%. So no improvement overall is factored in there.

And then the final piece you asked about was M&A, and I'll turn it to Ron. But of course, as is our approach, we don't bake expected M&A into our outlook. What we've provided you are deals that have already closed.

Yes. And Saba, I would say that when we -- at the third quarter call, I think we had told -- reported that we had closed about $250 million by then that we expected to close some $75 million to $100 million thereabout. You see we closed about another $80 million that brought that number to $330 million. In fact, today, we've closed -- and last week, closed about on the other $20 million of that. So that brings you right to that $100 million that we talked about what was out there that could occur during the fourth quarter or the very beginning of the year. So that has occurred.

So there's no real change to M&A, as Mary Anne said. Look, I know you haven't followed the space for forever, Saba. But if you go back, there's a pattern by multiple companies within the space that tend to go out and put out guidance at the beginning of the year and make all kinds of improvement assumptions in the economy and then come back around in the third quarter or the fourth and back all those off.

We don't believe that's a prudent way of providing guidance. We're providing guidance with what is known today and assuming it doesn't improve and that if it does improve, it will be upside. So we just think that's a more conservative approach, not saying there's anything wrong with the other approach, but this is a very consistent pattern for us and actually for others in the space, taking the approach they have.

Your next question comes from the line of Tami Zakaria with JPM.

I think your pricing is moderating versus last year as some of the cost pressures are also waning. I was curious, could you elaborate on which buckets of expenses you're seeing moderation and you believe are sustainably trending downward for the next few years?

Yes, Tami, I mean, number one, you are correct, prices moderating, and that's a good thing. We're happy about that. Remember, we don't always -- we don't focus on the ultimate amount of the dollar amount or percentage of the price increase. We try to focus on maintaining the spread of 150 to 200 basis points spread to what we believe our cost is going up.

So if you look at our guidance for price, core price of that 5% to 5.5% and say that's 100 basis points down from 2025, it would indicate to you that we believe our cost is down about 100 basis points relative to 2025 on an increased basis, and it is. We began 2025 with labor rates approaching 5% year-over-year, and we exited Q4 with labor rates up about 3.9% year-over-year and trending down towards 3% to 3.5% throughout 2026.

We had other costs within the P&L in 2025 that began the year probably closer to 4.5% and moved throughout the year closer to more in that 2.5% to 3%. So it's just about the spread. We look forward to not having to put as much dollar amount or percentage rate increase on our customers. They're feeling the same effects from the economy as everyone else. But the spread has maintained the same or approximately the same, and that's what we focus on.

Understood. That's very helpful. And I think we love hearing about all the tech and AI investments you're making to improve the efficiency in your business. Any exciting initiatives you want to call out specifically that's due for implementation this year that we can look forward to?

Well, yes, there are. And we're actually excited about them, too. whoever thought in an old-line industrial waste company that we would understand what AI even was. But this year, we're focused heavily on 2 incremental initiatives of 7 that we've agreed to do between '25 and '27. This year's 2 are moving the company into more of a dynamic, real-time customer routing opportunity.

We have very good routing today, but it is what I'd call static. It has no ability to read incoming data. So you run the route sort of the night before or the week before, where we're moving to is sort of a real-time routing that takes into effect things just like I said on another call would be like ways for your car.

It takes in road closures, it takes in traffic conditions, it takes in accidents, it takes in third-party data fees to allow us to react real-time and resequence with the utilization of AI doing the resequencing, not somebody doing it in another way. So that's one.

And the second one is we're developing a dramatically more robust mobile connectivity platform and working towards trying to eliminate inbound calls to our customer service groups locally by as much as 30% to 50% over a multiyear period. We take over 1.5 million calls from customers per month right now. And our objective is to get that down somewhere between 700,000 to 1 million over the next couple of years by being able to push out information mobily to customers for the 5 to 6 most common things.

We know what the 5 to 6 most common things customers are asking. And it's mostly because they're not receiving that information in real-time, such as I think your driver is not -- didn't pick me up today because he usually picks me up between 7 and 8 a.m. And in reality, he's going to pick them up that day and -- but the road has been closed due to snow. And so we're able to push out. They're able to see mobily when their driver will arrive and where the driver is on the route, much like you do with your Uber, if you order an Uber today, you know where they're at and how far away they are.

Those kinds of things are dramatic changes in efficiency and customer service quality for us. So those are 2 things that we're working to bring online in '26.

Your next question comes from the line of Noah Kaye with Oppenheimer & Co.

Ron, in years past on M&A, you've talked about the potential for an outsized year. How do you assess based off of the pipeline, the potential coming into this year? And then on the same subject of capital allocation. I know you said you'll be opportunistic with the buyback. But just given where the stock price and the valuations sit today, just how opportunistic are you being here to start the year?

Well, let's tackle the first part of that, which was your M&A question. Look, as you know, M&A can be lumpy. We've had 3 very strong years in a row. No reason to expect that '26 looks any different. There's nothing that has changed in the underlying opportunity basket, nothing has changed in our appetite to complete deals or our ability to complete deals, our financial flexibility. So I think it's very fair that you and others should expect another sort of outsized year.

Now how much of an outsized relative to a normal $150 million to $200 million year? The year needs to play out to see that. But I think hopefully, you look back at the last 3 years' track record, and we're not seeing something that would make us think that this year looks differently. And we certainly have the capacity, as we said in our script, to do both whatever comes along at M&A and as much buyback and return of capital as we think is prudent based on the fundamentals of our business and what is driving those opportunities in the buyback. So we don't see any limitations on any of those.

As far as every now and then, you pointed out that a larger deal comes along. And we looked at several things that made that we didn't pursue or weren't successful on in '25. And we had one of those in '24. We had one of those in '23. I mean certainly, there's a good chance that happens in '26. But we don't bank on any of that or forecast any of that because that just leads to overpaying and pushing to do something that you might not otherwise have done.

So we continue to look at everything and be very active, but we're going to continue to be very disciplined in our approach to what we think is a quality asset for long-term value creation.

Very helpful. We can table the buybacks until we see the results, I guess. I really want to get after, because I think it's just so important for a lot of investors, the underlying free cash flow conversion becoming the headline free cash flow conversion to be doing 50% underlying is really impressive. So on these moving pieces, the sustainability CapEx in Chiquita, I guess with sustainability CapEx, is 2026 really kind of the last big slug that you envision and we go from $100 million down to almost nothing on RNG in 2027. Is that the right way to think about it?

And then on Chiquita...

Go ahead, but ask the Chiquita, we'll get you -- we'll answer you both. No problem.

I think just to help us understand kind of your level of confidence that 2026 is really kind of the last big chunk of spend there. Maybe help us understand a little bit better how it's played out and why that might be the case? And where kind of pending any big regulatory change you could see this kind of winding down in 2027?

Sure. Okay. Well, let's address the -- you made a comment about the buyback. First off, look, we don't communicate at any time whatever the stock price is, what our intentions are. We have, obviously, our view of underlying fundamental value that we are running at all times and we're going to be active, that's what I can tell you, okay? And so I think that speaks for itself. You saw what we did in the third and the fourth quarters when there was dislocation.

On RNG, there's actually a 2-point inflection that you need to think about here for this conversion moving back. And you're right, 50% is impressive. But I would remind you, we've been as high as 53%, 54% at one point in time. So getting back to 50% for us is actually very average of where we've been.

But next year in '27, you lose the CapEx that has been associated with this RNG, these 12 projects, and you now begin most of the full contribution of the EBITDA and free cash flow. So it's sort of a double whammy for '27 in that vein. Now will there be incremental RNG or sustainability in future years? Well, certainly, there could be. But that would be for new projects that represent incremental cash flow and growth opportunities, not related to the 12 original and the 3 to 4 big recycling facilities we've talked about. That piece will be done this year.

We expected the outlay for RNG to be done in '25. But the reality is we don't control all the timing on that outlay because of the permitting and the local utility interconnect that we have to respond to. And I think you're seeing that in everybody's RNG that it's taking a little longer to get online than original thoughts. But we're very confident in that $100 million, to answer your question, being done in '26 and then the contribution being there for '27 in the EBITDA and cash flow.

Next to Chiquita. Look, what I would tell you is this: First off, I think you and other investors need to think through this, this way. First off, an ETLF is nothing new in this industry. There are 10 to 15 going on right now across the U.S. in many states. Your large public companies have between 3 and 5 each going on today, that were going on last year, that were going on the year before. The difference is they don't have them in California.

If this had happened in 49 other states, you and no one else would have ever known about it, which is why you don't know about the other 10 to 15 occurring because they're not in California. One is by one of our large competitors, but be thankful for them, it's not in Los Angeles County. It's adjacent. The reason the EPA is involved at our request is because they are having an extremely difficult time understanding the dysfunctionality of California's inability to resolve its own regulations. That is the issue, okay?

And so what we know is -- your question was, is '26 the last year of outlay for Chiquita and how confident? What we're confident is, this is stepping down and continues to step down, and will step down fairly meaningfully in '26 as the year goes on because of the involvement and the streamlining that is coming along. Will there be some in '27? Yes, but it will be quite lower again than '26.

So we should begin to approach those approximate 50% conversion levels as we come through '27. So we can't sit here and tell you what would be exactly that in '27 without knowing where we'll end with things on Chiquita in '26? No, but all those things are triangulating to that direction.

Your next question comes from the line of Jerry Revich with Wells Fargo.

Ron, I'm wondering if you could just give us an update on how the Northeast corridor, rail corridor build-out is going? Update us, if you don't mind, on your expectations on shipments over the course of this year and the densification on the collection side as well, where do we stand on that initiative?

Sure, Jerry. And I think most of what you're referring to is where we are in our Arrowhead Landfill in Alabama and our intermodal facilities along the Eastern Seaboard in Mass, Connecticut and New Jersey, New York. Again, to remind everybody, in August '23 when we acquired this network, it was doing about 2,300 to 2,500 tons a day through the network into the landfill. We're now doing 7,500 tons a day sort of at the peak period.

We have built out incremental rail, storage and track capacity in our New York, New Jersey intermodal facility. We have incremental track build-out that we must do at our Arrowhead Landfill, which we are in the process of. We believe as we come through '26, we will be in the 9,000 to 9,500 tons a day into our Arrowhead Landfill. So we basically almost, not quite, almost quadrupling what was there 2.5 years ago right now.

So I would tell you that I think that's going fairly well, as is our continued densification, to use your word, in the Northeast. We did multiple tuck-ins in our New York franchise market area in '25. We acquired, at the end of the year, a large transfer station as well in New York, in Queens. We acquired a large recycling facility in Hoboken in '25. So we have, I'd say, put a lot of effort into building sort of our leading position, certainly, at least in the New York City metro area. So I would tell you, overall, Jerry, that continues to be a focus and continues to be -- there's opportunity there, but we have made good headway.

And Jerry, the only thing I would add to Ron's remarks would be just to clarify that where you've seen that increase in activity at Arrowhead, as we've talked about throughout '25, it's really from internal tons as opposed to incremental third-party tons. And we had seen that as an opportunity. And so two things, you see that in our internalization rates, which I mentioned in the prepared remarks, which are now up to almost 60%; and secondly, you see the margin contributions, and you see the outsized margin performance in '25, decreased third-party disposal was a component of that, and that's really the impact of Arrowhead.

Okay. Super. I appreciate the update. And then can we shift gears and talk about just to expand on the landfill gas part of the conversation. So in terms of the timing getting pushed out, obviously, everybody is working through that, so that's clear. What we're seeing from some others is the initial plant ramp-up and productivity and profitability has generally been lower for a number of operations. Can you just talk about how that's going for your plants that are coming online versus initial expectations in terms of efficiency rates and profitability ramp based on what's the most recent vintage that's come online?

Sure. Well, Jerry, I would say that your characterization that others are experiencing are very similar to ours in many ways. Look, these things are taking a little longer to get online due to mostly permitting and start-up issues, but they get there. We get them there as a company and as an industry. There are multi-months, if not up to a year, to work out and get the flow accurate and really work through the start-up issues of the plant. So you probably start up at somewhere maybe in a 40% to 50% efficiency and you work up over time to approaching 100%.

You're not at 100% efficiency until well after a year plus being online and getting your flows increase and everything dialed in. So the ramp is somewhat slow. Of course, profitability is affected by both revenue values. And as you know, that is that RINs have come off a high of $3.40-ish down to a low of $2 and now sit in that $2.40-ish range. So they're down 1/3, and that certainly has an impact depending on your structure of the RNG ownership facility.

As you know, we and most others have sort of 1 of 3 types of a structure, fully owned to some sort of hybrid, to a royalty arrangement. And it also is affected by inputs on the cost side, such as the cost of electricity. And of course, that has had some waxing and waning. So I would tell you that the returns, while lower than probably -- and then certainly, when run at $3 and $3.25, are still very good, extremely good returns at the $2.20 to $2.50 range, not a RIN value and current electricity cost, not as great as they were at an obviously higher commodity value, but still very attractive and well worth the investment that we're making.

And Jerry, when we look at our full year outlook, we didn't assume that facilities were necessarily contributing. They may have some incremental costs during the course of the year or that they were going through testing. And as Ron described, at these lower run rates or efficiency rates, so there'd be upside to the extent that moves along more quickly. And then, of course, any improvement in RINs as well would be upside to our guidance.

Yes. And to give you an example, Jerry, a real-life example, I mean, we're -- we have one of the largest -- we have the largest facility in Canada outside of Montreal that we've owned a long time, it's very effective. We started another one. It was supposed to be online in April of '25. It came online in December of '25, and it only began running at sort of close to full capacity in the last couple of weeks. So they do -- they can take a little longer, but they -- definitely the performance is still attractive.

Your next question comes from the line of James Schumm with TD Cowen.

I have a multipart question on Chiquita. Last quarter, you gave daily leachate production figures and like how that was dropping. Can you update us there? And is it fair to assume that leachate costs make up, I don't know, 50% to 60% of your total Chiquita spend? And then also, like what is the cost per gallon for disposal there? And do you see any opportunity to lower that cost with evaporation or any other potential help from the EPA?

So James, I'll give you some high-level stuff on this because a lot of this changes fluidly quite frequently. But -- so at the peak of the reaction, which we believe the peak was somewhere between June and August of '24, we were generating as much as 400,000 gallons of leachate per day, okay? As of the end of the fourth quarter, we were generating most days between 200,000 and 225,000 gallons.

So that number, as you can see, is at least from the peak down approaching 50%. We have other things such as wellhead temperatures that are cooling. So we have every reason to believe that the statistics point to that we are on the downward slope or the backside of the curve of the slope of the reaction as it is starting to cool and wane. What the slope of that trajectory line is? Obviously, it's too early to tell, but the indicators are that we're over the hump and on the other side. So that's number one.

The cost per gallon varies. It can be as low as about $0.50 to $0.60 to as high as $1.50 to $2.50 depending on what treatment facilities are available and what constituents they can take, okay? Some facilities cannot take various things that are within leachate and so you have to transport further to a more complex treatment facility. And yes, to answer your question, I would say that the leachate treatment is not 50% to 60%, but I would characterize it more as about 40% to 45% of the cost. Certainly, the large majority.

And then lastly, I would tell you that I'm not sure that evaporation is necessarily going to happen. This still resides within the state of California. But it's interesting you bring that up, and a large one of these going on in Nevada right now. There, you can purchase acreage and go out and aerate this in the desert for $0.02 a gallon. So it is quite interesting how one state handles this compared to a state like California.

So I doubt we'll get to evaporation. But yes, we do believe that the involvement of EPA can lead to some streamlining of treatment facility opportunities, and that ultimately leads to a more cost-efficient process.

That's great. And then maybe just moving to Seneca Meadows. Can you provide an update there? I think you guys had said you're pretty confident that this moves forward, but I don't think we've gotten resolution on that yet. And I was just curious if that landfill were forced to close, what kind of impact would that have on your EBITDA?

Well, first off, again, it's a very good question, two-part. Hopefully, both things we're going to answer here gives you some comfort in this. First off, we absolutely do believe that, that expansion will go forward. That is expected to happen here over the course of the next several months. There is a -- we are in the technical review piece of the expansion with the state and generally in the state of New York and other states the technical review is really what the design, the final design and contours will be relative to whether it's a go or no go. The go or no go is a separate process, and that has effectively been decided in our favor.

So we have quite a very high degree of confidence that Seneca will succeed in its expansion and go forward. But in order to have enough airspace to honor our commitments, we have been throttling back volumes consciously at Seneca, our choice, over the last 18 months. And so -- and we have taken that to other landfills that we own throughout our network, both in New York and Pennsylvania and some to our Arrowhead network that we mentioned earlier, intermodal.

We have also had to push out some third party to do that. And so we've overcome that as well in our results. But to answer your question, I would tell you that the -- if Seneca were to close, as you said, if that is a worst-case scenario, the impact to us is far less than what we absorbed at Chiquita closing, okay? So without [indiscernible], it's far less, and you've seen us overcome the impact to EBITDA revenue and margin of Chiquita, and this would be far -- so it would be something I'm not even sure you would notice.

Your next question comes from the line of Adam Bubes with Goldman Sachs.

I think the outlook implies an improvement in the rate of change of volumes around 150 basis points, at least on an apples-to-apples basis with how you traditionally report. And it doesn't sound like that embeds macro improvement. So what are some of the moving pieces driving the rate of change improvement in volumes year-over-year?

Sure. As we've talked about volumes, historically, the way we've communicated it, you had what we would characterize as that price volume trade-off or I'd argue there's a piece of mix in there and churn. We also talked about shedding and then we've talked about the underlying economy that price volume trade-off what -- the way we'll be communicating it is embodied in the yield calculation, just the same way our peers do.

And so I'd say that hasn't moved materially, although we look forward to seeing certainly the churn element of that continue to decline as we use better tools, and we've talked about the visibility we have there with our price increases. So then I'd observe that the shedding has decreased. We talked about anniversarying one of those last contracts last year in Q4. So that's behind us, so I'd expect that to be more de minimis.

And then as we said, we still expect that there's some from those more cyclically driven pieces of the business and that's why we said maybe that's flat to down about 0.5 point. That's essentially what you're seeing there. And again, that doesn't mean that things are getting better. It's just that we're anniversarying these low rates and the comps are easier. And as we've said, we have already seen some pickup in special waste, and we're continuing to see our pipeline, our visibility on special waste projects improve. But again, no macro pickup, that's all upside.

And then, Ron, you talked about the technology initiatives, specifically the real-time routing sounds really interesting. It sounds like you're in the early innings. But to what extent is that rolled out across the fleet today? And what type of initial savings or productivity are you seeing?

That is not yet rolled out to the fleet today, Adam. So it'd be misleading to tell you that it is and what we think those savings will be. We have beta-tested what we've done in probably what would equate to maybe up to 5% of our locations, but not at all of the routes on those 5%. So that's a smaller test. So -- but I do expect that we will have this rolled out fairly broadly by the third and fourth quarter of this year and then really more fully deployed throughout '27, but have a good impact or a good understanding of the potential impact in the second half of this year at some point.

Your next question comes from the line of Chris Murray with ATB Capital Markets.

Maybe turning back to the margin expansion that you saw in Q4. And then we start looking at, at least what you're proposing to see in 2026. Ron, I mean you alluded to the fact that a lot of this was attributable to -- there's some price/cost spread gains, but it was also kind of the underlying improvement in things like turnover and risk.

Thinking that, that stuff is not going to change, can you just maybe kind of square the circle on why you wouldn't think that those trends would extend a little bit more into the year and you're kind of looking at a lower year-over-year kind of growth rate?

Sure. So I guess what you're referring to is that we've guided to 70 basis points at the high end of underlying margin expansion after exiting the year at -- which, by the way, is about what we've seen through the course of the year and then exiting the year at over 100 basis points margin expansion. And I'd say that we recognize that the trends are still in the right direction. So there's certainly continued opportunity, and we factored that into our expectations for what we would characterize as above average margin expansion from that price/cost spread driven in part, as you note, by the employee retention and safety-driven benefits.

Just remember, we had talked about 100 basis points of margin expansion coming from that improvement over a multiyear period and we're really 2 years through that multiyear period. And we mentioned that the final piece, the risk, is the largest contributor in the final pieces. So it's just an acknowledgment that as those metrics continue to improve, we look forward to seeing continued opportunity. Obviously, it's gets harder the further down you go with improving these numbers and hitting record lows. But we'll certainly look forward to continuing to driving those savings.

And Chris, I also think in terms of pricing retention and the improvement in churn that we've already seen from our pricing tools. So I think there's opportunity, which is why we're guiding to 50 to 70 basis points of underlying margin expansion when, as you know, that number would historically or typically be 20 to 40 in February.

Okay. Fair enough. Another quick one just for me. The Canadian government changed its -- or is introducing new regulations around methane emissions for landfills. Just wondering if you guys have any thoughts on how that could impact the Canadian landscape, either creating some opportunities or some costs for you and how you think that it will actually impact the industry over the next few years?

Yes. I would tell you, Chris, that it's probably too early for us to make any real educated response to that. But I can tell you in speaking with our Canadian leadership team, we were just in Canada this week at our Canadian region office on Monday and Tuesday. And they -- it was not something they were concerned about based on everything they understood at this point.

Your next question comes from the line of Trevor Romeo with William Blair.

Just a couple of quick ones for me. I think first on the E&P business. Would love to know if you could kind of talk about in the quarter, I think you had some M&A deals contributing, but maybe talk about the organic growth you saw in Q4? And then as you think about modeling E&P for 2026, I think, Mary Anne, you said maybe flattish for the year. Maybe you could talk about what you're expecting in U.S. versus Canada? Is anything to call out on a seasonal basis or anything else on that topic?

Sure. So looking at Q4, I'd say we outperformed in Q4 that is the seasonally weakest quarter. And what we saw was that there were some benefits in the U.S. from some remediation work, which that is episodic or lumpy, and so that was a nice add. And we saw continued outperformance in Canada. So both of those markets, even normalizing for acquisitions, were up year-over-year.

And that's in spite of lower rig count and lower values for crude. So I'd say that the business is arguably outperforming sort of the macro environment and I think that the concerns that have been expressed looking forward, we're certainly mindful but we've seen no indication of a slowdown. And as I said, we think in terms of how the year plays out, at this point, we'd say flattish is the right way to think about it and let it be upside because, again, things like remediation jobs, those don't necessarily repeat every quarter. And so that's kind of the approach to the business. But generally speaking, I'm very pleased that as we've said before, the thesis on the Canadian business being more production-oriented played out last year, and it's your expectation that it continues to play out with the steadiness, the [ predictability ] of that business, which has not shown any signs of change.

[Technical Difficulty]

Sorry, you're cutting out.

You're cutting out. We couldn't hear you, Trevor.

[Technical Difficulty]

No, it's not better.

No, it's not better.

Your next question comes from the line of Seth Weber with BNP.

Just going back to the RNG business, sorry if I missed it, but is $100 million of EBITDA still kind of the right way to think about the contribution for 2027 or run rate it's fully operational? Is that still a good number to talk to?

Yes. I think that's a fair way to think about it based on what we know right now. And I'd just remind you that there's -- almost half of the projects are online and so the incremental contribution would be what remains after that.

Sorry. So you mean half your projects are online today, so the year-over-year '27 versus '26 won't be $100 million. Is that what you're saying?

Correct. Yes.

Okay. But $100 million in aggregate is the right way to think about the return on that overall investment.

That's right. Maybe a little higher, $100 million, $120 million, something like that.

Okay. And then just lastly, I think in prior calls, you called out Florida and Texas as being kind of weak or softer end markets. Is that still the case? Are you seeing -- and then kind of related to that, did you see any weather impact in the quarter just broadly around some of the cold snap and stuff like that?

In the first quarter -- in the fourth quarter are you referring to Trevor or in the -- the quarter we're now sitting in? We really didn't see any weather impact in the fourth quarter. I mean, weather was somewhat mild, but nothing to note. Of course, in the month of January, there was a fairly significant cold snap that I think affected our business in up to 30 states. And certainly, there is some impact, but nothing material by any means.

Yes. Just on Q4, it really wasn't -- you're right, we've mentioned those markets on the construction-driven activity. I'd say those stayed about the same, and there was a little incremental weakness in the Northeast that may have been some minor weather during Q4.

And to your question on Texas and Florida, that -- and to the -- I think you asked a question on Texas and Florida.

I think we covered it. That was the construction driven slowdown...

Okay.

Your next question comes from the line of Shlomo Rosenbaum with Stifel.

Ron, I want to go back to the things you touched on earlier in the call about the ability to improve your operations and technology, and you're talking about routing and dynamic routing and other things. I want to ask, when you kind of sequenced some of these things that you were looking at, did you go after the biggest opportunities first?

And like what should we be thinking about for subsequent years of things that you're going to attack? And just is there a way to use technology that you're seeing that maybe could squeeze more out of the assets, maybe trucks, maybe not have to have so many trucks on reserve in terms of proactively being able to [ fix ] them using technology. I'm just trying to get at other things that might be out there that might be able to squeeze more efficiency out of the system, both operationally and then frankly, from a capital perspective?

Yes. Well, look, we -- to start with, when we looked at this, we actually identified up to 40 areas that we could potentially look at the utilization of AI in some way or another. We prioritized the 7 things over a 3-year period that we thought had the biggest opportunity for impact to the business positively, whether that be from an operating, a financial, customer service, et cetera, efficiency. So those are the things we attack.

Last year, we worked heavily, '25, on commercial pricing and a couple of other initiatives in AI. This year, as I said, it will be on routing and mobile customer engagement. Without question, these initiatives should and I think will lead to improved efficiency, improved margin performance and improved asset utilization. No question.

Dynamic real-time routing allows you to move assets with information that today you don't really have or you have only reactively, not proactively. And therefore, you have to have a little bit higher spare factors in your fleet at locations, those kinds of things. You end up with a little higher over time because you are reactive versus proactive. So it's not one of these things that moves the dial in one area 40 or 50 basis points, it's one of these things that moves 7 or 8 dials 10 to 20 basis points throughout your P&L over time.

And so that's how what we see and what we are seeing. And ultimately, look, it provides a better service quality, a more proactive communication with your customer, greater efficiency for your physical and your human assets and greater projectability in your business. Those are the things we're expecting and we're seeing. So it just makes it better for all of our shareholders, our customers, our employees and ultimately, our shareholders.

So we're excited about it. I think it's still early innings and not prepared to put a marker out there of what does this mean. But I can tell you that these investments, the payback is very quick. The payback is months to maybe a year to 1.5 years. So these are very solid investments for the business.

Okay. And then just more on a tactical perspective. Mary Anne, can you talk a little bit about like what a change in commodities prices would do to revenue and EBITDA in '26 versus the baseline that you're using right now?

Yes. So when I look at overall what our recycled commodities sales are of about $250 million, that tells you a 10% moves around $25 million. And so what we factored into our outlook is a 15% decline overall year-over-year, which translates to meaning based on current prices as compared to last year, and that translates to that 20 to 30 basis points of margin drag, which starts off probably a multiple of that in Q1 and drops down to over the course of the year.

Your next question comes from the line of William Grippin with Barclays.

Appreciate you squeezing me in here. Just another one here on commodity prices. I know you're not baking in a recovery into the forecast, but just curious if you could maybe elaborate a little bit on what you're seeing in that market today? And maybe what developments you're watching that could potentially signal or support an improvement in commodities prices off these cyclical lows?

Sure. So we saw some incremental weakness early in the fourth quarter, then there was stabilization and what we saw most recently was a little uptick in OCC, which was encouraging. The reality is though that was offset by incremental weakness in plastics. So I'd say, overall, the basket really hasn't moved, which again, that informs our thinking for how we guide.

So then what we're watching for and looking forward to would really be the uptick, which is driven by underlying economic activity, which ultimately drives the demand, most importantly, for fiber, which as you'll recall is the majority of the value in a ton of recyclables. So cardboard, so commerce, right, demand, consumer confidence, all those things that are the engines of driving consumption, which ultimately is what drives our business and recycled commodity values.

Appreciate that. And then just coming back to RNG and obviously, the EPA widely expected to release the '26-'27 biofuels RVO here, hopefully in the first quarter. Anything you're watching there that could cause you to maybe change your approach to RNG offtake or capital deployment for those projects?

Really, just to be clear, these are terrific projects at a whole range of outcomes for RINs. And we've talked about delayed start-up or the whole project development. If it goes to a couple of year payback or 4 or 5 years versus 2 or 3, it's still very compelling. And as we remind folks, we have $6 billion sunk into our landfills. Of course, we're looking to monetize the value as that gas -- the waste breaks down and generates gas.

So you should expect us to continue to opportunistically pursue these projects. And of course, we're completing the projects we have underway, and we look forward to delivering those returns. In terms of what we're watching, we're encouraged. We don't know exactly where the RVOs come out or what RIN values do, but we've recently seen some improvement in the D5 RINs, which are a good indicator for D3 because that can be a substitute. And again, we've seen stability in RIN values in that kind of $2.40 level. And we're encouraged by what we're seeing out there.

So no change in the philosophy. As you know, we've done -- we've taken a portfolio approach of not having outright risk on all of the RINs through a variety of ownership structures. We'll continue to evaluate those opportunities over time and continue to own the most attractive in our network. But -- so again, no change in the thinking. As we've said, the largest outlays are behind us for this -- getting through '26 for this large group of facilities, but we'll continue to have the one-off facilities over time, again, as our landfills mature and the opportunities present themselves.

And one other thing I would say, William, that I think we weren't going to talk about this, but since you raised the question. Look, we have gone out and purposely recruited one of what we believe is the top RNG experts anywhere in the industry and this person is an executive officer of one of the finest RNG companies. We work with all of them, and we have more regard for this company than anywhere else and they have built and operated some of our facilities. And we have been laser-focused on figuring out how to have him join us, and he starts Monday morning.

And we are very, very excited about that. We're not going to release that name right now because that's not appropriate for him or his company, but that I think shows you our commitment to RNG and our acknowledgment that we can continue to get better there. And like any area, just like we're doing in AI and others, if you got to go out and get the talent, we're going to go out and get the best talent we can find to drive what we may not be as good in as we are in some of our core competencies. So I think we'll just continue to get better as we go forward in RNG starting Monday morning.

Great to hear that sounds like a nice win and a great resource. I appreciate the color.

Your next question comes from the line of Konark Gupta with Scotia Capital.

Just maybe on free cash. I wanted to understand, Mary Anne, besides earnings growth that you expect this year and lesser outlays on RNG and Chiquita, is there anything else in terms of major swing factors embedded in guidance? Or any wildcards to watch for, for free cash?

No. I think when you think about the free cash flow drivers, you've got that incremental $200 million in EBITDA, the decline in Chiquita. We gave you the CapEx number that steps up a little bit. Cash taxes step up a little bit because they were so suppressed this year. But no, I'd say those are the major moving pieces that you've probably already observed.

Okay. And just a clarification on the margin [ bridge ] side of things. I mean, you said 50 to 70 bps of underlying expansion before commodities. But are there any headwinds that are embedded in that 50 to 70 bps like from Chiquita maybe or is there any like tax offsets that are swinging in the direction?

No. We're talking about EBITDA margin drivers. No, there's no anomalistic headwinds that are out there. As I said, we've lapped some of the outsized improvements that drove even greater underlying margin expansion, and we continue to work on all the same things, so we'd look forward to unlocking even more margin expansion, but I think this is the right way to guide.

Your next question comes from the line of Toni Kaplan with Morgan Stanley.

This is Yehuda Silverman on for Toni. Just a quick question on strategy. So the comments you made about how Chiquita is being affected by being in Los Angeles and California being the difference between that and other ETLF events. Does that change your strategy at all of where you might want to operate in terms of more politically friendly areas? Is that something that's already factored in? Or is this just sort of a one-off situation?

Yes. Well, it's clear, we'd rather operate only in jurisdictions that have a more friendly business environment, but we are obviously in 45 states, so that bed is already decided. I certainly wouldn't pursue owning an additional landfill in California in the next 200 years. But other than that, no, it doesn't change anything.

Your next question comes from the line of Kevin Chiang with CIBC.

Maybe just one here on your Eastern region. A lot of good color on what you're doing with Arrowhead. You're rolling out the franchises in the New York zone. Does that change the structural margin profile of the Eastern region? Those seem like there would be tailwinds to profitability? And then just broadly on Arrowhead, does the potential merger of UNP or Union Pacific and Norfolk Southern, does that change how you think about the growth opportunities within Arrowhead if you're partnering up with a much bigger railroad there?

I'll start with the margin commentary regarding our Eastern region. Certainly, around the edges, as I mentioned, increased internalization does help margins, but more broadly, the Eastern regions margins are dictated by the high transfer and disposal expenses that are just inherent in that market. So that will never change.

You can improve around the edges and look for ways to optimize within that market, and you've seen us do acquisitions that help on that front in terms of optionality. But no, I wouldn't encourage you to think about a major step change in the margins of the Eastern region beyond that.

And then, Ron, I think...

Yes. What I would say, Kevin, no, I do not necessarily believe that the franchise of New York City or the franchising model of the New York City market becomes necessarily a tailwind. What I do think, however, is it becomes a much more stable, less volatile market because it is a very competitive market up until now. And so you have large swings. So I think it becomes a much more stable projectable investable market than it has been in the past where you can have a swing of a collection margin that goes from 10% to 6% to 20% in a 3-year period.

And now I think what you have is you have a very tight bandwidth of margin performance for the most part at very good margins at sort of company average type margins on an integrated basis.

And I think Kevin had also asked about the Norfolk Southern merger.

Yes. And look, I don't think -- I mean, I think it's too early to tell what will happen in the UP NS merger. I think we're quite a ways away from understanding whether that will happen and if it will happen, what will be the guardrails put around that. We have a very long-term agreement with Norfolk Southern that the combined company would be honoring. So we're not concerned about it in that way. Could it open up additional opportunity because of the connectivity between those two? Well, that's certainly a possibility, but not something we've yet explored.

Your next question comes from the line of Tony Bancroft with Gabelli Funds.

Congratulations on doing great work, Ron and Mary Anne. My question, maybe you could opine a little bit here, Ron, on -- you talked about automation and AI, but maybe a little further down the road thought of self-driving. Obviously, your largest part of your cost structure is -- a very large part is your labor and all the driver tightness and your focus -- the industry's focus on safety.

You've seen, obviously, some recent reports about the improvements and safety on self-driving. Have you ever talked to -- ever thought about it, tested, done anything, maybe having either doing like a leasing self-driving. It seems it could be a great market for taking people off the truck and more safety even if the person stays on the truck and then you just have that added safety and technology there. Just want to get your thoughts on that.

Yes. I mean, Tony, number one, I mean just to say that we've done anything in that arena, I mean, would be misleading because we have not. Do I think it is something that could potentially occur in the waste industry? Absolutely. I think it is potentially there. As you know, there's mixed views depending on where you are and what you look at on the self-driving vehicles. It's obviously happening in some markets today. So the technology is certainly there.

But I will tell you, Tony, as you know, I'm on the board of a publicly traded airline, and I can tell you that you can -- for the last 7 to 8 years, you can push a jet back from the jetway, taxi to the runway, take off, fly to your destination city, land and open the door with no one in the cockpit. I'm not sure anyone is getting on that plane.

So there's still pilots in every day. So there's this theoretical could this occur? And then the reality of when a car gets in an accident, that's bad. But when a garbage truck hits something, it's catastrophic. And so even if it could, I still think you would have professionals in the cab there for those reactionary scenarios that occur if something malfunctions, exactly the reason airlines have pilots today.

It's not because they can't do it without it. It's because of the 1/10 of 1% that happens that they protect everyone from. And I think garbage truck would be the same way. But it's certainly something we will look at as the technology evolves. We're always, as are our peers always looking for ways to improve the safety aspect of the business, the efficiency, the customer improvement. So -- but I think it's quite a ways out. And we look forward to the day if that opportunity arises where we can improve it, but it's not there today.

Your next question comes from the line of Tobey Sommer with Truist.

It's Henry on for Tobey. Great to hear the labor turnover numbers and where those are to start the year. Could you just give us an update on the driver academies? What percentage of new driver hires you expect to pass through those in the coming year? And how much of an incremental benefit that could have on labor turnover throughout the year?

Yes. Thank you for asking that question. So when we opened our academies one at the beginning of '24 and one at the end of '24, we felt that if we could get to approximately 35% of our driver need per year being internally developed at our academies, we would consider that a tremendous success. We achieved that number in '25. And for '26, we are forecasting that 60-plus percent of our driver need will go through 1 of our 2 academies, so far exceeding our expectations.

Now that's a twofold function. That's because we've reduced turnover quite dramatically. So the need for new drivers isn't as high. But the second, and more important thing, is the retention rate through our academies is almost double the retention rate of those that don't go through our academies. And we also thought that would happen. But we didn't think it would be quite as good as it has been, however.

So we're getting a double sort of whammy, and that's what's helped decelerate improved turnover so quickly. Do we ever think that gets to 100%? Probably not. But if it could stay in this above 50% range per year, sort of what we call being internally developed and trained, we'd be very happy.

And as I said, we believe that number will be north of 60% this year. So, so far, that -- and again, what is that yielding and we're working through getting the statistics to support this. But we believe that the drivers that go through our academies, number one, the turnover is lower, we know those little direct linkage between turnover and tenure and safety. And so we think as we look out through this year into next year, the linkage will show that those drivers we internally develop tend to have better safety performance statistics as well. So that's sort of where we are there.

Great. That's great to hear. And then just if we could just quickly circle back to core pricing cadence over the course of the year. You expect a pretty steady step down kind of sequentially during 2026. And how much visibility do you guys have at this point in the year on the full year guidance for pricing?

Sure. So as is typical, you should expect pricing to step down sequentially. So obviously, if we've talked about 5% to 5.5%, you'd start north of that, maybe 6% and drop down over the course of the quarter to something less than that to average that number in the middle. And in terms of visibility, as is typical in our model, by the time we're through -- by the time we report Q1, we'll have visibility on 65% or 70% of our price increases. Most of the competitive piece will be done. And then we'll have known amounts for our CPI-linked markets. So pretty typical for us in terms of the visibility. We're a company that stops talking about price really after April.

There are no further questions at this time. I will now turn the call back to Ron Mittelstaedt for closing remarks.

Okay. Well, if there are no further questions, on behalf of our entire management team, we appreciate your listening to and interest in the call today. Mary Anne and Joe Box are available today and to answer any direct questions that we did not cover that we are allowed to answer under Regulation FD, Regulation G and applicable securities laws in Canada.

Thank you, again, and we look forward to seeing you at upcoming investor conferences or on our next earnings call.

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

Good morning, everyone, and welcome to the Waste Connections, Inc. Q3 2025 Earnings Call. [Operator Instructions]. Also note today's event is being recorded. At this time, I'd like to turn the conference over to Ron Mittelstaedt, President and CEO. Sir, please go ahead.

Thank you, operator, and good morning. I would like to welcome everyone to this conference call to discuss our third quarter results and to provide some thoughts about the remainder of the year and the setup for 2026. I'm joined this morning by Mary Anne Whitney, our CFO, and several other members of our senior management.

As noted in our release, superior execution drove better-than-expected financial results in the third quarter, bolstered by continued improvement in operating trends. another quarterly step down in employee turnover and new record low safety incident rates, together with strong pricing execution -- retention drove adjusted EBITDA margins of 33.8%, reflecting underlying solid waste margin expansion of approximately 80 basis points in the period.

I'm extremely pleased by our team's efforts to overcome incremental commodity headwinds and ongoing uncertainty in the economy in Q3 and to achieve the results above expectations. Assuming continuing trends and without further headwinds, we remain well positioned to deliver our full year 2025 outlook as provided in July.

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

Thank you, Ron, and good morning. The discussion today during today's call includes forward-looking statements made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including forward-looking information within the meaning of applicable Canadian securities laws. Actual results could differ materially from those made in such forward-looking statements due to various risks and uncertainties.

Factors that could cause actual results to differ are discussed both in the cautionary statement included in our October 21 earnings release and in greater detail in Waste Connections filings with the U.S. Securities and Exchange Commission and the Securities Commissions or similar regulatory authorities in Canada. You should not place undue reliance on forward-looking statements as there may be additional risks of which we are not presently aware or that we currently believe are immaterial, which could have an adverse impact on our business.

We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change after today's date. On the call, we will discuss non-GAAP measures such as adjusted EBITDA, adjusted net income attributable to Waste Connections on both the 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.

Okay. Thank you, Mary Anne. We are extremely pleased to deliver third quarter results above expectations, demonstrating the durability of solid waste regardless of the economic environment. Q3 revenue growth was led by 6.3% for solid waste price with reported volumes slightly better than expected, down 2.7%. We delivered margins of 33.8%, up 100 basis points year-over-year, excluding the impact of commodities and our decision to close Chiquita Canyon landfill as of January 1. Said another way, normalizing for these factors puts our Q3 margins at 34.7%, without the benefit of any contribution from positive volumes.

As we've said, we remain well positioned to enjoy the upside from any pickup in volumes from the broader economy, given our asset position and market selection strategy. As anticipated, we continue to advance that strategy through acquisition activity, which has continued at an above-average pace, resulting in approximately $300 million in annualized revenues, either closed or under definitive agreement year-to-date, with more expected in Q4 and by early 2026.

We've had some fantastic M&A wins, including 2 of the largest private companies in Florida, one of which we closed during Q3 with the other signed and expected to close in Q4. Moreover, our operating performance, free cash flow and balance sheet continue to provide the capacity for outsized acquisition activity and expanded return of capital to shareholders. To that end, our Board of Directors authorized an 11.1% increase to our regular quarterly cash dividend, our 15th consecutive annual double-digit increase since the initiation of our dividend in 2010.

Additionally, as noted on our last call, we've been in the market buying back shares as we take an opportunistic approach to share repurchases and look to capitalize when we see compelling dislocation and across the market or within our sector. To date, we bought back approximately 2.4 million shares or almost 1% of shares outstanding pursuant to our normal course issuer bid, which were renewed in August providing for annual repurchases of up to 5% of shares outstanding.

Along with executing our growth strategy, we've also shown significant progress towards achievement of our long-term aspirational sustainability-related targets as highlighted in our recently released 2025 sustainability report. In fact, we've already achieved several of our initial targets, including emissions reductions, safety performance and recycling and being well ahead of our expectations. And we continue to challenge ourselves for further progress as we demonstrate that sustainability is integral to our long-term value creation and part of our corporate culture.

Most notably, with multiyear reductions of 19% in emissions, our results demonstrate the outsized growth is compatible with the achievement of our long-term aspirational ESG targets. This improvement also applies to employee engagement, where we've seen ongoing reductions during 2025 in voluntary turnover and safety-related metrics. In Q3, voluntary turnover was down for the 12th consecutive quarter for a total reduction of over 55% from the peak in late '22 and early '23.

Similarly, safety incident rates have shown continuous multiyear improvement, now down over 25% to new historic lows for the company. Cornerstone of our operating philosophy is that people are our strongest differentiator. So we're excited to see that the level of employee engagement has never been stronger. And as we've maintained, would be the case 2 years ago, we're seeing the benefits of higher employee retention and engagement in our financial results, as evidenced by our 80 basis points of underlying margin expansion in the quarter with more to come given record safety levels and nearly 3 years of progress.

What may be even more compelling is the opportunity ahead as we harness that engagement to leverage technology in new and unprecedented ways while adhering to the fundamentals that have driven our growth and success. Along with human capital as a differentiator, we're excited to recognize the benefits of using technology to accelerate and expand the reach of our leaders. To that end, we're making long-term investments in technology and infrastructure to maximize their impact and position the company for continued margin expansion.

These investments target productivity and efficiency gains as we look to further digitize and automate operations, enhanced forecasting through data analytics and improve service delivery, all while enabling a greater focus on the customer experience. We are already seeing positive outcomes, including improved pricing retention as we expand the utilization of data analytics across multiple platforms. We look to build upon these efforts as we deploy additional applications and expand our efforts in 2026 and '27.

Now before we look ahead, I'd like to pass the call to Mary Anne to review more in depth the financial highlights of the third quarter.

Thank you, Ron. In the third quarter, revenue of $2.458 billion was above our outlook and up $120 million or 5.1% year-over-year. Acquisitions completed since the year ago period contributed about $77 million net of divestitures. Core pricing of 6.3% in Q3 puts us on pace for full year core pricing of approximately 6.5%, which is above our initial expectations coming into 2025 and reflects stronger pricing retention in our competitive regions.

Volumes were down 2.7%, similar to Q2 and reflected ongoing purposeful and margin-accretive shedding of low-margin contracts and some price volume trade-off. Volumes also reflected continued sluggishness in the more cyclically exposed activities. The effects of slower roll-off activity and lower disposal volumes primarily from construction-oriented activity were similar to those described in previous periods. As such, we saw a more muted seasonal ramp and would be typical for Q3.

Looking year-over-year in Q3 by line of business on a same-store basis. Roll-up pulls were down 1% and rates per pull up 2%, which is a modest improvement from Q2. Year-over-year pulls in most regions were flattish with our Southern region still down mid-single digits. Markets like Florida and Texas continue to be our weakest, albeit less negative on a year-over-year basis than in previous quarters. Landfill tons were up almost 3%, led by higher MSW tons, up 2% and special waste tons up 10%, with some of that increase due to the timing of jobs that were otherwise expected in Q4.

C&D tons, while still negative at down 4%, were better on a comparative basis than in recent quarters as the rate of decline may be moderating or again as a result of some timing differences. We've seen pockets of C&D activity in our markets in our central and southern regions as well as ongoing special waste activity in certain West Coast markets.

Moving next to commodity-related activity. Value to recycled commodities and renewable energy credits, or RINs, continued to slide during Q3, both ending the quarter down 30% to 35% year-over-year. On a combined basis, recycled commodities and landfill gas revenues were down 27% year-over-year on lower pricing, partially offset by contributions at new facilities. Our E&P waste revenues, on the other hand, were up 7% year-over-year, driven by our production-oriented R360 Canada business, while our legacy U.S. business was down nominally year-over-year.

Adjusted EBITDA for Q3, as reconciled in our earnings release, was $830.3 million, up 5.4% year-over-year and slightly above our expectations. At 33.8%, our adjusted EBITDA margin was up 10 basis points year-over-year and better than expected. This was in spite of an extra 20 basis point drag from the decline in commodities during the quarter, as noted. In the aggregate, lower year-over-year revenues from recycling and RINs resulted in a margin drag of about 70 basis points in the quarter.

Underlying solid waste margins, on the other hand, were up 80 basis points, even better than in recent quarters. Not surprisingly, we once again saw the greatest margin improvement in those areas related to employee retention and lower openings. That includes a range of cost categories related to third-party services, including labor and maintenance, parts and repairs. In contrast, we continue to overcome lagging reductions in risk management costs and look forward to unlocking savings for margin expansion in future periods.

Net interest expense in the quarter was $79.4 million, and our effective tax rate for the third quarter was 23.6%. Our leverage remained comfortably within our expected range of 2.75x debt-to-EBITDA. And finally, year-to-date, we have delivered adjusted free cash flow of $1.084 billion on capital expenditures, up over $135 million year-over-year, providing visibility for full year adjusted free cash flow in line with our outlook of $1.3 billion.

Assuming continuing trends and without further headwinds is no change to our full year guidance, which implies Q4 revenue of approximately $2.36 billion and adjusted EBITDA margin up about 90 basis points year-over-year to about 33.3%.

With that, I'll turn the call back over to Ron to provide some preliminary thoughts about 2026 before we head into Q&A.

Thank you, Mary Anne. As we have described, we are pleased with our year-to-date results, which not only highlight the strength and resilience of our business but provide momentum for next year. Although we do not provide our formal outlook for 2026 until February, we are able to provide a high-level framework, assuming no change in the current economic environment. On that basis, we should be positioned for the following: mid-single-digit revenue growth in 2026 from price-led organic growth in solid waste and approximately 1% revenue carryover from 2025 acquisition activity to date partially offset by continued headwinds related to commodities.

Looking at margins, we remain well positioned for above-average underlying solid waste margin expansion with offsets expected from margin dilutive impacts from acquisitions and commodities. These combined impacts suggest adjusted EBITDA margin expansion in what we would consider a normalized range. And depending on the timing of capital expenditures and other outlays, the conversion of adjusted EBITDA to adjusted free cash flow should improve relative to 2025.

These aforementioned amounts will be positively impacted by the pace and magnitude of ongoing acquisition activity in Q4 and will grow during 2026 as we complete additional M&A. To the extent that we see improvements in commodities and RINs values, those impacts would also be additive to these preliminary thoughts. We look forward to having better visibility on the tone of the economy, including any government shutdown or tariff-related implications when we provide our formal outlook in February.

We're most grateful and extremely proud of the dedication of our over 25,000 employees and the local leadership team is responsible for the consistency of operational execution. We're excited to leverage their effectiveness and provide multiyear opportunities to accelerate growth through our investments in technology.

We're also proud to welcome Jason Craft, a long-tenured local, divisional and regional Waste Connections leader to the role of Chief Operating Officer during the quarter. Jason's strong operational background and business acumen make him an ideal addition to the senior leadership team. We will continue to focus on operational excellence and stay true to our culture while also welcoming new and innovative ways to drive value creation and as we say, win from within.

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

[Operator Instructions]. Our first question today comes from Tyler Brown from Raymond James.

Can you hear me?

Tyler, we can hear you.

Mary Anne, just real quick on E&P. I think it was pretty strong, maybe felt like something was helping there. Can you kind of talk about Q3 and then how we should think about run rating that business, maybe not only in Q4 but maybe even into next year?

Sure. What I'd say is that as in Q2, we saw nice steady performance in our production-oriented piece of the business in spite of lower crude and we talked about a little bit of weakness in our legacy R360 business. What was different about Q3, what was incremental was that there was a sequential increase in that Canadian business, primarily associated with the remediation job. And so if I were run rating it, I would back out that $10 million, which is what it accounted for.

Okay. Perfect. $10 million. Okay. Got it. And I appreciate, Ron, the early look on '26, but big picture, is there really any incremental benefit from the new RNG investments in that EBITDA number? Is that going to be more of a '27 number? And then based on what we know today, where should that green CapEx come in for '25? And then what will remain kind of in '26 as you sit here today?

Yes, Tyler. So first off, there is no incremental R&D revenue or EBITDA of any amount materially in the balance to '25 guidance or in the '26 first look, okay? Nothing there because most of our projects are time to come online at some point during the fourth quarter. So there could be a de minimis amount maybe a couple of months in '26. So that benefit is really not until '27 in revenue, EBITDA and margin.

And we originally thought we'd spend between $100 million and $150 million in CapEx on R&D in '25. That number is now probably between $75 million and $125 million. So maybe stepping down about $25 million to $35 million. So there could be $25 million to $50 million of green CapEx rollover into '26.

Okay. Excellent. Very helpful. And then I just want to make sure that I've got your commentary about '26 margins. So I think you said a more normalized year next year. That is assuming outsized expansion in solid waste offset based on what we know today by dilutive M&A and dilutive commodities. Is that right?

That's exactly right. You have it exactly right. Right now, we believe commodities, if they stayed where they are, about a 20 to 25 basis point dilutive impact on a year-to-year basis and M&A, call that 10 to 15. So you're somewhere between 30 and 40 that you're overcoming. And -- so that puts you in that 20 to 40 normalized, which tells you what the underlying is doing.

Yes. Perfect. Okay. And my last one is just a big picture question, and you touched on it, Ron. There's obviously a ton going on in the world of technology. And it sounds like you guys and quite frankly, the industry at large, probably stand to benefit from maybe some of the productivity that AI might bring. But can you just talk a little bit about your strategy where you are in the journey? What kind of tools you're talking about? And is that something that we should see a gift that gives over the next, call it, half decade? Or how should we just think about that broadly? Appreciate it.

Yes. Sure. Well, obviously, we are mostly talking about 2 things. We're mostly talking about data aggregation amongst historically disparate systems and apps which are now being aggregated and can speak to each other and provide data analytics that we really haven't had to this degree. And then the utilization and overlay in multiple areas of AI and to analyze that data and help us in areas of pricing, customer engagement, route optimization, maintenance projectability and a variety of other things.

We laid out in late '24 sort of a 3-year, call it, total digitization of the organization by the end of '27. So we are now -- call that 1/3 through that. We focused heavily on pricing and budgeting, forecasting and planning through the use of AI and data aggregation in '25. For '26, we will be doing the same on sort of route optimization.

As we've mentioned working to sort of, what I'd call, ways for garbage, if you will, from a routing -- a real-time routing standpoint rather than a static routing as well as a dramatically enhanced mobile application and a complete revamp of our maintenance software and its integration to our operating system. And then there are additional plans for '27.

So I think those -- I think it's too early to know exactly what that does margin-wise. It's obviously they are all a margin lift and continuing to help us with outsized margin expansion. But I can tell you the first 2 to 3 things that we have done in late '24 and '25, there's been a very, very rapid payback on those investments. And and we're surprised at the magnitude of the impacts, favorably surprised.

So I would tell you that looking out, as you said, maybe over a half decade or 4- to 5-year period, we should continue to see those. And I'd say those impacts are more in the 2- to 3-year period. We should see most of the benefit from.

Our next question comes from Noah Kaye from Oppenheimer & Company.

I'll pick up on Tyler's last question around really the runway for accelerating or improving pricing retention from some of these changes in tools. What are you specifically thinking about in price for '26 based off of the restricted and where you expect to be on open? And how much does this effort contribute to that?

Well, no, I'd actually start in '25 because we already said that we've actually been using this tool and been applying it this year -- deploying it this year. And as you'll recall, we had initially guided to pricing of around 6%, and we've ended up giving you an updated guidance for 6.5%. And so that improved pricing retention we would attribute in part to the tool that we've been deploying. And we'd also acknowledge that those improving metrics on the operating stats like having our seats full and retention better, lower turnover, that also contributes to pricing retention.

So I'd say that gives you a flavor for the kind of benefit we're seeing, a portion of it we would attribute to that pool. So then when we think longer term, we think about really the life cycle of the customer and be able to hold on to customers by putting in smart price increases and minimizing the amount of customer loss and of course, rollbacks. And so we think of it as taking some pressure off using the pricing lever to drive that price cost spread and being incremental as we've demonstrated this year for the possibility that there's upside when we go into a year.

To your specific question about how we're thinking about next year, as you know, we think in terms of the 2 pieces at the CPI-linked markets, and that's a lagging CPI adjustment, which over the past year, those increases have been smaller than in the prior year. So you'd expect less price in those CPI-linked markets. And then the real question becomes what are cost pressures doing and how much price do we need in our unrestricted markets and then how effective are those price increases.

And so I think all of that could sort of inform you directionally that the expectation is needing less price in '26 than we did in '25. But of course, the particular the specifics of that, we'll give -- when we give our guidance in February.

And no, I would just add that the expectation of still 150 to 200 basis point price cost spread, is directionally how you should think of that and our confidence level of achieving that, I think, has improved with the utilization of the AI tool that we've been working on for the past year plus. So if we have a lower gross price and a higher net price with lower customer churn, we believe that can ultimately pull 50 to 100 basis points out of that reported volume number, meaning improving it. Because right now, we're getting a trade-off of probably up to 1 point for up to about 100 to 150 basis points more that we're pushing price.

So as we can pull that down and offset that churn, that is -- that layers for us in the organic growth number as well.

Very interesting. You mentioned, I guess, the $50 million potential year-over-year benefit from lower green CapEx to free cash flow in '26. Just what are some of the other puts and takes that we should be thinking about in our models for free cash flow conversion?

Well, of course, no, we need to get through this year to -- so -- we know the timing of CapEx, we've talked about taking advantage of bonus depreciation by potentially adding CapEx as we exit '25 for fleet and equipment. You should expect us to be looking at that. That will inform our thinking about '26. As we said, the green CapEx will inform it and ultimately what we guide to for EBITDA. All of those things will together inform our thinking about what the moving pieces are for '26.

And our next question comes from Konark Gupta from Scotiabank.

I just want to kind of follow on the last question about free cash flow. So I think one of the other moving parts, I think the last couple of years, at least, has been the Chiquita related outlays. So can you update us on where the Chiquita situation today is in terms of your remediation obligations? And how do you expect those outlays to trend in the next year or so? And then also maybe update on where the litigation currently sits there.

Sure. I'll take a crack at this for you. So we would tell you that overall, the mitigation and treatment of the reaction or what we call the ETLF is actually going about as we expected or maybe in ways even a little better. We continue to make progress on the removal of the leachate from the landfill that is being generated by the reaction. And that amount continues to drop quarter-to-quarter. We keep at handling over 400,000 gallons a day, and we are now handling about 220,000 to 240,000 gallons a day in real time.

And at that 220,000 to 240,000 gallons a day, we are reducing the level of leachate within the landfill itself, which tells us that we are on the back side of the reaction curve because we're now effectively outrunning the reaction generation, whereas a year ago, the reaction generation was outrunning us. So those are some very good signs. We have completely capped with about 42 acres of synthetic liner, the reaction area. We have voluntarily agreed to cap an additional 50 acres over the next 3 years preventatively and at the request of agencies, and we agree with that.

And we are complete drilling of all of the extraction wells and implementing all of the submersible pumps to remove the liquid. So -- and we have dropped by over 95% the registered odor complaints that are monitored through local agencies and the state of California Air Board. So I would tell you that the reaction handling is going as expected or even better on that front. At this point, the outlays are running somewhat ahead of our expectations because we've taken additional steps to decrease the impacted area and accelerated some of those steps on our leachate treatment activities.

We continue to believe and expect these efforts and that others that we're pursuing will and are resulting in decreasing outlays given the progress that we've made. So that's really the reaction front, and then you have the sort of the whole separately regulatory compliance and litigation that comes along with this type of event. And of course, we're not going to comment on litigation because we are in a public forum, but I'll just tell you that, that's probably expected as you would expect in something like this. So that's really the update on where we're at.

And that's helpful, Ron. And just in terms of guide posts around the outlays for the Chiquita this year versus what you can expect maybe next year?

Yes. Well, we're not yet prepared to outline that. We will obviously do so in February when we give our full guidance. But what I can tell you is that -- as we said, we're somewhat ahead at this point right now this year. We don't necessarily view that negatively. We have no reason to expect as we sit here today, that the total outlay that we have outlined when we originally took an impairment and a charge when we closed the site for our post-closure has any material change to the totals.

Okay. That's really helpful. And just to wrap up quick on the volume side of things. I think heading into the third quarter, the expectation was volumes to be a little bit worse than what you guys have seen in the first half. So just trying to understand like if you can parse out some of the key underlying drivers in the volumes here with respect to macro, the Chiquita obviously overlap because you shut down the landfill in Q4 last year. And also anything else in the volume that you can call out for Q3 and expectation in Q4?

Sure. So to your point, coming into Q3, we've seen some incremental weakness at the end of Q2. And our expectation was that perhaps there was really no seasonal ramp, and we did see a bit of a seasonal ramp, but we would describe it as muted. I think it was up about 1.5% sequentially, which is less than half of what you would typically expect to see. So some muted improvements. As I mentioned in the prepared remarks, special waste was up by about 10%.

I'd always hesitate to generalize from something that's event-driven and pretty lumpy since last year special waste was down 10% in the quarter, but it was encouraging to see less negative trends, again, as I mentioned in the remarks, in C&D. So a little better than it had been in prior quarters.

Again, I wouldn't generalize from this because also, as I've mentioned, some of it is just timing. And we had expectations about what the back half of the year could look like. And if some of it occurs in Q3, that means you shouldn't assume it happens again in Q4, again, given the event-driven nature of the business. But encouraging to see that things aren't incrementally worse. Arguably, this is our eighth quarter or even more of just kind of flattish activity levels and so you're not seeing the creation of new volumes.

Our next question comes from Chris Murray from ATB Capital Markets.

Maybe just -- maybe just thinking about volumes as we go into next year. And just if you think about that we're going to be rolling off Chiquita, which has been a pretty big headwind, if I think about the kind of the revenue guide kind of mid-single digits with kind of, call it, 3 percentage type inflation numbers, can you just really give us an idea how you're thinking about getting to that kind of mid-single-digit number? And does that include any sort of expectation for any volume growth kind of in MSW year-over-year?

Sure, Chris. So of course, we're not giving guidance. And these were broad strokes, but at a very high level, a way to think about it since -- as you know, we think in terms of price-led organic growth and as I mentioned, earlier, we think in terms of how much price we need and whether or not we're seeing incremental headwinds from inflation or we're seeing any easing.

And given the fact that, as we've talked about the underlying margin expansion we've enjoyed because of the self-help measures and the fact that trends aren't getting worse based on what we're seeing right now, one could envision that the pieces would have price that's not as positive as it was in the current environment, and there might be volumes that are not as negative.

And the net impact of those 2 would get you to be approaching the kind of numbers we're talking about. And then you layer on the M&A with some offsets. And so I'd say that's the way to think about the building blocks. And of course, we'll have better information and insights in February when we actually give our guidance.

And Chris, I would tell you that, look, we have said that our cost this year have been running. Of course, they were higher at the beginning of the year, coming down throughout the year. We point to labor because that's the largest cost item. As we exit the year, we are approaching going below 4% in labor. It was 4.1% in Q3. And our other costs are running just below that. So we are -- we believe that next year that, that labor number runs closer to the mid-3s, maybe 3.5%. So again, we've talked about maintaining the type of spread we've had this year in price. So assuming that is what continues in the cost, I think you can get yourself pretty close.

Yes. No, that's helpful. And then maybe taking like the giant kind of step and into '27, assuming that you kind of get the normal kind of inflection, at least the thinking has been as we've been bringing in these RNG investments, and thank you for the clarification. It's probably going to be a Q4 '26 thing, but as we get into '27, it was -- I guess the expectation was always there would be about $1 of EBITDA for every dollar you sort of put into the program. But if you just have any updates and any thoughts around how we should maybe frame that as we think about maybe those years, that would be helpful.

Sure. So Chris, we've talked over the past couple of years about the fact that, that dollar of investment had grown and the fact that we've seen the cost creep and the delays on these projects and that has continued, and it's contributed to the expectations that those don't come online until late '26 or early '27. The other major factor driving that equation is what RIN values are. And of course, at one for one was in an environment of $2.50 to $3 RINs. And if we're sitting at $2.25 and have been below that, that certainly alters our expectations. And you could see the 1:1 moving closer to 2:1 depending on what those ultimate values are.

Our next question comes from Kevin Chiang from CIBC.

First of all, congratulations on the progress you're making on some of these safety metrics. I guess as you think about 2026, I'm wondering if you start seeing the benefits of less of a headwind, I guess, from the risk management inflation you're seeing in the 2025 results? And then I did notice Canada actually had -- at least you called out in Q3, risk management was actually a tailwind to your margin. Just wondering what's happening in Canada from a risk management cost perspective versus what you're seeing in the U.S.

I think that was specifically rated to a comeback on workers' comp episodically, we get a credit, and so that can cause some lumpiness quarter-to-quarter. All of our regions are seeing improvement in safety. And to your question about when we see the benefit of risk management costs, again, given the nature of the lagging nature and the fact that it's statistically driven or actuarially driven and clean development periods impact or influence how long it takes to see. We'd always be cautious about putting too fine a point on it. But even in our overall program costs, I'm optimistic that there's some benefits in '26 versus '25.

I think the key thing to take away, Kevin, is that we had talked about 100 basis points of margin expansion, and we're driving the kind of results you've seen in spite of the fact that it's not just that we haven't gotten the risk benefit, but it continues to be a headwind of 20 to 30 basis points in the quarter. So it gives you an idea of what unlocking it could do as we look ahead.

That's helpful. Maybe just on your Canada R360 opportunities. If I recall, you had some idled assets when you made the acquisition, I guess, from Secure. Just given where energy prices are, just -- how do you view that optionality, I guess? Is that still something that you'd look to invest in to bring some of these facilities online? Or do you need a higher energy price to make that work?

Yes. Good recollection on that, Kevin. In fact, there were 6 idle assets when we closed the transaction 2.25 years ago or 2.5 years ago now. We have, in the course of 2025, invested in and opened 2 of those 6. And that is actually something that helped us in Q3 at one of those facilities. Again, these are smaller facilities and smaller contributions, but they certainly were positive to volumes and our performance in Q3 and will be in Q4. We're going to assess each of the remaining 4 -- we reassess all the time.

It isn't as much in Canada because it's a production-based business. It isn't as much the price of crude, although that is influential, no question. It's where there is new drilling activity and its proximity to facilities that you might have shuttered. So as activity moves amongst formations from time-to-time, and it moves much slower in Canada because they have much longer life wells. That will really affect when we open those additional facilities.

That's super helpful. And maybe if I could just fit one last one in here. Just any update on the newer commercial zones. It looks like they're going to open up to, I guess, the 2 Bronx regions, which I think you have I guess, the permit in those markets as well. Just how is that going? And if you're experiencing Queens, I guess as that test run has come to an end here.

Yes. You are right. In fact, they have opened 2 additional zones, and we have permits in both, Kevin, to answer your question, they opened those October 1. So we're 2.5 weeks into it. It's going fairly well. And again, I would say about as expected. We didn't mention this in our commentary, but in the fourth quarter, we will be closing the large -- closing on the largest remaining transfer station in the Queens market that we have actually had under definitive agreement since -- back in April and May, and there's a complex regulatory process to get through in New York. And we have gotten through that process and gotten approval to close on that transfer station.

And that really gives us one more leg in this jigsaw puzzle of how the franchise business comes together in New York City. So we are looking forward. We will have that open here -- well, we'll have it under ownership here in the fourth quarter. So we're making good progress. It's a scramble when they open these zones, but we are very, very well positioned for that with the magnitude and size of our sales force and our operating footprint there. So that -- I'd say that continues to play out about as expected, and we look forward to them rolling out the remaining zones over '26 and '27.

Our next question comes from Jim Schumm from TD Cowen.

Nice quarter. All of my questions have been answered. I have just 2 quick ones for you, though. Are you seeing any issues obtaining new trucks? And do you think there will be any tariff impact next year? I know there was pretty much no impact this year.

Yes, Jim, I mean, first off, I would tell you that we are really not seeing, and it's a good question because up until, I would tell you probably about mid this year, there was still some supply chain delay, but that has really eased. And in fact, we are in the market currently buying additional fleet that we're pulling into '25 because of availability of it and our desire to not only obtain it, but to take advantage of bonus depreciation with the change in law. So no, we're really not. So I wouldn't want to use that as a reason we couldn't deliver on getting all of our vehicles.

As far as tariffs, we are hearing from manufacturers that there's probably somewhere in the neighborhood of a 3 up to -- $3,000 up to about a $7,500 per truck impact because it affects different components of both the chassis and the bodies separately. So I would tell you that, that is relatively de minimis in the total scheme of things, but there is some very small impact at this point in time in '26 going forward from the manufacturers.

Okay. Great. And then you guys talked quite a bit about volume. And just maybe one more on that. From a volume standpoint next year, are there any major contracts that expire that you're likely to shed for next year now? I know that there's always going to be some, but I mean like large sort of needle movers, whether it be from Progressive or any other contracts.

Right. Understanding that there's always ins and outs. No, there's no significant chunky contract. And in fact, in Q4, the chunkier one that's been impacting this year, about 20 basis points that actually expires or anniversaries. And so it eases that shedding a little bit.

Our next question comes from Tobey Sommer from Truist.

With commodity prices in RINs recycling kind of being a headwind here for a period of time, does this influence an effect at all the way you think about the mix and exposure that you want to have within the portfolio and income statement in these buckets? And how much higher or lower do you think your exposure might be in 3 or 5 years?

Tobey, we think in terms of providing the service to our customers, and so it's really a function of the mix of markets where, as you can appreciate on the West Coast, where we've always had a high amount of diversion and therefore, recycling, and that's a great model for that business. And then off of the West Coast in places where really, we've always taken kind of a slow-moving approach to get critical mass and then build out our own recycling facilities.

Again, it's all based on meeting the customers' needs. And then we think about derisking it to the extent we can. That's why you've seen us build our own recycling facilities in certain markets and it's really coincided with the incremental technology in these facilities, and so that's made it a better business. And partnering with a nationwide broker to get better pricing through volumes.

So we've approached it as how do we mitigate the overall impact, make it a better underlying business and then communicate to you all what the sensitivity is with movement in commodity values. Because we've always maintained -- particularly given the fact that the recycled commodities running through our facilities come off of our own trucks, it really has to start with pricing it appropriately at the street. And so that's what we focus on.

And last thing I'd say, Tobey, is with regard to that is if you think about or -- I'm going to use this word growth algorithm where we have predominantly price-led organic growth. It -- obviously, if that's the case, your percentage of commodities will naturally drop over time mathematically. And unless your M&A is materially outpacing in a year your price-led organic growth. And it has been running about the same or maybe a little under. So I think over time, it is much more likely that the percentage of things that are linked to a commodity that has some market volatility continues to drop as a percentage of revenue in generalities.

And I wanted to ask a question about the great labor retention and cascading positive financial impacts on the income statement. Much of a margin impact sort of delta is there between the current trend, which is phenomenal and what you might consider to be normal because should the labor market ever kind of change here and start to improve, there may be a little bit of giveback for the industry and the company.

Yes. Well, I would characterize it in this way. We have -- originally, when we went down this path, we said, hey, there's about 100 basis points of margin expansion that can be unlocked over a 2- to 3-year period as we achieve our turnover reduction goals. And we said that, that doesn't show up in just one line item, it sort of shows up in 7 or 8 at 10 to 15 basis points per line item. And that has happened. We are about 2/3 through, I'd call it, 65 to 70 basis points of that unlock has been achieved.

Now here is the thing. We've actually achieved 130 basis points because we've overcome the margin headwinds of things that have affected against us, such as drops in commodities, RINs as we've talked about and increases in risk from prior period severity. So we've still got another 1/3 to go to get that at 100, but that would actually put it at closer to about 160 to 170 is what we would have achieved through that.

So we believe you'll see the vast majority of that finish out over the course of '26. And then if there is, to use your word, additional give back because there was some labor softening, that would be determined. But I will tell you that, look, you're always in the market to hire the best quality people. And even in the time of labor softening, best quality people in this economy have opportunities. So I wouldn't think of not flexing downward. I would just think of it as being more stabilized.

Our next question comes from Sabahat Khan from RBC Capital Markets.

Just a quick clarification on the margin and maybe a bit more of a detailed one. If we caught it right, I think you were saying about 50 to 80 bps of underlying margin improvement, offsetting about 30 to 40 bps of headwinds, one, did I catch that correct? And secondly, is this just more kind of price cost spread and benefits of the employee sort of safety and all the retention-related benefits? Or are there kind of other benefits that you expect, maybe even if you think about 2, 3 years, kind of where are the some of the margin levers that we should look at?

So just to make sure we're all saying the same thing. We think of normalized margin expansion in the 20 to 40 basis point range. So however you net to that number is the right way to think about being driven by that underlying solid base margin expansion. You've seen us deliver underlying solid waste margin expansion for the past several quarters and acknowledging that there are headwinds from commodities, which we said is, call it, 20-ish, 25 basis points, and that acquisitions are dilutive and would it be expected to continue to be to the extent anyone's layering more deals, of course, we wouldn't encourage that. But just need to be mindful of those dynamics.

So I think we're all saying the same thing, but that would just be the clarification there. And again, in terms of what's driving the underlying margin expansion, again, we go into any year thinking of that price/cost spread and the opportunity to do better than that because of these self-help measures, whether it's on pricing retention or employee retention and the cost benefits associated with that, including those lagging benefits from risk. But any of the granularity on the drivers, we'll certainly look forward to talking about in February when we give our guidance. We appreciate the opportunity to communicate at a very high level broad strokes how we're thinking about next year.

Okay. Great. And then just within that 7% growth number in the E&P, I think you mentioned there's a small facility that added as well. Is there any way to quantify what the sort of an annual run rate benefit from a facility like that might be?

The annual contribution from a facility like that is probably in the $3 million revenue range and $1.5 million to $2 million EBITDA range.

Great. And then lastly, I think there's a comment in within this quarter, the results there is an amount related to a landfill. Presumably, it's something different than the Chiquita landfill. But should we assume that this was just sort of like a one-off? Is there any sort of bookends you'd want to put on some amount like that? Or should we just see this as a one-off remediation type cost that was incurred in the quarter?

Yes. Thanks. Nothing to do with Chiquita. It's a one-off as I said, I mean it's just a timing difference in commissioning and disposal well on some incremental costs in the meantime.

Our next question comes from William Grippin from Barclays.

Just one quick one for me here on capital allocation. You obviously ramped up share repurchases here in the third quarter. Just wondering how we should think about maybe the split between spending on acquisitions and buybacks as we look into '26, maybe in the context of the M&A pipeline that you kind of see in front of you right now?

Sure. Well, you should always think in terms of strategically consistent, appropriately priced M&A is always going to be our highest and best use. We look forward to continuing to grow the business the same way we've historically grown it, concentrating on the types of markets that have really driven our success. Still see a lot of runway. We've talked about the $4.5 billion to $5 billion in private company revenue that fits that model. And that really, of course, sellers drive the timing of deals, but I have talked about the pipeline continuing to be robust.

And Ron talked about the successes we've had this year and the things we're closing in Q4 and looking ahead to next year, more to do. So with that as the backdrop, then the observation is, even with a dividend that continues to grow at double-digit percentages annually since its inception, we have tremendous flexibility to also do share repurchases, and you saw that in this recent period when as we would characterize it, there was an opportunistic environment or said another way, a dislocation that made it compelling from our perspective.

So that is the way to think about it. The fact that we -- our leverage is [ $275 million ] tells you we have tremendous flexibility to continue really doing all of the above, but always M&A, as I described, will be the first order of business.

Our next question comes from Tami Zakaria from JPMorgan.

I'll add one quick question here. Any thoughts on how much of a volume headwind we could see next year from some of the contract shedding you're doing woefully? And if you could remind us how much of a drag it's expected to be this year? That would be helpful.

Sure, Tami. As we've said, when we look at the 2.7% in negative volumes, about 70 basis points of that has been this intentional shedding. I mentioned earlier, we know about 1/3 of that, it will step down even in Q4 because of one contract with anniversary. And then going forward, it will really be a function of how much that continues to decline would be a function of any incremental shedding from acquisitions that we're currently doing or have done in the last year.

And so given the fact that we've still been busy, there's certainly potential for pieces there, but I wouldn't expect it to get greater than what we've recently seen. I would expect those losses overall to be smaller than they have been in recent periods.

Our next question comes from Michael Doumet from National Bank.

I just wanted to ask a question on the regional results. It looks like Canada and the Southern U.S. are seeing some pretty solid margin expansion while the other regions are flat to down year-to-date. I mean, is that reflective of where the recycling business is a little bit larger? Just wondering what is driving the differences in the margins in the regions.

So typically, the biggest drivers would be, yes, it would include recycling, to your point, our Western region and our Eastern region both have large recycling impacts. It also reflects acquisition activity because acquisitions are typically dilutive and so you would certainly see that in any of those regions where we've closed deals.

And the other thing I would say, Michael, is it also reflects -- when you ask the difference between original margins, it also reflects the general tip fee, landfill tip fee has built into the regional differences. So where you are in the Northeast and you're talking $80 to $120 tip fees or the West where you're talking $60 to $120 tip fees, you're going to have suppressed EBITDA margins relative to the central part of the country and the South and Southeast, where you're experiencing $20 to $40 landfill tip fees. So some is just a structural difference.

Got you. And then I guess on the -- if I remember correctly, on the Q1 conference call, I remember you indicating that there are a few chunkier deals in the pipeline. And it sounds like you've closed a few of them. But I was wondering if there are more ahead and how they are progressing and just generally on how you view the M&A environment for 2026.

Yes. Well, I mean, you are correct, Mike. We have closed some of those deals. We closed a very nice side, a large company in South Florida in Q3. We have signed and will close in the next few weeks another nice company in Central Florida. So some of those were ones we were referring to. We are also referring to this large transfer station in New York that we have under definitive agreements since May.

And as I mentioned earlier in a question asked, we will be closing that in this quarter as well. And there are always our deals of various sizes that are under constant discussion and negotiation. I would characterize the M&A environment as continuing to be very strong, very robust. We've already done sort of about 2x a "normalized year" through 3 quarters and will continue at a strong pace in Q4.

So this is going to end up being a more than double average year. And we're not really seeing any material change to that in any way as we head into '26. I think if and when and hopefully soon, the economy turns, as interest rates continue to pull down throughout '26 and private owners get a little more lift in their sales, that helps accelerate M&A activity. So the catalysts that drive things are not going -- they're going in the right direction, not the wrong direction.

Our next question comes from Shlomo Rosenbaum from Stifel.

Ron, I just wanted to start asking you if you could flesh out a little bit more your discussion on pricing that you've gotten from technology, and it sounds like you've been kind of favorably surprised in where you can both price and kind of help you price, I guess, in a very pinpoint way so you're not impacting churn. Where do you think you are in terms of kind of rolling those learnings out across the organization? And in your efforts to kind of explore and analyze it, are you finding additional adjacencies with that technology and analytics that are kind of ongoing, where you're consistently finding some new areas where you feel like you can press additional buttons?

Yes. Well, first off, to answer your question, I think we're only in the second inning of a 9-inning game as far as deployment. So very, very early in doing so. We have deployed this to about 1/7 of our P&Ls so far, and that will grow to about, call it, half to 75% throughout '26. So I think you'll continue to see improvement in that '26 and into '27 before you really start to see all of the impact. And really, look, the ultimate objective, I think, and I don't think we're any different than any of the other large public companies is how do you achieve your price increase objectives with the least customer churn by type of customer, by geography.

And so instead of being, I'm going to call it more uniform with, if everybody is getting a 7% increase in a certain market, does somebody get 1.9% and somebody get 10.4% based on individual customer specifics of sort of an algorithmic stack of what we believe causes customer price acceptance or rejection or negotiation. And so I think ultimately, this takes pressure off volume, trade-off between price and volume, and you're going to begin seeing that in '26. And continue to see it as we go forward.

And I think it allows us to achieve with less customer rollback and defection, our price increase objectives. So I think it's a little too early to say what else that means. But if it accomplishes that objective alone, we'd be extremely satisfied. And the early indication from 1/7 of the company's location is very positive. It's a 30% to 40% reduction in churn on similar price increases. So that's pretty significant.

And then maybe Mary Anne, can you talk a little bit about the puts and takes in the implied margin expansion of 90 basis points year-over-year for next quarter? Like maybe just give us a little more breakdown on how that should shake out, at least and how you're thinking about it?

Sure. So the key moving pieces there that change between Q3 and Q4 is that 70 basis point headwind that we talked about from recycled commodities and RINs declines to about 30 basis points. And so that, of course, is the biggest driver of the change period-over-period.

Okay. And then if I'm -- do you have like a rollover into 2026 for the acquisitions that have been completed to date?

Yes. We said it was approaching 1%. That was kind of rounded. I think it's somewhere between 80 and 90 basis points, something like that.

Our next question comes from Toni Kaplan from Morgan Stanley.

This is Yehuda Silverman on for Toni. Just have a quick question on commodities in the quarter. Some of the factors -- the headwinds that were factored into the guide were the results in the quarter are worse or better than expected? And then looking ahead, what is something that can mark recovery or stabilization of the commodity prices? Is it more macro or economic activity, the only notable driver or other drivers for potential recovery?

Sure. So the incremental headwinds from commodities that we talked about in the quarter were about 20 basis points. So the continued slide we saw during the quarter that we talked about overcoming with our underlying margin expansion. And I would say, generally speaking, the best indicator would be the macro environment, the overall demand and visibility on that demand.

The good news is that there's been so much conversion in the United States of mills to taking recycled feedstock that demand has been steady and there's far less influence internationally. And that's why I would argue that it could be a factor in the greater stability overall in those commodity prices, particularly OCC.

Got it. Just one more quick one. Is there -- on a government shutdown, if that's prolonged, is there any potential impact on customers' decision-making or contracts or nothing really important?

It's not so much government contracts. It would just be the overall activity and the lack of visibility there to the extent it's influenced by a government shutdown. I mean we certainly might pick up at parks or things, but it's not a needle mover.

And our next question comes from Trevor Romeo from William Blair.

Just maybe a couple of quick landfill related questions. One, just on Arrowhead, I think maybe, first, I guess, any update on tons going to the facility, whether those are still ramping. And then we have a big merger in the rail space, I guess, pending that could include some of the lines in that part of the country. So just wondering if you could maybe see any changes or impact to your service there if that merger is approved?

Yes, sure. I'm happy to give you an update. So Arrowhead has continued to progress. We are now hitting about 7,500 tonnes a day in Q3 at Arrowhead. Recalling that when we acquired the site in August of '23, so 2 years ago this quarter, it was about 2,500 to 2,700 tonnes a day. So we've made substantial progress there. I will also tell you that we have laid the foundation for incremental continued improvement in '26 and '27 in that we have built out incremental track at our landfill.

And when I say we have actually Norfolk Southern has done it for us, of course, with our capital, and they've also done that at our New York facility, loading facility outside of New York City. Those 2 things were crucial for them to begin running a unit train for us, dedicated unit train, multiple days a week, and that is actually scheduled to begin in the mid- to late fourth quarter of this year. That would be -- will be very helpful to us. That will reduce transit times by potentially up to 25% to 30%, and that helps the overall cost structure for Norfolk Southern, but also for us, because it requires less railcar capital from us as we expand because you're getting more turns on your existing railcars. So those are all good things.

Yes. And the pending UP -- Norfolk Southern merger, we -- first off, we have a very long-term contract with Norfolk Southern that will have no effect on or should have no effect from the merger. So we're not concerned about that. And UP really does not pull in the lane segments that we are operating in, and Norfolk Southern is the predominant rail there. So we really expect no material impact from their proposed merger.

That's helpful and good news on the expansions. And then real quick on Seneca Meadows, I know you're going through kind of a permitting process for an expansion there. Just any quick updates you could give us on how that process is going?

Yes. I would tell you that really, we are tracking about as expected. We remain very confident in our ability to get the expansion. There's sort of a 2-step process -- well, there's a 3-step process with the biggest one being local post-agreement approval, and we have achieved that. It was also a legal challenge by some township group there.

And that has been effectively forwarded by the higher court in New York here in the last -- it's been stayed is a better way to say it, maybe than forwarded. We believe it's a good indication. It will be forwarded, but it's been stayed. So that's positive. And then there is a final technical demonstration through the state DOC, and that is ongoing. So we again remain confident that we're on track to obtain it.

Our next question comes from Stephanie Moore from Jefferies.

Most of my questions have been asked. So apart from asking you, Ron and Mary Anne, how you're doing, I think I'll just throw in as you think about your M&A opportunity and your pipeline going forward, is it at this point solely focused on kind of MSW deals? Or is there a willingness to look outside of traditional MSW deals as well?

Well, first off, Stephanie, thank you for asking how we're doing. Thankfully, we're doing all right. I appreciate that. And as far as our pipeline, there is nothing in the pipeline that is anything but traditional solid waste steels. That is what is in the pipeline. That is what you will see closing in Q4. That is what you will see closing in '26. And we are not looking at something that is outside of that, our sort of core arena and do not believe there's any need to do so at this point in time.

And our next question comes from Tony Bancroft from Gabelli Funds.

Ron and Mary Anne, great job on the quarter and a great job overall. Just regarding maybe, Ron, just you could -- I know it's very late in the game here, but regarding your view on maybe how PFAS will play out? I know it's sort of been quieted recently. But all these long-term liabilities always seem to pop their heads up again. I just want to get your view on that at your landfills and the economics around that. Maybe a quick hip pocket lecture. And then you've seen others talk about doing these plastic sort of polymer plants. And just want to get your view on what you think of the economics on that are long-term. Maybe just a quick hip pocket lecture, if you could.

Sure. I appreciate it, Tony. Look, with regard to PFAS, obviously, things will continue to be codified through the federal government. And we, as an industry and us as a company, we'll react to that. I can tell you that we have been working on this for the better part of 3 years. We've narrowed down to 2 to 3 technologies, all of which are working and performing very well. We have bought portable units at multiple of our landfills, effectively utilizing what I would call sort of, in effect, a solidification and stabilization of the PFAS from a leachate and removing it before you do anything with the leachate and taking that PFAS, which is now in a solid form and disposing of that properly.

So we're very confident in our ability to comply with it. We're confident in our ability to pass those appropriate costs on in our rate increases to our customers and to demonstrate to publicly owned and privately owned wastewater treatment plants that the leachate is below a level from a PFAS standpoint of any federal regulation. So it is not a needle mover in any direction for us on a real revenue opportunity or a real expense creep at this point in time. So we remain confident in that.

Plastics, obviously, one of the national companies has done a great job with their, I think, now 2 polymer centers they've opened and plan to open a third. What I would say is those have been opened in relatively large urban markets where that company has a very nice position, and I think it makes tremendous sense. And I think they're demonstrating that it makes good sense there financially and sustainability-wise. We are looking at some similar things, not a polymer center, but some similar plastic separation treatment technologies that could make sense.

We're not prepared to say that they do, but we are moving down the road testing some of them. So I would stay tuned on that. As you may know, right now, plastics have been falling. And so -- but the demand and the EPR requirements that are moving on through certain of the states, you're going to need to address plastics. We, as a company and us as an industry to help those states comply with their EPR legislation. So it will be a continued developing area.

The one thing I would add, Tony, is just keep in mind that plastics are a tiny fraction of the overall stream of recyclables. And to Ron's point, if you have a critical mass in one area, the mass will be very different from having a small amount in lots of markets.

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

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

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