Item 2. Management’s Discussion and Analysis
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, 2024.
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 and achieve the anticipated benefits therefrom, including synergies; legal, regulatory 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; failure to maintain an effective system of internal control over financial reporting; existing or new environmental and other regulations, including developments related to emerging contaminants, gas emissions, renewable energy, 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; exposure to different regulatory, legal, financial and economic conditions in international jurisdictions; 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; pricing actions; impacts from international trade restrictions and tariffs; competitive disposal alternatives, diversion of waste from landfills and declining waste volumes; changing conditions in the healthcare industry; weakness in general economic conditions and capital markets; instability of financial institutions; adoption of new tax legislation; fuel shortages; failure to develop and protect new technology; failure of technology to perform as expected; failure to prevent, detect and address cybersecurity incidents or comply with privacy regulations; inability to adapt and manage the benefits and risks of artificial intelligence; negative outcomes of litigation or governmental proceedings, including those acquired through transactions; 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, 2024. 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 more practical for larger urban markets, where the distance to landfills is typically farther, we manage transfer stations
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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 subsidiaries, including our Waste Management Renewable Energy (“WM 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. Additionally, 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) WM Renewable Energy and (v) WM 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” businesses. We also provide additional services not managed through our five reportable segments, which are presented as Corporate and Other.
Stericycle Acquisition
On November 4, 2024, we completed our acquisition of all outstanding shares of Stericycle, Inc., a provider of regulated waste and compliance services and secure information destruction services that protect people and brands, promote health and well-being and safeguard the environment. The post-closing operating results of Stericycle have been included in our Condensed Consolidated Financial Statements as a new reportable segment referred to as WM Healthcare Solutions. During the first quarter of 2025, we prioritized maintaining service delivery continuity for our customers, ensuring business alignment with WM’s core values and capturing preliminary synergies through reduction of duplicative processes and costs. Additional integration efforts focused on optimizing processes through technological enhancements, establishing a performance management approach aimed at accountability and improving utilization and optimization of the asset portfolio.
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 is 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 are furthering our strategy of focused differentiation and continuous improvement beyond our traditional waste operations through our sustainability growth strategy that includes significant investments in our WM Renewable Energy and Recycling Processing and Sales segments, while increasing automation and reducing labor dependency. In addition, with our acquisition of Stericycle, we have advanced our growth strategy and built upon our sustainability initiatives. The acquisition provides a complementary business platform in regulated waste and compliance services involving 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 are also evaluating and pursuing 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
25
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 regulated waste and compliance services and secure information destruction 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 2024 Sustainability Report providing details on our sustainability-related performance and outlining progress towards our 2030 sustainability goals. The Sustainability Report conveys the strong linkage between the Company’s sustainability goals and our growth strategy, inclusive of the planned and ongoing expansion of the Company’s Recycling Processing and Sales and WM 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 volume changes in higher margin businesses 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 for certain high-turnover positions, 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 WM Renewable Energy segments. During the first quarter, we experienced moderate decreases in the market price for recycled commodities when compared to the prior year period. The impacts of commodity price fluctuations are not currently material to our WM Renewable Energy segment; however, as we continue to make investments to grow that segment, we may experience more significant impacts from fluctuations in the prices of electricity, natural gas, RINs and RECs. We continue to take proactive steps to adjust our business models to protect against the downside risk of changes in commodity prices.
Variability i n 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 our customers.
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Current Quarter Financial Results
During the first quarter of 2025, we continued to focus on our priorities to advance our strategy – enhancing employee engagement, permanently reducing our cost to serve our customers through the use of technology and automation, investing in growth through our Recycling Processing and Sales and WM Renewable Energy segments and integrating the Stericycle business. 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. We also continue to make investments in automation and optimization to enhance our operational efficiency and improve labor productivity for all lines of business. As part of the integration of Stericycle, which constitutes our new WM Healthcare Solutions segment, we achieved synergies by reducing costs of duplicative business processes, focused on service delivery for our customers and aligned team members and business processes with WM’s core values.
Key elements of our financial results for the first quarter include:
● Revenues were $6,018 million compared with $5,159 million in the prior year period, an increase of $859 million, or 16.7%. The increase is primarily attributable to (i) the acquisition of Stericycle; (ii) higher yield in our Collection and Disposal businesses; (iii) tuck-in collection and disposal acquisitions and (iv) higher volumes in our landfill, recycling and WM Renewable Energy businesses, which were partially offset by lower industrial and residential collection volumes;
● Operating expenses were $3,647 million, or 60.6% of revenues, compared with $3,140 million, or 60.9% of revenues, in the prior year period. The $507 million increase is primarily attributable to (i) the impact of our recent acquisitions and (ii) inflationary impacts. These increases were offset in part by (i) lower industrial and residential collection volumes and (ii) improved operating efficiency and cost control initiatives in our Collection and Disposal businesses;
● Selling, general and administrative expenses were $687 million, or 11.4% of revenues, compared with $491 million, or 9.5% of revenues, in the prior year period. The $196 million increase is primarily attributable to (i) the impact of our Stericycle acquisition and related integration costs and (ii) increased labor costs due to higher annual long-term incentive compensation costs and annual wage increases for our employees;
● Income from operations was $1,013 million, or 16.8% of revenues, compared with $1,016 million, or 19.7% of revenues, in the prior year period. We achieved $49 million of growth in income from operations of the Collection and Disposal businesses, but that growth was more than offset by an increase in our Corporate and Other costs, which can largely be attributed to Stericycle acquisition and integration costs, and an increase in depreciation and amortization as a result of the Stericycle acquisition;
● Net income attributable to Waste Management, Inc. was $637 million, or $1.58 per diluted share, compared with $708 million, or $1.75 per diluted share, in the prior year period. Net income decreased $71 million primarily due to an increase in interest expense as a result of additional debt incurred to fund our acquisition of Stericycle and to a lesser extent a decrease in income from operations, discussed above. These decreases were partially offset by a reduction in income tax expense of $11 million, or $0.03 per diluted share.
● Net cash provided by operating activities was $1,208 million compared with $1,367 million in the prior year period, with the decrease driven by (i) higher cash interest primarily due to additional debt incurred to fund our acquisition of Stericycle; (ii) unfavorable changes in working capital, net of effects of acquisitions and divestitures and (iii) higher annual incentive compensation payments. This decrease was partially offset by higher earnings across all segments, including the contributions from our recent acquisitions.
● Free cash flow was $475 million compared with $714 million in the prior year period. The decrease in free cash flow is attributable to the decrease in net cash provided by operating activities discussed above as well as an increase in capital spending, which was driven by (i) investments in capital assets such as trucks, landfills and equipment and (ii) capital expenditures within our WM Healthcare Solutions segment to support the business. These decreases were partially offset by proceeds from the divestiture of non-strategic assets and businesses. Free cash flow is a non-GAAP measure of liquidity. Refer to Free Cash Flow below for our definition of free cash
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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.
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)(b)
Revenues
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
WM Renewable Energy
91
1
92
WM Healthcare Solutions
619
8
627
Corporate and Other
2
8
10
Total
$
6,018
$
1,214
$
7,232
2024
Commercial
$
1,316
$
185
$
1,501
Industrial
747
187
934
Residential
854
22
876
Other collection
698
53
751
Total collection
3,615
447
4,062
Landfill
792
360
1,152
Transfer
309
251
560
Total Collection and Disposal
4,716
1,058
5,774
Recycling Processing and Sales
368
68
436
WM Renewable Energy
69
1
70
Corporate and Other
6
5
11
Total
$
5,159
$
1,132
$
6,291
(a) Intercompany operating revenues reflect each segment’s total intercompany sales, including intercompany sales 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) Beginning with the 2024 Form 10-K, the Company adjusted gross and intercompany operating revenues to reflect the 15% royalty paid by WM Renewable Energy to our Collection and Disposal and Corporate and Other businesses for the purchase of landfill gas. There was no change to net operating revenues. Prior periods have been recast to conform to current presentation.
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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, 2025 vs. 2024
As a % of
As a % of
Related
Total
Amount
Business(a)
Amount
Company(b)
Collection and Disposal
$
178
4.0
%
Recycling Processing and Sales and WM Renewable Energy (c)
1
0.1
Energy surcharge and mandated fees
(2)
(0.9)
Total average yield (d)
$
177
3.4
%
Volume (e)
4
0.1
Internal revenue growth
181
3.5
Acquisitions
694
13.5
Divestitures
(4)
(0.1)
Foreign currency translation
(12)
(0.2)
Total
$
859
16.7
%
(a) Calculated by dividing the increase or decrease for the current year period by the prior year period’s related business revenue 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 revenue 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 WM Renewable Energy segments, as well as changes in certain recycling fees charged by our collection and disposal operations.
(d) The amounts reported herein represent the changes in our revenues attributable to average yield for the total Company.
(e) Includes activities from our Corporate and Other businesses.
The following provides further details about our period-to-period change in revenues:
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.
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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, 2025 vs. 2024
As a % of
Related
Amount
Business
Commercial
$
79
5.8
%
Industrial
27
3.2
Residential
43
5.2
Total collection
149
4.7
Landfill
12
1.6
Transfer
17
5.7
Total Collection and Disposal
$
178
4.0
%
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 landfills, which achieved average yield of 4.0% for the first quarter of 2025.
Recycling Processing and Sales and WM Renewable Energy — Recycling Processing and Sales revenues attributable to yield decreased $7 million in the first quarter of 2025 as compared with the prior year period. This decline was driven by 10% lower average market prices in our brokerage business compared with the prior year, partially offset by 5% higher average market prices for our single-stream recycled commodities. In addition, revenues attributable to yield in our WM Renewable Energy segment increased $8 million as compared with the prior year period, primarily driven by an increase in electricity and natural gas prices due in part to extreme winter weather in the current quarter, which was partially offset by lower RINs pricing. While there may be short-term fluctuations in our commodity-driven businesses as prices change, we continue to take proactive steps to adjust our business models to protect against the downside risk of changes in commodity prices.
Energy Surcharge and Mandated Fees — These fees decreased $2 million for the first quarter of 2025 as compared with the prior year period. Our energy surcharge revenues declined $9 million primarily due to a decline in the market prices for diesel fuel of approximately 8.5% in the first quarter of 2025 as compared with the prior year period. This decline was partially offset by a $7 million increase in our mandated fees primarily related to fees and taxes assessed by various state, county and municipal government agencies at our landfills and transfer stations, particularly in our West Tier.
Volume
Our revenues from volume (excluding volumes from acquisitions and divestitures) increased $4 million for the first quarter of 2025 as compared with the prior year period. Special waste volume in our West Tier was favorably impacted by the wildfires clean-up activities that began in the first quarter of 2025. Additionally, volumes increased in both our Recycling Processing and Sales and WM Renewable Energy segments primarily due to contributions from growth projects. These volume increases were largely offset by declines in industrial and residential collection volume as well as the impacts of one fewer workday and extreme winter weather in the current quarter. Industrial collection volume declined primarily due to lower contributions from temporary business and residential collection volume declined largely due to our intentional shedding of lower-margin business.
Acquisitions and Divestitures
Acquisitions and divestitures resulted in a net increase in revenues of $690 million, or 13.4%, in the first quarter of 2025 as compared with the prior year. This increase was primarily due to our acquisition of Stericycle in November 2024. The remaining increase was related to our ongoing investment in tuck-in collection and disposal businesses.
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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):
2025
2024
Labor and related benefits
$
1,074
17.8
%
$
893
17.3
%
Transfer and disposal costs
332
5.5
315
6.1
Maintenance and repairs
549
9.1
489
9.5
Subcontractor costs
600
10.0
536
10.4
Cost of goods sold
236
3.9
228
4.4
Fuel
131
2.2
112
2.2
Disposal and franchise fees and taxes
181
3.0
172
3.3
Landfill operating costs
124
2.1
129
2.5
Risk management
116
1.9
77
1.5
Other
304
5.1
189
3.7
$
3,647
60.6
%
$
3,140
60.9
%
Our operating expenses for the three months ended March 31, 2025 increased as compared with the three months ended March 31, 2024, primarily due to (i) our recent acquisitions and (ii) moderate inflationary pressures. These increases were offset, in part, by (i) lower residential and industrial volumes attributable, in part, to intentional shedding of lower margin residential contracts, industrial economic softness and one less workday as compared with the first quarter of 2024 and (ii) continued operating efficiency and cost control initiatives in our Collection and Disposal businesses. Although our operating expenses increased overall, efficiency gains, improved turnover and momentum in truck deliveries combined with the benefit of price increases positioned us to reduce our operating expenses as a percentage of revenue when compared with the prior year period.
Significant items affecting the comparison of operating expenses for the reported periods include:
Labor and Related Benefits — The increase in labor and related benefits costs was largely driven by (i) the addition of employees as a result of our recent acquisitions and (ii) annual employee wage increases. The increase was offset, in part, by residential collection efficiency improvements, improved driver retention and conversion to automated side-load routes.
Transfer and Disposal Costs — The increase in transfer and disposal costs was primarily due to additional disposal costs attributable to our recent acquisitions and inflationary cost pressures, which includes increased disposal fees at third-party sites and higher rates from our third-party haulers. These increases were offset, in part, by decreases in residential and industrial collection volumes.
Maintenance and Repairs — The increase in maintenance and repairs costs was largely driven by (i) additional costs incurred as a part of our recent acquisitions; (ii) inflation in parts, supplies and third-party services and (iii) annual employee wage increases. These increases were offset, in part, by new truck deliveries, which lowered average fleet age and reduced demand for third-party services, parts and supplies.
Subcontractor Costs — The increase in subcontractor costs was primarily due to (i) additional costs incurred as a part of our recent acquisitions and (ii) continued inflationary cost pressures, particularly labor costs from third-party haulers. These increases were offset, in part, by the impact of lower fuel prices on third-party subcontracted hauling and services as compared with the three months ended March 31, 2024.
Cost of Goods Sold — The increase in cost of goods sold was primarily driven by (i) additional pipeline costs attributable to new RNG facilities brought on-line since the first quarter of 2024 and (ii) a 5% increase in recycled commodity prices compared to the prior year period.
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Fuel — The increase in fuel costs was primarily due to (i) our recent acquisitions and (ii) the expiration of the federal alternative fuel tax credit on December 31, 2024. These increases were offset, in part, by an 8.5% decrease in market prices for diesel fuel.
Disposal and Franchise Fees and Taxes — The increase in disposal and franchise fees and taxes was primarily driven by increased landfill volumes in our West Tier.
Landfill Operating Costs — The decrease in landfill operating costs was primarily due to certain adjustments to increase our environmental remediation reserve during the first quarter of 2024.
Risk Management — Risk management costs increased primarily due (i) additional claims and premiums attributable to our recent acquisitions and (ii) increases in claims costs due to negative claim development from prior accident years.
Other — Other operating cost increases were primarily due to (i) additional expenses attributable to our recent acquisitions and, to a much lesser extent, (ii) increased utility costs largely attributable new RNG plants brought on-line since the first quarter of 2024 and increased power prices.
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):
2025
2024
Labor and related benefits
$
427
7.1
%
$
321
6.2
%
Professional fees
92
1.5
47
0.9
Provision for bad debts
19
0.3
10
0.2
Other
149
2.5
113
2.2
$
687
11.4
%
$
491
9.5
%
Selling, general and administrative expenses have increased primarily due to higher labor costs from acquisitions as well as consulting costs incurred to support the integration of Stericycle.
Significant items affecting the comparison of our selling, general and administrative expenses for the reported periods include:
Labor and Related Benefits — The increase in labor and related benefits costs was primarily related to (i) our recent acquisitions, particularly Stericycle; (ii) higher long-term incentive compensation costs; (iii) increased headcount and (iv) annual employee wage increases.
Professional Fees —The increase in professional fees was primarily attributable to our acquisition of Stericycle, including integration, business optimization and system development costs.
Provision for Bad Debts —The increase in provision for bad debts was primarily attributable to our Stericycle acquisition.
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Depreciation, Depletion and Amortization Expenses
The following table summarizes the components of our depreciation, depletion and amortization expenses for the three months ended March 31 (in millions of dollars and as a percentage of revenues):
2025
2024
Depreciation of tangible property and equipment
$
371
6.2
%
$
308
6.0
%
Depletion of landfill airspace
183
3.0
176
3.4
Amortization of intangible assets
102
1.7
30
0.6
$
656
10.9
%
$
514
10.0
%
The increase in depreciation of tangible property and equipment during the first quarter of 2025, as compared with the first quarter of 2024, was driven by (i) our recent acquisitions and (ii) investments in capital assets such as trucks, landfills and equipment. The increase in depletion of landfill airspace was driven by volume increases, particularly at sites within our West Tier. The increase in amortization of intangible assets during the first quarter of 2025, as compared with the first quarter of 2024, was primarily driven by the amortization of customer relationships and other intangibles acquired as part of the Stericycle acquisition.
Restructuring
The increase in restructuring during the first quarter of 2025, as compared with the first quarter of 2024, was primarily driven by employee costs related to our acquisition of Stericycle.
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
2025
2024
Change
Collection and Disposal:
East Tier
$
661
$
654
$
7
1.1
%
West Tier
670
627
43
6.9
Other Ancillary
(3)
(2)
(1)
*
Collection and Disposal
1,328
1,279
49
3.8
Recycling Processing and Sales
18
19
(1)
(5.3)
WM Renewable Energy
19
21
(2)
(9.5)
WM Healthcare Solutions
(25)
—
(25)
*
Corporate and Other
(327)
(303)
(24)
7.9
Total
$
1,013
$
1,016
$
(3)
(0.3)
%
Percentage of revenues
16.8
%
19.7
%
* Percentage change does not provide a meaningful comparison.
The significant items affecting income from operations for our segments during the first quarter of 2025, as compared with the prior year period, are summarized below:
Collection and Disposal — Income from operations in our Collection and Disposal businesses increased primarily due to (i) revenue growth from price increases, which translate into increased yield or average unit price; (ii) special waste volume in our West Tier, which was favorably impacted by the wildfire clean-up activities and (iii) actions to improve the
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efficiency and operating costs incurred to serve our customers. These increases were partially offset by a decline in industrial collection volumes primarily due to lower contributions from temporary business.
Recycling Processing and Sales — Income from operations in Recycling Processing and Sales was essentially flat year over year. While certain costs attributable to maintenance and repairs and lease termination increased, we benefitted from the automation of our recycling facilities as well as investments in new facilities and improvements in commodity pricing.
WM Renewable Energy — The decrease in income from operations in WM Renewable Energy was primarily due to the value and quantity of RINs sold partially offset by an increase in energy prices related to extreme winter weather.
WM Healthcare Solutions – Our WM Healthcare Solutions segment generated a loss of $25 million during the three months ended March 31, 2025, which was largely attributable to (i) depreciation and amortization expenses and (ii) integration related expenses. There was no activity for this segment during the first quarter of 2024, as Stericycle was acquired in November 2024.
Corporate and Other — The decrease in income from operations was primarily driven by (i) integration related consulting fees in connection with our recent Stericycle acquisition and (ii) an increase in risk management expenses as referenced in Operating Expenses above.
Interest Expense, Net
Our interest expense, net was $232 million and $130 million during the three months ended March 31, 2025 and 2024, respectively. The increase is primarily related to an increase in our average debt balances to fund our November 2024 acquisition of Stericycle.
Income Tax Expense
Our income tax expense and effective income tax rates were $151 million, or 19.2%, and $162 million, or 18.6%, for the three months ended March 31, 2025 and 2024, 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. The provisions of the IRA concerning investment tax credits are expected to generate a cumulative benefit ranging from $300 million to $400 million, $145 million of which was recognized in 2023 and 2024 with the remainder anticipated to be realized in 2025 and 2026. The expected benefit from the investment tax credit for 2025 and 2026 is dependent on a number of estimates and assumptions, including the timing of project completion. Additionally, we expect that the production tax credit incentives for investments in renewable energy and carbon capture, as expanded by the IRA, could result in an incremental benefit to the Company, although at this time, the anticipated amount of such benefit has not been quantified due, in part, to the lack of regulatory guidance .
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
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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.
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,
2025
2024
Cash and cash equivalents
$
216
$
414
Restricted funds:
Insurance reserves
$
519
$
385
Final capping, closure, post-closure and environmental remediation funds
131
128
Other
4
—
Total restricted funds (a)
$
654
$
513
Debt:
Current portion
$
954
$
1,359
Long-term portion
22,883
22,541
Total debt
$
23,837
$
23,900
(a) As of March 31, 2025 and December 31, 2024, $100 million of these account balances were included in other current assets in our Condensed Consolidated Balance Sheets.
Debt — As of March 31, 2025, we had approximately $3.8 billion of debt maturing within the next 12 months, including (i) $1.5 billion of short-term borrowings under our commercial paper program (net of related discount on issuance); (ii) $1.3 billion of tax-exempt bonds with term interest rate periods that expire within the next 12 months, which is prior to their scheduled maturities; (iii) $500 million of 0.75% senior notes that mature in November 2025 and (iv) $454 million of other debt with scheduled maturities within the next 12 months, including $298 million of tax exempt bonds. As of March 31, 2025, we have classified $2.8 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 $954 million of debt maturing in the next 12 months is classified as current obligations.
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Guarantor Financial Information
WM Holdings has fully and unconditionally guaranteed all of 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, 2025
December 31, 2024
Balance Sheet Information:
Current assets
$
24
$
15
Noncurrent assets
14
14
Current liabilities
877
1,367
Noncurrent liabilities:
Advances due to affiliates
15,909
15,328
Other noncurrent liabilities
20,464
20,140
Three Months Ended
March 31, 2025
Income Statement Information:
Revenue
$
—
Operating income
(230)
Net loss
(170)
Summary of Cash Flow Activity
The following is a summary of our cash flows for the three months ended March 31 (in millions):
2025
2024
Net cash provided by operating activities
$
1,208
$
1,367
Net cash used in investing activities
$
(829)
$
(755)
Net cash used in financing activities
$
(536)
$
(737)
Net Cash Provided by Operating Activities — Our operating cash flows decreased by $159 million for the three months ended March 31, 2025, as compared with the prior year period, driven by (i) higher cash interest due to additional debt incurred to fund our acquisition of Stericycle; (ii) unfavorable changes in working capital, net of effects of acquisitions and divestitures and (iii) higher annual incentive compensation payments. This decrease was partially offset by higher earnings in all of our segments, including the contributions from our recent acquisitions.
Net Cash Used in Investing Activities — The most significant items included in our investing cash flows for the three months ended March 31, 2025 and 2024 are summarized below:
● Capital Expenditures — We used $831 million and $668 million for capital expenditures during the three months ended March 31, 2025 and 2024, respectively. The increase in capital spending is primarily driven by (i) investments in capital assets such as trucks, landfills and equipment and (ii) capital expenditures within our WM Healthcare Solutions segment to support the business.
● Divestitures — Proceeds from divestitures of businesses and other assets, net of cash divested were $98 million and $15 million for the three months ended March 31, 2025 and 2024, respectively. Proceeds in 2025 primarily related to the sale of our WM Healthcare Solutions’ Spain and Portugal subsidiaries. The remaining 2025 and 2024 proceeds were from the sale of certain non-strategic assets.
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● Other, Net — The year-over-year changes 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, 2025 and 2024, we used $92 million and $90 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, 2025 and 2024 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):
2025
2024
Borrowings :
Commercial paper
$
4,993
$
4,412
$
4,993
$
4,412
Repayments :
Commercial paper
$
(4,708)
$
(4,528)
Senior notes
(422)
—
Other debt
(33)
(42)
$
(5,163)
$
(4,570)
Net cash borrowings (repayments)
$
(170)
$
(158)
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, 2024, we used $250 million to repurchase shares of our common stock under accelerated share repurchase agreements . In the fourth quarter of 2024, we announced our temporary suspension of share repurchase activity as a result of the acquisition of Stericycle. We expect to resume share repurchases once the Company’s leverage returns to targeted levels, which is currently projected to be about 18 months after the November 2024 acquisition of Stericycle.
● Cash Dividends — For the periods presented, all dividends have been declared by our Board of Directors. We paid cash dividends of $336 million and $307 million during the three months ended March 31, 2025 and 2024, respectively. The increase in dividend payments is primarily due to our quarterly per share dividend increasing from $0.75 in 2024 to $0.825 in 2025.
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.
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Our calculation of free cash flow and reconciliation to net cash provided by operating activities for the three months ended March 31, 2025 and 2024 is shown in the table below (in millions) and may not be calculated the same as similarly-titled measures presented by other companies:
2025
2024
Net cash provided by operating activities
$
1,208
$
1,367
Capital expenditures to support the business
(703)
(502)
Capital expenditures - sustainability growth investments (a)
(128)
(166)
Total capital expenditures
(831)
(668)
Proceeds from divestitures of businesses and other assets, net of cash divested
98
15
Free cash flow
$
475
$
714
(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, 2024. 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. While weather-related and other event-driven special projects can boost revenues through additional work for a limited time, due to significant start-up costs and other factors, such revenue can generate earnings at comparatively lower margins.
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
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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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Information about market risks as of March 31, 2025 does not materially differ from that discussed under Item 7A in our Annual Report on Form 10-K for the year ended December 31, 2024.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.