WASTE MANAGEMENT INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and notes thereto included under Item 1 and our Consolidated Financial Statements and notes thereto and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2025. This Quarterly Report on Form 10-Q contains certain forward-looking statements that are made subject to the safe harbor protections provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are often identified by the words, “will,” “may,” “should,” “continue,” “anticipate,” “believe,” “expect,” “plan,” “forecast,” “project,” “estimate,” “intend,” and words of a similar nature and include estimates or projections of financial and other data; comments on expectations relating to future periods; plans or objectives for the future; and statements of opinions, views or beliefs about current and future events, circumstances or performance. You should view these statements with caution. They are based on the facts and circumstances known to us as of the date the statements are made. These forward looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those set forth in such forward-looking statements, including but not limited to failure to implement our optimization, automation, growth and cost savings initiatives and overall business strategy; failure to obtain the results anticipated from strategic initiatives, investments, acquisitions or new lines of business; failure to identify acquisition targets, consummate and integrate acquisitions, including our ability to integrate the acquisition of Stericycle, Inc. (“Stericycle”) (which is now presented as our Healthcare Solutions segment) and achieve the anticipated benefits therefrom, including synergies; legal, regulatory, operational, technological and other matters that may affect the costs and timing of our ability to integrate and deliver all of the expected benefits of the Stericycle acquisition; existing or new environmental and other regulations, including developments related to emerging contaminants, gas emissions, renewable energy, recyclables, extended producer responsibility and our natural gas fleet; significant environmental, safety or other incidents resulting in liabilities or brand damage; failure to obtain and maintain necessary permits due to land scarcity, public opposition or otherwise; diminishing landfill capacity, resulting in increased costs and the need for disposal alternatives; failure to attract, hire and retain key team members and a high quality workforce; increases in labor costs due to union organizing activities or changes in wage and labor related regulations; disruption and costs resulting from severe weather and destructive climate events; failure to achieve our sustainability goals or execute on our sustainability-related strategy and initiatives, including within planned timelines or anticipated budgets due to disruptions, delays, cost increases or changes in environmental or tax regulations and incentives; focus on and regulation of, environmental and sustainability-related disclosures, which could lead to increased costs, risk of non-compliance, brand damage and litigation risk related to our sustainability efforts; macroeconomic conditions, geopolitical conflict and large-scale market disruption resulting in labor, supply chain and transportation constraints, inflationary cost pressures and fluctuations in commodity prices, fuel and other energy costs; increased competition and pricing pressure; impacts from international trade restrictions and tariffs; competitive disposal alternatives, diversion of waste from landfills and declining waste volumes; changes in general economic conditions, capital markets or consumer trends; changing conditions in the recycling industry, including impacts on demand, pricing and availability of counterparties; changing conditions in the healthcare industry; adoption of new tax legislation; fuel shortages; failure to develop and protect new technology; failure of technology to perform as expected; inability to adapt and manage the benefits and risks of artificial intelligence; failure to prevent, detect and address cybersecurity incidents or comply with privacy regulations; negative outcomes of litigation or governmental proceedings, including those acquired through transactions; failure to maintain an effective system of internal control over financial reporting; and operational or management decisions or developments that result in impairment charges and other risks discussed in our filings with the SEC, including Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025. We assume no obligation to update any forward-looking statement, including financial estimates and forecasts, whether as a result of future events, circumstances or developments or otherwise. ​ Overview We are North America’s leading provider of comprehensive environmental solutions, providing services throughout the United States (“U.S.”) and Canada. We partner with our customers and the communities we serve to manage and reduce waste at each stage from collection to disposal, while recovering valuable resources and creating clean, renewable energy. We own or operate the largest network of landfills throughout the U.S. and Canada. In order to make disposal 22 ​ more practical for larger urban markets, where the distance to landfills is typically farther, we manage transfer stations that consolidate, compact and transport waste efficiently and economically. Our solid waste business is operated and managed locally by our subsidiaries that focus on distinct geographic areas and provide collection, transfer, disposal, recycling and resource recovery services. Through our Renewable Energy segment, we are also a leading developer, operator and owner of landfill gas-to-energy facilities in the U.S. and Canada that produce renewable electricity and renewable natural gas (“RNG”), which is a significant source of fuel that we allocate to our natural gas fleet. Our Healthcare Solutions segment provides regulated waste and compliance services (“RWCS”) and secure information destruction (“SID”) services in the U.S., Canada and Western Europe that protect people and brands, promote health and well-being and safeguard the environment. Additionally, through our Recycling Processing and Sales segment, we are a leading recycler in the U.S. and Canada, handling materials that include paper, cardboard, glass, plastic and metal. Our senior management evaluates, oversees and manages the financial performance of our business through five reportable segments, referred to as (i) Collection and Disposal - East Tier (“East Tier”); (ii) Collection and Disposal - West Tier (“West Tier”); (iii) Recycling Processing and Sales; (iv) Renewable Energy and (v) Healthcare Solutions. Our East and West Tiers, along with certain ancillary services (“Other Ancillary”) that are not managed through our Tier segments, but that support our collection and disposal operations, form our “Collection and Disposal” business. We also provide additional services not managed through our five reportable segments, which are presented as Corporate and Other. Strategy Our fundamental strategy has not changed; we remain dedicated to providing long-term value to our stockholders by successfully executing our core strategy of focused differentiation and continuous improvement. We have enabled a people-first, technology-led focus to drive our mission to maximize resource value, while minimizing environmental impact, and sustainability and environmental stewardship are embedded in all that we do. Our strategy leverages and sustains the strongest asset network in the industry to drive best-in-class customer experience and growth. Our strategic planning processes appropriately consider that the future of our business and the industry can be influenced by changes in economic conditions, the competitive landscape, the regulatory environment, asset and resource availability and technology. We believe that focused differentiation, which is driven by capitalizing on our unique and extensive network of assets, will deliver profitable growth and position us to leverage competitive advantages. Simultaneously, we believe that investing in automation to improve processes and drive operational efficiency combined with a focus on the cost to serve our customers will yield an attractive profit margin and enhanced service quality. We have furthered our strategy of focused differentiation and continuous improvement beyond our traditional waste operations through our sustainability growth strategy, which has positioned us to capitalize on the significant investments made in our Renewable Energy and Recycling Processing and Sales segments, while increasing automation and reducing labor dependency. In addition, our Healthcare Solutions segment provides a complementary business platform in medical waste, a sector with attractive near- and long-term growth dynamics and in secure information destruction services to further our leading suite of comprehensive waste and environmental solutions. Furthermore, we continue to evaluate and plan to pursue emerging diversion technologies that may generate additional value. Business Environment The waste industry is a comparatively mature and stable industry. However, customers increasingly expect more of their waste materials to be recovered and those waste streams are becoming more complex. In addition, many state and local governments mandate diversion, recycling and waste reduction at the source and prohibit the disposal of certain types of waste at landfills. We monitor these developments to adapt our service offerings. As companies, individuals and communities look for ways to be more sustainable, we promote our comprehensive services that go beyond our core business of collecting and disposing of waste in order to meet their needs. This includes expanding traditional recycling services, increasing organics collection and processing, providing medical waste services and expanding our renewable energy projects to meet the evolving needs of our diverse customer base. As North America’s leading provider of comprehensive environmental solutions, we are taking big, bold steps to catalyze positive change – change that will impact our Company as well as the communities we serve. Consistent with our Company’s long-standing commitment to sustainability and environmental stewardship, we have published our 2025 Sustainability Report, providing details on our sustainability-related performance and outlining progress towards our 2030 sustainability goals. The 2025 Sustainability Report conveys the strong linkage between the Company’s sustainability goals and our growth strategy, inclusive of the 23 ​ expansion of the Company’s Recycling Processing and Sales and Renewable Energy segments. The information in this report can be found at sustainability.wm.com but it does not constitute a part of, and is not incorporated by reference into, this Quarterly Report on Form 10-Q. We encounter intense competition from governmental, quasi-governmental and private service providers based on pricing, and to a much lesser extent, the nature of service offerings, particularly in the residential line of business. Our industry is directly affected by changes in general economic factors, including increases and decreases in consumer spending, business expansions and construction activity. These factors generally correlate to volumes of waste generated and impact our revenue. Negative economic conditions and other macroeconomic trends can and have caused customers to reduce their service needs. Such negative economic conditions, in addition to competitor actions, can impact our strategy to negotiate, renew, or expand service contracts and grow our business. We also encounter competition for acquisitions and growth opportunities. General economic factors and the market for consumer goods, in addition to regulatory developments, can also significantly impact commodity prices for the recyclable materials we sell. Significant components of our operating expenses vary directly as we experience changes in revenue due to volume and inflation. Volume changes can fluctuate significantly by line of business and can impact key financial metrics. We must dynamically manage our cost structure in response to volume changes and cost inflation. We believe the Company’s industry-leading asset network and strategic focus on investing in our people and our digital platform will give the Company the necessary tools to address the evolving challenges impacting the Company and our industry. In line with our commitment to continuous improvement and a differentiated customer experience, we remain focused on our automation and optimization investments to enhance our operational efficiency and change the way we interact with our customers. Advancements made through these initiatives are intended to seamlessly and digitally connect all enterprise functions required to service customers and provide the best experience. We have made significant progress in executing this technology enablement strategy to automate and optimize certain elements of our service delivery model. The key benefits are reduced labor dependency on certain high-turnover jobs, particularly in customer experience, recycling and residential collection, while further elevating our customer self-service through digitalization and implementation of technologies to enhance the safety, reliability and efficiency within our collection operations. We sometimes experience margin pressures and variability in earnings and margins from our commodity-driven businesses, specifically within our Recycling Processing and Sales and Renewable Energy segments. During the quarter ended March 31, 2026, we continued to experience decreases in market prices for recycled commodities when compared to the prior year quarter. Additionally, commodity price fluctuations from the prior year quarter had an unfavorable impact on the Renewable Energy segment. We continue to take proactive steps to adjust our business models to protect against the down side risk of changes in commodity prices. Variability in economic conditions, including inflation, interest rates, employment trends and supply chain reliability, can create risk and uncertainty in financial outlook. We take proactive steps to recover and mitigate inflationary cost pressures through our overall pricing efforts and by managing our costs through efficiency, labor productivity and investments in technology to automate certain aspects of our business. We remain committed to putting our people first to ensure that they are well positioned to execute our daily operations diligently and safely. We remain focused on delivering outstanding customer service, managing our variable costs with changing volumes and investing in technology that will enhance our customers’ experience and provide operating efficiencies intended to reduce our cost to serve. Current Quarter Financial Results During the first quarter of 2026, we continued to focus on our priorities to advance our strategy – growing the core business by focusing on customer lifetime value; delivering operational excellence and capitalizing on network advantages; capturing and enhancing returns from our investments in our Recycling Processing and Sales and Renewable Energy segments and driving accretive growth as we take our Healthcare Solutions segment from integration to scalable growth. We continue to invest in our people through paying a competitive market wage, investing in our digital platform and providing training for our team members. During the period, we also allocated $729 million of available cash to our shareholders through dividends and common stock repurchases. 24 ​ ​ Key elements of our financial results for the first quarter of 2026 include: ● Revenues of $6,227 million compared to $6,018 million in the prior year period, an increase of $209 million, or 3.5%. The increase is primarily due to (i) higher yield in our Collection and Disposal business; (ii) incremental volumes from our Renewable Energy segment primarily due to contributions from growth projects and (iii) our recent acquisitions. These increases are partially offset by lower collection volumes and a reduction in single-stream and brokerage recycled commodity prices; ● Operating expenses of $3,694 million, or 59.3% of revenues, compared to $3,612 million, or 60.0% of revenues, in the prior year period. The $82 million increase is primarily due to (i) annual wage increases and higher employee medical costs; (ii) higher fuel prices and (iii) growth in our Renewable Energy business. These increases were offset by (i) lower costs driven by lower collection volumes and (ii) continued efficiency and cost control initiatives in our Collection and Disposal business. Although total operating expenses increased, costs as a percent of revenue improved due to continued cost discipline; ● Selling, general and administrative expenses of $707 million, or 11.4% of revenues, compared to $687 million, or 11.4% of revenues, in the prior year period. The $20 million increase is primarily due to increases in (i) technology spend; (ii) bad debt expense and (iii) labor costs; ● Income from operations of $1,113 million, or 17.9% of revenues, compared to $1,013 million, or 16.8% of revenues, in the prior year period. The $100 million increase is primarily due to (i) growth in our Collection and Disposal business; (ii) contributions from increased volumes in our Renewable Energy segment and (iii) a gain from a business divestiture in our West Tier. These increases were partially offset by higher annual incentive compensation, employee wage increases and higher technology spend; ● Net income attributable to Waste Management, Inc. of $723 million, or $1.79 per diluted share, compared to $637 million, or $1.58 per diluted share, in the prior year period. The $86 million increase is primarily due to the increase in income from operations, discussed above; ● Net cash provided by operating activities of $1,501 million compared to $1,208 million in the prior year period. The $293 million increase in net cash provided by operating activities is primarily due to (i) higher earnings, particularly driven by our Collection and Disposal business; (ii) favorable changes in working capital, net of effects from acquisitions and divestitures and (iii) lower annual incentive compensation payments; ● Free cash flow of $920 million compared to $475 million in the prior year period. The $445 million increase in free cash flow is primarily due to the increase in net cash provided by operating activities described above as well as a decrease in capital spending driven by (i) lower spend on collection vehicles and (ii) anticipated reductions in capital investment in our sustainability growth projects due to our transition from peak construction of this portfolio into a period of harvesting returns. These changes are partially offset by lower proceeds from the sale of certain non-strategic assets. Free cash flow is a non-GAAP measure of liquidity. Refer to Free Cash Flow below for our definition of free cash flow, additional information about our use of this measure and a reconciliation to net cash provided by operating activities, which is the most comparable GAAP measure. 25 ​ Results of Operations Operating Revenues The mix of operating revenues for the three months ended March 31 are as follows (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net ​ Intercompany ​ Gross ​ ​ ​ ​ Operating ​ Operating ​ Operating ​ ​ Revenues ​ ​ ​ Revenues (a) ​ ​ ​ Revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2026 ​ ​ ​ ​ ​ ​ ​ ​ Commercial $ 1,429 ​ $ 229 ​ $ 1,658 Industrial ​ 758 ​ ​ 222 ​ 980 Residential ​ ​ 888 ​ ​ 18 ​ ​ 906 Other collection ​ 794 ​ 72 ​ 866 Total collection ​ 3,869 ​ 541 ​ 4,410 Landfill ​ ​ 864 ​ ​ 382 ​ ​ 1,246 Transfer ​ ​ 348 ​ ​ 271 ​ ​ 619 Total Collection and Disposal ​ 5,081 ​ 1,194 ​ 6,275 Recycling Processing and Sales ​ 368 ​ 87 ​ 455 Renewable Energy ​ 159 ​ 2 ​ 161 Healthcare Solutions ​ ​ 614 ​ ​ 107 ​ ​ 721 Corporate and Other ​ ​ 5 ​ ​ 8 ​ ​ 13 Total ​ $ 6,227 ​ $ 1,398 ​ $ 7,625 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2025 ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial $ 1,380 ​ $ 214 ​ $ 1,594 Industrial ​ 741 ​ ​ 199 ​ 940 Residential ​ ​ 872 ​ ​ 22 ​ ​ 894 Other collection ​ 753 ​ 72 ​ 825 Total collection ​ 3,746 ​ 507 ​ 4,253 Landfill ​ ​ 840 ​ ​ 353 ​ ​ 1,193 Transfer ​ ​ 336 ​ ​ 256 ​ ​ 592 Total Collection and Disposal ​ 4,922 ​ 1,116 ​ 6,038 Recycling Processing and Sales ​ 384 ​ 81 ​ 465 Renewable Energy ​ 91 ​ 1 ​ 92 Healthcare Solutions (b) ​ ​ 619 ​ ​ 102 ​ ​ 721 Corporate and Other ​ ​ 2 ​ ​ 8 ​ ​ 10 Total ​ $ 6,018 ​ $ 1,308 ​ $ 7,326 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (a) Includes each segment’s intercompany activity, including transactions within a segment and between segments. Transactions within and between segments are generally made on a basis intended to reflect the market value of the service. (b) In the third quarter of 2025, as a result of continued integration efforts and to enhance transparency and accountability, the Company began reflecting intra-segment activity within the Healthcare Solutions segment. These charges were designed to measure profitability at more granular levels of the enterprise and to facilitate clearer financial accountability within operating units. Accordingly, adjustments to the three months ended March 31, 2025 were made to properly reflect intra-segment activity for the period. Intra-segment operating revenues and operating expenses within Healthcare Solutions for the three months ended March 31, 2026 and 2025 are $101 million and $94 million, respectively. ​ 26 ​ The following table provides details associated with the period-to-period change in revenues and average yield (dollars in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period-to-Period Change for the Three Months Ended March 31, 2026 vs. 2025 ​ ​ ​ ​ ​ As a % of ​ ​ ​ ​ As a % of ​ ​ ​ ​ ​ Related ​ ​ ​ ​ Total ​ ​ ​ ​ Amount ​ ​ ​ Business(a) ​ ​ ​ ​ Amount ​ ​ ​ Company(b) ​ Collection and Disposal ​ $ 182 ​ 3.9 % ​ ​ ​ ​ ​ ​ Recycling Processing and Sales and Renewable Energy (c) ​ (35) ​ (7.1) ​ ​ ​ ​ ​ ​ Energy surcharge and mandated fees ​ 20 ​ 8.2 ​ ​ ​ ​ ​ ​ Total average yield ​ ​ ​ ​ ​ ​ $ 167 ​ 2.7 % Volume (d) ​ ​ ​ ​ ​ ​ 10 ​ 0.2 ​ Healthcare Solutions (e) ​ ​ ​ ​ ​ ​ ​ ​ (13) ​ (0.2) ​ Internal revenue growth ​ ​ ​ ​ ​ ​ ​ ​ 164 ​ 2.7 ​ Acquisitions ​ ​ ​ ​ ​ ​ ​ ​ 35 ​ 0.6 ​ Divestitures ​ ​ ​ ​ ​ ​ ​ ​ (4) ​ — ​ Foreign currency translation ​ ​ ​ ​ ​ ​ ​ ​ 14 ​ 0.2 ​ Total ​ ​ ​ ​ ​ ​ ​ $ 209 ​ 3.5 % (a) Calculated by dividing the increase or decrease for the current year period by the prior year period’s related business revenues adjusted to exclude the impacts of divestitures for the current year period. (b) Calculated by dividing the increase or decrease for the current year period by the prior year period’s total Company revenues adjusted to exclude the impacts of divestitures for the current year period. (c) Includes combined impact of commodity price variability in both our Recycling Processing and Sales and Renewable Energy segments, as well as changes in certain recycling fees charged by our collection and disposal operations. (d) Includes activities from our Corporate and Other businesses. (e) The amounts reported herein represent the change in our revenues from the combined impacts of yield and volume attributable to our Healthcare Solutions business. The significant items affecting revenues during the first quarter of 2026, as compared to the prior year period, are summarized below: Average Yield Collection and Disposal Average Yield — This measure reflects the effect on our revenues from the pricing activities of our collection, transfer and landfill operations, exclusive of volume changes. Revenue growth from Collection and Disposal average yield includes not only base rate changes and environmental and service fee fluctuations, but also (i) certain average price changes related to the overall mix of services, which are due to the types of services provided; (ii) changes in average price from new and lost business and (iii) price decreases to retain customers. 27 ​ The details of our revenue growth from Collection and Disposal average yield are as follows (dollars in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ Period-to-Period Change for the ​ ​ Three Months Ended ​ ​ ​ March 31, 2026 vs. 2025 ​ ​ ​ ​ ​ ​ As a % of ​ ​ ​ ​ ​ ​ Related ​ ​ ​ ​ ​ Amount ​ ​ ​ ​ ​ Business Commercial ​ $ 69 ​ 4.7 % Industrial ​ 27 ​ 3.1 ​ Residential ​ 53 ​ 6.3 ​ Total collection ​ 149 ​ 4.5 ​ Landfill ​ 22 ​ 2.8 ​ Transfer ​ 11 ​ 3.2 ​ Total Collection and Disposal ​ $ 182 ​ 3.9 % Our overall pricing efforts are focused on keeping pace with the increasing costs and capital intensity of our business. We continue to see yield growth in our landfill business primarily driven by municipal solid waste, which achieved yield of 6.9% for the first quarter of 2026. Recycling Processing and Sales and Renewable Energy — Recycling Processing and Sales revenues attributable to yield decreased $28 million as compared to the prior year period. Average market prices for single-stream recycled commodities declined approximately 27% in the first quarter of 2026 as compared to the prior year period. Revenues attributable to yield in our Renewable Energy segment decreased $7 million as compared to the prior year period primarily due to lower RNG pricing, partially offset by higher electricity and natural gas prices. While there may be short-term fluctuations in our commodity-driven businesses as prices change, we believe that our business models and processes appropriately mitigate the downside risk of changes in commodity prices. Energy Surcharge and Mandated Fees — These fees increased $20 million as compared to the prior year period. The increase in energy surcharge revenues is primarily due to an increase of approximately 12% in market prices for diesel fuel as compared to the prior year period. Volume Our revenues from volume (excluding volumes from acquisitions and divestitures, as well as Healthcare Solutions) increased $10 million, or 0.2% as compared to the prior year period. Volume increased in both our Recycling Processing Sales and our Renewable Energy segments primarily due to contributions from growth projects. These volume increases were largely offset by volume declines in our collection business primarily due to harsh winter weather in the current period as well as our intentional shedding of lower-margin residential business. Additionally, special waste landfill volumes were down compared to the prior year period, which benefited from wildfire cleanup activities in the West Tier. Healthcare Solutions Revenues from our Healthcare Solutions business decreased $13 million, or 0.2% as compared to the prior year period as contributions from pricing activities were more than offset by declines in volumes. Acquisitions and Divestitures Acquisitions and divestitures resulted in a net increase in revenues of $31 million, or 0.6%, as compared to the prior year period primarily due to 2025 investments in tuck-in collection and disposal businesses. 28 ​ Operating Expenses The following table summarizes the major components of our operating expenses for the three months ended March 31 (in millions of dollars and as a percentage of revenues): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2026 ​ ​ ​ ​ 2025 ​ Labor and related benefits ​ $ 1,115 ​ ​ ​ 17.9 % ​ $ 1,074 ​ ​ ​ 17.8 % Transfer and disposal costs ​ 326 ​ 5.2 ​ ​ 332 ​ 5.5 ​ Maintenance and repairs ​ 546 ​ 8.8 ​ ​ 549 ​ 9.1 ​ Subcontractor costs ​ 617 ​ 9.9 ​ ​ 600 ​ 10.0 ​ Cost of goods sold ​ 212 ​ 3.4 ​ ​ 236 ​ 3.9 ​ Fuel ​ 142 ​ 2.3 ​ ​ 131 ​ 2.2 ​ Disposal and franchise fees and taxes ​ 188 ​ 3.0 ​ ​ 181 ​ 3.0 ​ Landfill operating costs ​ 101 ​ 1.6 ​ ​ 89 ​ 1.5 ​ Risk management ​ 114 ​ 1.8 ​ ​ 116 ​ 1.9 ​ Other ​ 333 ​ 5.4 ​ ​ 304 ​ 5.1 ​ ​ ​ $ 3,694 ​ 59.3 % ​ $ 3,612 ​ 60.0 % ​ Our operating expenses increased as compared to the prior year period, primarily due to (i) annual employee wage increases and higher employee medical costs; (ii) higher fuel prices and (iii) growth in our Renewable Energy business. These increases were partially offset by (i) lower costs driven by lower collection volumes, as discussed above and (ii) continued operating efficiency and cost control initiatives in our Collection and Disposal business. Although total operating expenses increased, costs as a percent of revenue improved due to continued cost discipline. The significant items affecting operating expenses during the first quarter of 2026, as compared to the prior year period, are summarized below: Labor and Related Benefits — The increase in labor and related benefits costs is primarily due to annual employee wage increases and an increase in employee medical costs as compared with the prior year period. These increases were partially offset by (i) lower costs driven by lower collection volumes as discussed above; (ii) collection efficiency improvements and (iii) improved driver retention. Transfer and Disposal Costs — The decrease in transfer and disposal costs is primarily due to lower transfer and disposal volumes, caused by harsh winter weather during the current period, and lower residential volumes attributable to intentional shedding of lower-margin contracts. Maintenance and Repairs — The slight decrease in maintenance and repairs costs is primarily due to reduced demand for third-party services driven by fleet and operational optimization. The decrease was partially offset by annual wage increases and increased headcount of our maintenance technicians. Subcontractor Costs — The increase in subcontractor costs is primarily due to an increase of approximately 12% in market prices for diesel fuel as compared to the prior year period. Cost of Goods Sold — The decrease in cost of goods sold is primarily due to 27% decrease in average market prices for single-stream recycling commodities. This decrease was partially offset by additional pipeline transportation costs attributable to new RNG facilities brought on line during 2025. Fuel — The increase in fuel costs is primarily due to an increase of approximately 12% and 6% in average market prices for diesel and CNG fuel, respectively. This increase was partially offset by reduced fuel consumption due to declines in collection volumes. Disposal and Franchise Fees and Taxes — The increase in disposal and franchise fees and taxes is primarily due to an increase in landfill host fees and other fees and taxes paid to municipalities on our disposal volumes. 29 ​ Landfill Operating Costs — The increase in landfill operating costs is primarily due to higher leachate treatment costs in our West Tier . Risk Management — The slight decrease in risk management costs is primarily due to lower auto and property premium costs as compared to the prior year period. Other — The increase in other operating costs is primarily due to (i) increased utility costs largely attributable to higher electricity prices and new RNG plants brought on line during 2025 and (ii) gains on the sale of real estate in the prior year period that did not recur in the current year. Selling, General and Administrative Expenses The following table summarizes the major components of our selling, general and administrative expenses for the three months ended March 31 (in millions of dollars and as a percentage of revenues): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2026 ​ ​ ​ ​ 2025 ​ Labor and related benefits ​ $ 437 ​ ​ ​ 7.0 % ​ $ 427 ​ ​ ​ 7.1 % Professional fees ​ 82 ​ 1.3 ​ ​ 92 ​ 1.5 ​ Provision for bad debts ​ 29 ​ 0.5 ​ ​ 19 ​ 0.3 ​ Other ​ 159 ​ 2.6 ​ ​ 149 ​ 2.5 ​ ​ ​ $ 707 ​ 11.4 % ​ $ 687 ​ 11.4 % ​ Selling, general and administrative expenses increased from the prior year period primarily due to increases in (i) technology spend; (ii) bad debt expenses and (iii) labor costs. The significant items affecting selling, general and administrative expenses during the first quarter of 2026, as compared to the prior year period, are summarized below: Labor and Related Benefits — The increase in labor and related benefits costs is primarily due to annual employee wage increases and higher annual incentive compensation costs. These increases were partially offset by a reduction in workforce as we achieved synergies from our acquisitions, particularly Stericycle. Professional Fees — The decrease in professional fees is primarily due to non-recurring consulting costs incurred in the prior year period to support Stericycle’s integration. Provision for Bad Debts —The increase in provision for bad debts is primarily due to a benefit recorded in the prior year period on specific accounts as well as a favorable credit reserve adjustment booked in the prior year period in our Collection and Disposal business. Other — The increase in other expenses is primarily due to increased technology spend to support strategic initiatives. Depreciation, Depletion, Amortization and Accretion Expenses The following table summarizes the components of our depreciation, depletion, amortization and accretion expenses for the three months ended March 31 (in millions of dollars and as a percentage of revenues): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2026 ​ ​ ​ ​ 2025 ​ Depreciation of tangible property and equipment $ 407 ​ ​ ​ 6.5 % ​ $ 371 ​ ​ ​ 6.2 % Depletion of landfill airspace 192 ​ 3.1 ​ ​ 183 ​ 3.0 ​ Amortization of intangible assets 97 ​ 1.6 ​ ​ 102 ​ 1.7 ​ Interest accretion on landfill and environmental remediation liabilities ​ 39 ​ 0.6 ​ ​ ​ 35 ​ 0.6 ​ ​ $ 735 ​ 11.8 % ​ $ 691 ​ 11.5 % ​ 30 ​ The increase in depreciation of tangible property and equipment is primarily due to investments in capital assets placed in service during 2025, particularly within our sustainability businesses. The increase in depletion of landfill airspace is primarily due to changes in rates from revisions in landfill estimates within our East Tier. The decrease in amortization of intangible assets is primarily due to the conclusion of amortization related to customer relationships and other intangibles acquired as a result of acquisitions during prior years within our East Tier. The increase in interest accretion on landfill and environmental remediation liabilities is primarily due to revisions in landfill estimates. Income from Operations The following table summarizes income from operations for our reportable segments for the three months ended March 31 (dollars in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period-to-Period ​ ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ Change ​ ​ ​ Collection and Disposal: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ East Tier ​ $ 723 ​ $ 661 ​ $ 62 9.4 % West Tier ​ 737 ​ 670 ​ 67 10.0 ​ Other Ancillary ​ — ​ (3) ​ 3 * ​ Collection and Disposal ​ 1,460 ​ 1,328 ​ 132 9.9 ​ Recycling Processing and Sales ​ ​ 19 ​ ​ 18 ​ ​ 1 ​ 5.6 ​ Renewable Energy ​ ​ 48 ​ ​ 19 ​ ​ 29 ​ 152.6 ​ Healthcare Solutions ​ ​ (14) ​ ​ (25) ​ ​ 11 ​ 44.0 ​ Corporate and Other ​ ​ (400) ​ ​ (327) ​ ​ (73) ​ (22.3) ​ Total ​ $ 1,113 ​ $ 1,013 ​ $ 100 9.9 % Percentage of revenues ​ ​ 17.9 % ​ 16.8 % ​ ​ ​ ​ ​ * Percentage change does not provide a meaningful comparison. The significant items affecting income from operations for our segments during the first quarter of 2026, as compared to the prior year period, are summarized below: Collection and Disposal — Income from operations in our Collection and Disposal business increased primarily due to (i) revenue growth from price increases, which translates into increased yield or average unit price; (ii) actions to improve efficiency and the operating costs incurred to serve our customers and (iii) a gain from a business divestiture in our West Tier. These increases were partially offset by declines in volumes primarily due to harsh winter weather. Recycling Processing and Sales — Income from operations in our Recycling Processing and Sales segment remained steady due to lower expenses from the suspension of a business engaged in accelerating plastic film and wrap recycling capabilities during 2025, and increased volumes and reduced costs from the automation of our recycling facilities as well as investments in new facilities, mostly offset by declines in commodity prices. ​ Renewable Energy — Income from operations in our Renewable Energy segment increased primarily due to higher volumes driven by the completion of projects that increase the beneficial use of landfill gas sold to third parties. This increase was partially offset by a decline in RINs pricing. Healthcare Solutions — The loss from operations in our Healthcare Solutions segment improved primarily due to non-recurring integration costs incurred during the prior year period along with lower costs in the current year from the realization of synergies. ​ Corporate and Other — The loss from operations in Corporate and Other increased primarily due to (i) higher health and welfare expenses, driven by a comparison to an unusually favorable first quarter in 2025 resulting from workforce 31 ​ mix changes from a large acquisition and improved vendor economics; (ii) increased technology support costs to support strategic initiatives; (iii) higher annual incentive compensation and (iv) annual wage increases. Interest Expense, Net Our interest expense, net was $225 million and $232 million for the three months ended March 31, 2026 and 2025, respectively. The decrease is primarily due to a decrease in our average debt balances period over period. Income Tax Expense Our income tax expense and effective income tax rates were $168 million, or 18.9%, and $151 million, or 19.2%, for the three months ended March 31, 2026 and 2025, respectively. See Note 4 to the Condensed Consolidated Financial Statements for more information related to income taxes. Tax Legislation — The Inflation Reduction Act of 2022 (“IRA”) contains several tax-related provisions, including with respect to (i) alternative fuel tax credits; (ii) tax incentives for investments in renewable energy production, carbon capture and other climate actions and (iii) the overall measurement of corporate income taxes. Given the complexity and uncertainty around the applicability of the legislation to our specific facts and circumstances, we continue to analyze the IRA provisions to identify and quantify potential opportunities and applicable benefits included in the legislation. We secured approximately $60 million of annual pre-tax benefit through the provisions of the IRA related to alternative fuel tax credits (recorded as a reduction in our operating expense) from tax credits in 2024. The alternative fuel credit expired at the end of 2024 and will not provide any future benefit to the Company without further legislative action. With respect to the Section 48 investment tax credit, we expect our cumulative benefit to be between $400 million and $425 million, $309 million of which was recognized between 2023 and 2025 with the remainder anticipated to be realized in 2026 and 2027 . Finally, in February 2026 the Internal Revenue Service issued proposed regulatory guidance clarifying qualification for the Section 45Z clean fuel production tax credit. We expect our cumulative benefit from this clean fuel production tax credit to be as much as $150 million through 2029. This expected benefit is dependent on a number of estimates and assumptions, which we continue to monitor and factor into our credit realization expectations. Liquidity and Capital Resources The Company consistently generates cash flow from operations that meets and exceeds our working capital needs, allows for payment of our dividends, investment in the business through capital expenditures and tuck-in acquisitions and funding of strategic sustainability growth investments. We continually monitor our actual and forecasted cash flows, our liquidity and our capital resources, enabling us to plan for our present needs and fund unbudgeted business requirements that may arise during the year. The Company believes that its investment grade credit ratings, diverse investor base, large value of unencumbered assets and modest leverage enable it to obtain adequate financing, and refinance upcoming maturities, as necessary to meet its ongoing capital, operating, strategic and other liquidity requirements. We also have the ability to manage liquidity during periods of significant financial market disruption through temporary modification of our capital expenditure and share repurchase plans. 32 ​ Summary of Cash and Cash Equivalents, Restricted Funds and Debt Obligations The following is a summary of our cash and cash equivalents, restricted funds and debt balances (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 Cash and cash equivalents ​ $ 158 ​ $ 201 Restricted funds: ​ ​ ​ ​ Insurance reserves ​ $ 612 ​ $ 472 Final capping, closure, post-closure and environmental remediation funds ​ ​ 141 ​ ​ 140 Other ​ ​ 1 ​ ​ 10 Total restricted funds (a) ​ $ 754 ​ $ 622 Debt: ​ ​ ​ ​ Current portion ​ $ 641 ​ $ 711 Long-term portion ​ 22,250 ​ 22,196 Total debt ​ $ 22,891 ​ $ 22,907 (a) As of March 31, 2026 and December 31, 2025, $100 million and $109 million, respectively, of these account balances were included in other current assets in our Condensed Consolidated Balance Sheets. Debt — As of March 31, 2026, we had approximately $3.7 billion of debt maturing within the next 12 months, including (i) $1.8 billion of tax-exempt bonds with term interest rate periods that expire within the next 12 months, which is prior to their scheduled maturities; (ii) $1.1 billion of short-term borrowings under our commercial paper program (net of related discount on issuance); (iii) $223 million of 7.1% senior notes that mature in August 2026; (iv) $359 million of 2.6% Canadian senior notes that mature in September 2026 and (v) $201 million of other debt with scheduled maturities within the next 12 months. As of March 31, 2026, we have classified $3.1 billion of debt maturing in the next 12 months as long-term because we have the intent and ability to refinance these borrowings on a long-term basis as supported by the forecasted available capacity under our $3.5 billion long-term U.S. and Canadian revolving credit facility. The remaining $641 million of debt maturing in the next 12 months is classified as current obligations. 33 ​ Guarantor Financial Information WM Holdings, Inc. (“WM Holdings”) has fully and unconditionally guaranteed all of Waste Management, Inc.’s (“WMI’s”) senior indebtedness. WMI has fully and unconditionally guaranteed all of WM Holdings’ senior indebtedness. None of WMI’s other subsidiaries have guaranteed any of WMI’s or WM Holdings’ debt. In lieu of providing separate financial statements for the subsidiary issuer and guarantor (WMI and WM Holdings), we have presented the accompanying supplemental summarized combined balance sheet and income statement information for WMI and WM Holdings on a combined basis after elimination of intercompany transactions between WMI and WM Holdings and amounts related to investments in any subsidiary that is a non-guarantor (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2026 ​ ​ ​ December 31, 2025 Balance Sheet Information: ​ ​ ​ ​ ​ ​ Current assets $ 10 $ 44 Noncurrent assets ​ ​ 12 ​ ​ 13 Current liabilities ​ 611 ​ 738 Noncurrent liabilities: ​ ​ ​ ​ ​ ​ Advances due to affiliates ​ ​ 19,020 ​ ​ 18,160 Other noncurrent liabilities ​ 19,794 ​ 19,733 ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, 2026 Income Statement Information: ​ ​ ​ Revenue $ — Operating income ​ ​ — Net loss ​ ​ (163) ​ ​ Summary of Cash Flow Activity The following is a summary of our cash flows for the three months ended March 31 (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2026 ​ ​ ​ 2025 Net cash provided by operating activities ​ $ 1,501 ​ $ 1,208 Net cash used in investing activities ​ $ (731) ​ $ (829) Net cash used in financing activities ​ $ (821) ​ $ (536) ​ Net Cash Provided by Operating Activities — Our operating cash flows increased by $293 million for the three months ended March 31, 2026, as compared to the prior year period, primarily due to (i) higher earnings, particularly driven by our Collection and Disposal business; (ii) favorable changes in working capital, net of effects from acquisitions and divestitures and (iii) lower annual incentive compensation payments. Net Cash Used in Investing Activities — The most significant items included in our investing cash flows for the three months ended March 31, 2026 and 2025 are summarized below: ● Capital Expenditures — We used $650 million and $831 million for capital expenditures during the three months ended March 31, 2026 and 2025, respectively. The decrease in capital spending is primarily driven by (i) lower spend on collection vehicles and (ii) anticipated reductions in capital investments in our sustainability growth projects due to our transition from peak construction of this portfolio into a period of harvesting returns. ● Divestitures — Proceeds from divestitures of businesses and other assets, net of cash divested were $69 million and $98 million for the three months ended March 31, 2026 and 2025, respectively. Proceeds in 2026 primarily related to a business divestiture in our West Tier. Proceeds in 2025 primarily related to the sale of our Healthcare Solutions segment’s Spain and Portugal subsidiaries. 34 ​ ● Other, Net — The change in other investing activities were primarily driven by changes in our investment portfolio associated with a wholly-owned insurance captive. During the three months ended March 31, 2026 and 2025, we used $146 million and $92 million, respectively, of cash from restricted cash and cash equivalents to invest in available-for-sale securities. Net Cash Used in Financing Activities — The most significant items affecting the comparison of our financing cash flows for the three months ended March 31, 2026 and 2025 are summarized below: ● Debt Borrowings and Repayments — The following summarizes our cash borrowings and repayments of debt for the three months ended March 31 (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2026 ​ 2025 Borrowings : ​ ​ ​ ​ Commercial paper ​ $ 6,048 ​ $ 4,993 ​ ​ ​ ​ ​ ​ ​ Repayments : ​ ​ ​ Commercial paper ​ $ (6,076) ​ $ (4,708) Senior notes ​ — ​ ​ (422) Other debt (49) ​ (33) ​ $ (6,125) ​ $ (5,163) Net cash borrowings (repayments) ​ $ (77) ​ $ (170) ​ Refer to Note 3 to the Condensed Consolidated Financial Statements for additional information related to our debt borrowings and repayments. ● Common Stock Repurchase Program — During the three months ended March 31, 2026, we paid cash of $344 million for common stock repurchases. There were no share repurchases made in 2025. See Note 10 to the Condensed Consolidated Financial Statements for additional information about our share repurchase activity. ● Cash Dividends — For the periods presented, all dividends have been declared by our Board of Directors. We paid cash dividends of $385 million and $336 million during the three months ended March 31, 2026 and 2025, respectively. The increase in dividend payments is primarily due to our quarterly per share dividend increasing from $0.825 in 2025 to $0.945 in 2026. Free Cash Flow We are presenting free cash flow, which is a non-GAAP measure of liquidity, in our disclosures because we use this measure in the evaluation and management of our business. We define free cash flow as net cash provided by operating activities, less capital expenditures, plus proceeds from divestitures of businesses and other assets, net of cash divested. We believe it is indicative of our ability to pay our quarterly dividends, repurchase common stock, fund acquisitions and other investments and, in the absence of refinancings, to repay our debt obligations. Free cash flow is not intended to replace net cash provided by operating activities, which is the most comparable GAAP measure. We believe free cash flow gives investors useful insight into how we view our liquidity, but the use of free cash flow as a liquidity measure has material limitations because it excludes certain expenditures that are required or that we have committed to, such as declared dividend payments and debt service requirements. 35 ​ Our calculation of free cash flow and reconciliation to net cash provided by operating activities for the three months ended March 31, 2026 and 2025 is shown in the table below (in millions) and may not be calculated the same as similarly-titled measures presented by other companies: ​ ​ ​ ​ ​ ​ ​ 2026 ​ ​ ​ 2025 Net cash provided by operating activities $ 1,501 ​ $ 1,208 Capital expenditures to support the business (589) ​ (703) Capital expenditures - sustainability growth investments (a) ​ (61) ​ ​ (128) Total capital expenditures ​ (650) ​ ​ (831) Proceeds from divestitures of businesses and other assets, net of cash divested 69 ​ 98 Free cash flow $ 920 ​ $ 475 ​ (a) These growth investments are intended to further our sustainability leadership position by increasing recycling volumes and growing renewable natural gas generation. We expect they will deliver circular solutions for our customers and drive environmental value to the communities we serve. ​ Critical Accounting Estimates and Assumptions In preparing our financial statements, we make numerous estimates and assumptions that affect the accounting for and recognition and disclosure of assets, liabilities, equity, revenues and expenses. We must make these estimates and assumptions because certain information that we use is dependent on future events, cannot be calculated with precision from available data or simply cannot be calculated. In some cases, these estimates are difficult to determine and we must exercise significant judgment. In preparing our financial statements, the most difficult, subjective and complex estimates and the assumptions that present the greatest amount of uncertainty relate to our accounting for landfills, environmental remediation liabilities, long-lived asset impairments, intangible asset impairments and the fair value of assets and liabilities acquired in business combinations, as described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025. Actual results could differ materially from the estimates and assumptions that we use in the preparation of our financial statements. Seasonal Trends Our financial and operating results may fluctuate for many reasons, including period-to-period changes in the relative contribution of revenue by each line of business, changes in commodity prices and general economic conditions. Our operating revenues and volumes typically experience seasonal increases in the summer months that are reflected in second and third quarter revenues and results of operations. Service or operational disruptions caused by severe storms, extended periods of inclement weather or climate events can significantly affect the operating results of the geographic areas affected. Extreme weather events may also lead to supply chain disruption and delayed project development, or disruption of our customers’ businesses, reducing the amount of waste generated by their operations. Conversely, certain destructive weather and climate conditions, such as wildfires in the Western U.S. and hurricanes that most often impact our operations in the Southern and Eastern U.S. during the second half of the year, can increase our revenues in the geographic areas affected as a result of the waste volumes generated by these events. Inflation Variability in economic conditions, including inflation, interest rates, employment trends and supply chain reliability, can create risk and uncertainty in financial outlook. We take proactive steps to recover and mitigate inflationary cost pressures through our overall pricing efforts and by managing our costs through efficiency, labor productivity and investments in technology to automate certain aspects of our business. These efforts may not be successful for various reasons including the pace of inflation, operating cost inefficiencies, market responses and contractual limitations, such as the timing lag in our ability to recover increased costs under certain contracts that are tied to a price escalation index with a lookback provision. 36 ​ Item 3. Quantitative and Qualitative Disclosures About Market Risk. Information about market risks as of March 31, 2026 does not materially differ from that discussed under Item 7A in our Annual Report on Form 10-K for the year ended December 31, 2025.