Waste Connections outlines mid-single-digit revenue growth for 2026 amid robust M&A and technology investment

Earnings Call Insights: Waste Connections, Inc. (WCN) Q3 2025

MANAGEMENT VIEW

* Ronald Mittelstaedt, Founder, CEO, President & Director, emphasized, "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." He highlighted that the company remains "well positioned to deliver our full year 2025 outlook as provided in July."
* The CEO noted ongoing acquisition activity, stating, "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." He also announced an 11.1% increase to the regular quarterly cash dividend and approximately 2.4 million shares repurchased, or almost 1% of shares outstanding.
* Mittelstaedt announced, "we're excited to recognize the benefits of using technology to accelerate and expand the reach of our leaders," with investments targeting productivity, efficiency, and the customer experience.
* Mary Whitney, Executive VP & CFO, stated, "In the third quarter, revenue of $2.458 billion was above our outlook and up $120 million or 5.1% year-over-year." She added, "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."
* Mittelstaedt welcomed Jason Craft as the new Chief Operating Officer during the quarter, describing him as "a long-tenured local, divisional and regional Waste Connections leader."

OUTLOOK

* Management maintained the full year 2025 guidance, with Whitney stating, "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%."
* Mittelstaedt described a high-level framework for 2026: "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."
* He added, "we remain well positioned for above-average underlying solid waste margin expansion with offsets expected from margin dilutive impacts from acquisitions and commodities."

FINANCIAL RESULTS

* Whitney reported, "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." Volumes were down 2.7%.
* Landfill tons were up almost 3%, with special waste tons up 10%. Recycling and landfill gas revenues were down 27% year-over-year on lower pricing.
* Adjusted EBITDA margin was 33.8%, up 10 basis points year-over-year, despite a 20 basis point drag from commodities.
* Year-to-date, adjusted free cash flow was $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 the $1.3 billion outlook.

Q&A

* Patrick Brown, Raymond James: Asked about E&P business performance. Whitney explained a sequential increase in Canadian business, mainly from a remediation job, and suggested backing out $10 million for run rate purposes.
* Brown queried incremental benefits from new RNG investments for EBITDA. Mittelstaedt indicated no material impact in 2025 or 2026, with benefits expected starting in 2027.
* Noah Kaye, Oppenheimer: Inquired about pricing tools and their impact. Whitney noted improved pricing retention attributed to new tools and higher employee retention, expecting less price needed in 2026 than in 2025.
* Konark Gupta, Scotiabank: Sought updates on Chiquita remediation costs. Mittelstaedt reported leachate management improvements and no expected material change to total outlay.
* Chris Murray, ATB Capital Markets: Asked about volume growth and margin impacts. Whitney described muted seasonal improvement and ongoing special waste activity.
* Kevin Chiang, CIBC: Asked about risk management costs and Canada operations. Whitney noted episodic credits in Canada and optimism for risk management cost benefits in 2026.
* Tobey Sommer, Truist: Queried about commodity headwinds and portfolio mix. Whitney emphasized focus on customer service, derisking, and margin stability.
* Sabahat Khan, RBC: Asked about margin levers. Whitney clarified normalized margin expansion in the 20-40 basis point range, driven by price/cost spread and retention benefits.
* William Grippin, Barclays: Focused on capital allocation. Whitney stated M&A remains top priority, but flexibility exists for share repurchases.

SENTIMENT ANALYSIS

* Analysts pressed on potential headwinds, volume clarity, and capital allocation, with a generally neutral tone but specific questioning on E&P, Chiquita, and margin impacts.
* Management maintained a confident tone during prepared remarks, emphasizing operational execution, margin expansion, and technology investments, but showed caution regarding commodity headwinds and litigation costs.
* Compared to the previous quarter, management’s tone remained confident, with greater emphasis on technology’s positive impact and M&A ramp-up, while analysts continued to scrutinize cost and volume trends.

QUARTER-OVER-QUARTER COMPARISON

* Q3 guidance and margin expansion language remained consistent with Q2, but commentary around pricing retention and technology’s impact strengthened.
* Management highlighted above-average acquisition activity and the new COO appointment, while the previous quarter focused on transitions and the COO retirement.
* Key metrics such as core pricing and margin expansion improved sequentially. Special waste activity and landfill volume trends showed slightly better performance than Q2.
* Analyst focus shifted from macroeconomic uncertainties and Chiquita costs in Q2 to the implementation of pricing tools, M&A, and technological initiatives in Q3.

RISKS AND CONCERNS

* Management cited ongoing commodity-related headwinds and litigation risks, especially concerning the Chiquita Canyon landfill. Mittelstaedt stated, "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."
* Analysts raised concerns about volume visibility, commodity prices, and risk management cost reductions lagging expectations. Whitney noted that "risk management costs...continues to be a headwind of 20 to 30 basis points in the quarter."

FINAL TAKEAWAY

Waste Connections delivered strong third quarter results above expectations, supported by margin expansion, disciplined pricing, and robust acquisition activity. Management reaffirmed its 2025 outlook, signaled mid-single-digit revenue growth for 2026, and highlighted the positive impact of technology investments and improved employee retention. While commodity headwinds and litigation remain challenges, continued operational execution and strategic flexibility position the company for sustained long-term growth.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/wcn/earnings/transcripts]

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