Waste Connections, Inc. (WCN) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call indicates positive financial and strategic developments. The company expects revenue growth driven by acquisitions and price-led organic growth, with improving margins and free cash flow. The Q&A reveals potential upside from commodity values and strong M&A activity. Although management avoided some specifics, the overall sentiment is optimistic with strategic investments in technology and infrastructure, and reduced costs. The positive outlook for free cash flow and M&A, along with strategic initiatives, suggests a positive stock price movement.
Key Financial Performance
Adjusted EBITDA margin Expanded by 110 basis points in Q4 2025, reaching 33% for the full year, up 100 basis points year-over-year. This was driven by price-led organic growth, solid waste, and continued operating improvements.
Acquired annualized revenue Approximately $330 million in 2025. This reflects 19 acquisitions, including West Coast franchises and competitive markets.
Shareholder returns Over $830 million returned to shareholders in 2025 through share repurchases and dividends. This includes a quarterly per share dividend increase of 11.1%, totaling over $330 million in dividends and over $500 million in share repurchases.
Solid waste core pricing 6.5% in 2025, exceeding original expectations. This contributed to a 100 basis point margin expansion in solid waste.
Revenue $2.373 billion in Q4 2025. Acquisitions contributed $58 million in Q4 and $377 million for the full year.
Adjusted EBITDA $796 million in Q4 2025, up 8.7% year-over-year, with a margin of 33.5%, up 110 basis points. For the full year, adjusted EBITDA was $3.125 billion, up 7.7% year-over-year, with a margin of 33%, up 50 basis points.
Adjusted free cash flow $1.26 billion in 2025, reflecting a conversion of approximately 50% of adjusted EBITDA. This overcame $200 million in higher-than-expected cash flow impacts from Chiquita Canyon landfill.
Capital expenditures $1.194 billion in 2025, including $100 million for R&D projects.
Chiquita Canyon landfill closure-related outlays Approximately $200 million in 2025. This impacted free cash flow but was partially offset by operational improvements.
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Operating Highlights
Renewable Gas (RNG) Facilities: Progress in developing portfolio with 5 facilities online and more expected operational by year-end.
AI Technology Initiatives: Investments aimed at enhancing efficiency, productivity, and customer experience through digitization and automation.
Acquisitions: Closed $330 million in annualized revenue from 19 acquisitions in 2025, with $125 million expected rollover revenue in 2026.
Market Expansion: Entered new markets and integrated businesses, focusing on solid waste.
Safety Improvements: Achieved record low safety incidents and improved employee retention, reducing costs and enhancing customer satisfaction.
Operational Efficiencies: Realized cost savings in labor, repairs, maintenance, and risk management, contributing to margin expansion.
Shareholder Returns: Returned over $830 million to shareholders through dividends and share repurchases in 2025.
Sustainability Projects: Invested in renewable energy and recycling facilities to drive long-term growth.
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Risk or Challenges
Chiquita Canyon landfill closure and ETLF event: The closure of the Chiquita Canyon landfill and the elevated temperature landfill (ETLF) event have led to significant regulatory, permitting, legal, consulting, and other unanticipated challenges. These issues have caused delays, inflated costs, and a burdensome process, impacting the company's operations and financials.
Decline in recycled commodity values and renewable energy credits: The company faced a second consecutive year of declines in the value of recycled commodities and renewable energy credits associated with landfill gas sales. This has created incremental pressure on reported margins.
Sluggish solid waste volumes: Underlying solid waste volumes have been sluggish, which could impact revenue growth and operational efficiency.
Regulatory and political challenges: The company is dealing with regulatory and political challenges, particularly related to the Chiquita Canyon landfill, which have exceeded expectations and created inefficiencies in addressing operational issues.
Economic uncertainties: The company has not factored in a material pickup in the economy for 2026, indicating potential risks from broader economic uncertainties.
Weather-related disruptions: Recent outsized weather events across several geographies have impacted operations, particularly in Q1, and could pose ongoing risks.
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Guidance & Outlook
Revenue Projections for 2026: Revenue is estimated in the range of $9.9 billion to $9.950 billion, with organic growth in solid waste collection, hauling, and disposal expected to be 3.5% to 4%. Core pricing is projected at 5% to 5.5%, with expected yields of approximately 4%, implying volumes flat to down about 0.5 percentage point. Acquisition revenue contribution is about $125 million, reflecting deals closed to date.
Adjusted EBITDA for 2026: Expected in the range of $3.30 billion to $3.325 billion, with adjusted EBITDA margin in the range of 33.3% to 33.4%, up 30 to 40 basis points year-over-year. This includes a commodity-related drag of 20 to 30 basis points. Incremental acquisition activity, economic improvement, or commodity increases could provide upside to this outlook.
Adjusted Free Cash Flow for 2026: Expected to increase by double-digit percentages to a range of $1.4 billion to $1.45 billion. This includes a $100 million to $150 million impact from closure-related outlays at Chiquita Canyon. Normalizing for noncore impacts, adjusted free cash flow reflects conversion of approximately 50% of EBITDA or approximately $1.7 billion.
Capital Expenditures for 2026: Estimated at $1.25 billion, including an aggregate of about $100 million for renewable natural gas (RNG) and recycling projects.
Sustainability and AI Initiatives: Progress continues on renewable gas (RNG) facilities, with five already online and the remainder expected operational around year-end. A new state-of-the-art recycling facility is expected online in 2027. AI-driven initiatives aim to enhance efficiency, productivity, and customer experience, with expanded deployment planned for 2026 and 2027.
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Shareholder Return Plan
Total dividends returned to shareholders: Over $330 million
Increase in quarterly per share dividend: 11.1%
Total share repurchases: Over $500 million
Approach to share buybacks: Opportunistic, with plans to continue in the current environment
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Key Q&A
Q:Can you delve into the sustainability CapEx and the cadence of the $100 million to $150 million spend on Chiquita?
A:Mary Whitney explained that the $100 million includes $75 million for RNG facilities, with almost half online and the rest expected by year-end. The remaining $25 million is for derisking recycling and improving recyclables' quality. For Chiquita Canyon, outlays in 2025 reflect accelerated work, and the cadence of spend is lumpy, with a decrease expected through 2026.
Q:What assumptions are baked into the broader guidance, and where could potential upside come from?
A:Mary Whitney stated that no improvement in commodity values, cyclical volumes, or M&A is baked into the guidance. Upside could come from better commodity values, cyclical volume improvements, or special waste pipeline firming. M&A deals already closed are included, but no new deals are assumed.
Q:Which expense buckets are moderating, and are they sustainably trending downward?
A:Ronald Mittelstaedt noted that labor rates are trending down from 5% to 3%-3.5% in 2026, and other costs have decreased from 4.5% to 2.5%-3%. The focus is on maintaining a 150-200 basis point spread between price increases and cost growth.
Q:What are the key AI and tech investments planned for this year?
A:Ronald Mittelstaedt highlighted two initiatives: dynamic, real-time customer routing to improve efficiency and a robust mobile connectivity platform to reduce inbound customer service calls by 30%-50% over a multi-year period.
Q:What is the outlook for M&A and capital allocation in 2026?
A:Ronald Mittelstaedt expects another strong year for M&A, with no change in the underlying opportunity basket or financial flexibility. The company will remain disciplined and opportunistic with buybacks, balancing M&A and capital returns.
Q:Is 2026 the last big year for sustainability CapEx and Chiquita spend?
A:Ronald Mittelstaedt confirmed that 2026 is expected to be the last big year for RNG-related CapEx, with contributions expected in 2027. Chiquita spend is also expected to step down significantly in 2026, with further reductions in 2027.
Q:How is the Northeast corridor rail build-out progressing?
A:Ronald Mittelstaedt reported that tonnage at Arrowhead Landfill increased from 2,300-2,500 tons/day to 7,500 tons/day, with further growth to 9,000-9,500 tons/day expected in 2026. Incremental rail and track capacity are being added.
Q:What is the status of landfill gas projects and their profitability?
A:Ronald Mittelstaedt noted that projects take time to ramp up, starting at 40%-50% efficiency and reaching full capacity after a year. RIN values have stabilized at $2.40, and returns remain attractive despite lower commodity prices.
Q:What is the update on Chiquita's leachate production and costs?
A:Leachate production has decreased from 400,000 gallons/day at its peak to 200,000-225,000 gallons/day. Costs range from $0.50-$2.50 per gallon, depending on treatment facilities. Leachate treatment accounts for 40%-45% of Chiquita's costs.
Q:What is the status of the Seneca Meadows landfill expansion?
A:Ronald Mittelstaedt expressed high confidence in the expansion proceeding, with technical review ongoing. Volumes have been throttled back to ensure commitments are met, and the impact of a closure would be less than that of Chiquita.
Q:What are the expectations for E&P business growth in 2026?
A:Mary Whitney expects the E&P business to be flat year-over-year, with outperformance in Q4 driven by remediation work and steady Canadian operations. The business is resilient despite lower rig counts and crude prices.
Q:What is the outlook for core pricing in 2026?
A:Core pricing is expected to start above 5%-5.5% and step down sequentially throughout the year. By Q1, 65%-70% of price increases will be visible, with CPI-linked markets providing additional clarity.
Q:What are the key drivers of free cash flow growth in 2026?
A:Free cash flow growth will be driven by $200 million in incremental EBITDA, reduced Chiquita and RNG outlays, and slightly higher cash taxes and CapEx.
Q:What is the status of driver academies and their impact on labor turnover?
A:Driver academies are expected to supply over 60% of new drivers in 2026, up from 35% in 2025. Retention rates for academy-trained drivers are nearly double those of non-academy hires, contributing to lower turnover and improved safety.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the potential impact of the Union Pacific and Norfolk Southern merger on Arrowhead's growth opportunities, stating it was too early to tell. Additionally, they did not provide specific details on the cost per gallon for Chiquita's leachate treatment or the exact timeline for Seneca Meadows' expansion approval.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI analytics
AI rollout
Acquisition contribution
CEO President
CEO release
Canyon impact
EPA
Founder CEO
President Director
RD project
amortization
buyback
challenge
closure outlay
comparison
contribution deal
customer satisfaction
dividend
effort
engagement
expense
flow conversion
flow generation
gain
gas
hand
harbor
investment
line expectation
margin basis
outlay progress
outperformance
platform
point commodity
productivity
release margin
share repurchase
sustainability
utilization
WCN Transcript
Waste Connections, Inc. (WCN) Q4 2025 Earnings Call Transcript
Positive2-12
The earnings call indicates positive financial and strategic developments. The company expects revenue growth driven by acquisitions and price-led organic growth, with improving margins and free cash flow. The Q&A reveals potential upside from commodity values and strong M&A activity. Although management avoided some specifics, the overall sentiment is optimistic with strategic investments in technology and infrastructure, and reduced costs. The positive outlook for free cash flow and M&A, along with strategic initiatives, suggests a positive stock price movement.
Waste Connections, Inc. (WCN) Q3 2025 Earnings Call Transcript
Positive10-22
The earnings call summary and Q&A indicate a positive outlook with expected revenue growth, margin expansion, and strategic acquisitions. The AI and technology strategy is promising for future improvements, and share repurchases indicate confidence. While there are challenges like Chiquita landfill and commodity impacts, the overall sentiment is positive, with optimistic guidance and proactive strategies. The lack of specific guidance for some areas is a minor concern but does not outweigh the positive aspects.
Waste Connections, Inc. (WCN) Q2 2025 Earnings Call Transcript
Unknown7-24
The earnings call presents a mixed picture. While there are positive elements such as improved employee retention and safety performance, strong acquisition revenues, and a flexible buyback strategy, concerns remain. The Q&A highlights uncertainties in volume recovery, muted seasonal trends, and potential cost increases due to tariffs. The lack of clear guidance on AI impact and cost reductions further adds to the uncertainty. Overall, the sentiment is balanced, leading to a neutral stock price prediction.
Waste Connections, Inc. (NYSE:WCN) Q1 2025 Earnings Call Transcript
Positive4-25
The earnings call summary indicates strong financial performance with a 7.5% revenue increase, solid waste margin expansion, and a positive shareholder return plan. The Q&A section shows confidence in M&A activities and stable pricing plans, despite some challenges like higher commodity levels. The company's proactive approach to potential risks, such as PFAS regulation, and strong financial metrics contribute to a positive outlook. However, the lack of market cap information limits the assessment of stock price sensitivity.
WCN Report
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