James Schumm

James Schumm, Director of Equity Research at TD Cowen, asked for the revenue split between document destruction and medical waste within WM Healthcare, and color on document destruction profitability and its future as a core business. He also questioned why the 2026 Collection and Disposal core price of 5.6% seemed conservative compared to 2025's 6.3%, inquiring about Q4 customer churn and the ideal churn rate.

Answer

President John Morris stated that WM Healthcare's revenue split is approximately two-thirds medical waste and one-third document destruction, viewing both as core collection, disposal, and processing businesses with strong margin expansion potential through integration. John Morris and CEO Jim Fish explained that the 5.6% core price for 2026 reflects a lag from declining CPI in 2025, which negatively impacts index-based price increases, while customer churn typically hovers around 10%.

James Schumm asked for the revenue split between document destruction and medical waste for WM Healthcare, and color on document destruction profitability and its future as a core business. He also questioned if the 2026 collection and disposal core price of 5.6% was conservative compared to 2025's 6.3%, and asked about Q4 customer churn and the right churn number.

Answer

President and COO John Morris stated the Healthcare split is about two-thirds medical waste and one-third document destruction, viewing both as core due to collection/disposal/processing competencies and integration benefits. He noted churn is around 10%. CEO Jim Fish explained the 5.6% core price for 2026 reflects a lag from CPI declines in 2025, impacting 2026 pricing, but emphasized strong margin performance.

James Schumm asked about the performance of the medical waste and document destruction businesses within WM Healthcare Solutions. He also inquired about quantifying the benefit of legacy Stericycle volumes going into WM landfills and sought clarification on a hazardous waste landfill impairment, specifically whether it was an incremental pursuit or an existing closure.

Answer

Rafael Carrasco (EVP Enterprise Strategy and President) explained that credits were primarily on the regulated medical waste side due to ERP frustration, leading to some churn but strong customer additions and renewals at low double-digit price increases. The auto shred business saw improved productivity. Devina Rankin (EVP and CFO) quantified the landfill internalization benefit as about one-fifth of the $80-$100 million synergy target for 2025. John Morris (President and COO) clarified that the impaired hazardous waste landfill was a non-operational site where an expansion pursuit was halted, reducing WM's disclosed hazardous waste landfills from five to four.

James Schumm asked for a breakdown of the performance between the medical waste and document destruction businesses within WM Healthcare Solutions. He also sought quantification of the benefit from internalizing legacy Stericycle volumes into WM landfills and clarification on the hazardous waste landfill impairment, including the current number of hazardous landfills.

Answer

EVP Enterprise Strategy and President Rafael Carrasco explained that credits were primarily issued on the regulated medical waste side due to ERP frustrations, but customer additions remain strong, with significant renewals at low double-digit price increases. He noted improvements in the auto shred (document destruction) business. EVP and CFO Devina Rankin quantified the landfill internalization benefit as about one-fifth of the $80-$100 million synergy value for 2025. President and COO John Morris clarified that the impaired hazardous waste landfill was not operational and was a long-term expansion pursuit, confirming WM now operates four hazardous waste landfills.

James Schumm of TD Cowen asked for the revenue split between medical waste and secure information destruction within WM Healthcare Solutions, its long-term EBITDA growth outlook, and the expected price/volume mix for its growth.

Answer

SVP Rafael Carrasco stated the revenue split is roughly two-thirds healthcare solutions and one-third information destruction, with a long-term top-line growth aspiration of 5-6%, balanced between price and volume. CEO Jim Fish added that the immediate focus is on fixing underlying ERP and system issues to improve customer onboarding and billing before aggressively pursuing top-line growth.

James Schumm questioned if there was anything structurally preventing the Stericycle business's SG&A from eventually reaching WM's corporate average of 9-10%. He also asked if Stericycle's former long-term growth targets (3-5% revenue, 13-17% EBITDA) were still appropriate.

Answer

EVP and CFO Devina Rankin stated that reaching WM's corporate SG&A level is the ultimate goal, with the only structural difference being a separate ERP system for the foreseeable future. Regarding long-term targets, she clarified that WM will provide its own specific 3-to-5-year outlook at its upcoming Investor Day and is not adopting Stericycle's prior guidance.

James Schumm of TD Cowen asked for an update on the most significant delays facing the RNG projects, whether all projects secured ITC eligibility by year-end 2024, and about the pipeline for incremental RNG opportunities beyond the current slate.

Answer

EVP and CFO Devina Rankin reported that they have better line of sight on previous delays like utility interconnects and feel more confident in the timeline, with all but two plants constructed by end of 2025. She confirmed all 20 U.S. projects are eligible for the ITC and that they are tracking a host of future opportunities, maintaining optionality on whether to self-develop or partner on them.

James Schumm questioned if Stericycle has a structurally higher SG&A cost profile compared to WM and asked for an update on the value contribution of OCC in the recycling revenue stream.

Answer

EVP & CFO Devina Rankin explained Stericycle's higher SG&A is partly due to its ongoing ERP implementation, a significant undertaking for its size. President & CEO Jim Fish added that the long-term goal is for Stericycle's SG&A to resemble a WM operating area (~5% of revenue), suggesting significant synergy potential. SVP & Chief Sustainability Officer Tara Hemmer stated that OCC represents 55-60% of the blended commodity value.

James Schumm asked about GFL's cost inflation expectations for next year, specifically whether it would be around 4% or potentially lower at 3.5%. Schumm also inquired about GFL's pricing strategy, including efforts to move away from CPI-based contracts, and how the one-time EPR benefits might impact 2026 pricing.

Answer

Luke Pelosi, CFO of GFL, projected 2026 cost inflation to 'squarely start with a 4%', driven by labor and benefits costs. Patrick Dovigi, CEO and Founder, explained GFL's strategy to move away from headline CPI for pricing, pushing for fixed increases or more favorable indices, particularly in municipal collection and post-collection assets. Pelosi added that 2026 pricing might be closer to 5% (down from 6% in 2025) as EPR benefits shift from price to volume.

James Schumm asked for more color on cost inflation expectations for next year, specifically whether it would be around 4% or potentially as low as 3.5%. Schumm also inquired about GFL's strategy to move off CPI for pricing, asking if they aim for CPI, water, sewer, trash, or a fixed 4% number, and how one-time EPR benefits might impact 2026 pricing, potentially leading to a larger move lower.

Answer

Luke Pelosi (CFO, GFL) expects 2026 cost inflation to "squarely start with a 4," citing labor costs (north of 3%), potential delayed impact of tariffs/regulations on spare parts, and medical/benefit costs accreting well north of 3%. Patrick Dovigi (CEO and Founder, GFL) explained that in Canada, they push for fixed price increases of high threes to 4% or price it in day one, as headline CPI doesn't reflect true costs. In the U.S., they seek more favorable indices than CPI or fixed pricing. Pelosi added that 2026 pricing would likely be closer to 5% than 6% due to the 75-100 basis points of EPR benefit in 2025 manifesting more in volume next year.

James Schumm of TD Cowen asked about the drivers behind GFL's lower exposure to economically sensitive C&D and industrial volumes compared to peers. He also requested an update on the company's fleet conversion progress to automated and CNG trucks.

Answer

Founder, Chairman, President & CEO Patrick Dovigi clarified that the lower exposure comment historically referred specifically to C&D volumes being sub-5% of revenue, while industrial exposure is more in line with peers. He added that the CNG fleet conversion is on track, with a significant ramp-up expected in 2026-2027 tied to new EPR and municipal contracts.

James Schumm requested an update on the EPR rollout, including potential future CapEx, and asked for an operational update on the GIP business, including its current EBITDA level and path forward.

Answer

CEO Patrick Dovigi stated that the EPR rollout will continue for another 1.5-2 years, with potential for a couple hundred million in additional CapEx if certain bids are successful. He confirmed the GIP business is past prior inflationary challenges and is on track to exit 2025 with a run-rate EBITDA of over $300 million. He also mentioned the company is exploring a potential partial monetization of GIP.

James Schumm inquired about the outlook for 2025, asking if another 100+ basis points of EBITDA margin improvement is possible and what the volume trend might be after recent contract shedding.

Answer

CFO Luke Pelosi gave a 'definitive yes' to the potential for another 100+ basis points of margin expansion in 2025. He also stated that with the largest part of the deliberate volume shedding now complete, he expects 2025 volumes to be 'closer to flat with the path to being up,' a significant improvement from the negative volumes seen in the first half of 2024.

James Schumm requested a detailed understanding of the 600N base oil market, including current pricing, historical peak-to-trough fluctuations, total demand, expected growth drivers, and end markets, given the significant SDA unit investment. He also sought clarification on the specific range for the SKSS segment's 2025 Adjusted EBITDA guidance and the confidence level in achieving the $140 million midpoint.

Answer

Mike Battles (Co-CEO) explained that 600N base oil is primarily used in resilient industrial applications (gear oils, heavy-duty diesel engines, hydraulic oils), is less sensitive to electrification, and commands a consistent dollar premium over Group 2 base oil. He noted that the U.S. largely imports 600N, and Clean Harbors would be a small player in a large market, with the SDA model assuming pricing decreases but having levers for upside. Eric Dugas (EVP and CFO) expressed high confidence in the $140 million SKSS Adjusted EBITDA midpoint for 2025, attributing it to successful CFO initiatives and consistent service, declining to provide a specific range but suggesting it would be tight. Mike Battles (Co-CEO) added that $140 million is considered a new low-water mark for the segment.

James Schumm requested a deeper understanding of the 600N base oil market, including current pricing, historical peak-to-trough fluctuations, total demand, and growth expectations, given the significant SDA unit investment. He also sought clarification on the specific range for Safety-Kleen Sustainable Solutions (SKSS) adjusted EBITDA guidance for the year and the confidence level in achieving the $140 million midpoint.

Answer

Co-CEO Mike Battles explained that 600N base oil is primarily used in resilient industrial applications (gear oils, heavy-duty diesel engines, hydraulic oils) and is less sensitive to electrification. He noted it trades at a consistent dollar premium to Group 2 base oil, and the US largely imports it. The company's model for the SDA unit assumes some pricing decreases but has levers to offset, such as potential third-party VTAE. EVP and CFO Eric Dugas expressed high confidence in the $140 million SKSS adjusted EBITDA midpoint for 2025, attributing it to successful CFO initiatives and consistent service, suggesting a narrow range around that figure. Mike Battles added that $140 million is seen as a new low-water mark for SKSS, with growth expected from there.

Probed for more detail on the confidence in the SKSS guidance, specifically regarding FIFO accounting benefits, and asked about the nature of pricing and contract structures in the Environmental Services segment.

Answer

Confidence in SKSS guidance is supported by the move to a "charge for oil" model and the fact that lower-cost inventory is now flowing through the system via FIFO accounting, which will boost profitability in the second half. In ES, most major customer contracts are 1-3 years with disciplined, regular price reviews that continue to outpace inflation across all services.

James Schumm of TD Cowen asked about recent base oil pricing trends, whether the SKSS guidance accounts for recent weakness, and the current state of SKSS inventories. He also questioned the company's thinking on potentially divesting the SKSS business.

Answer

Co-CEO Mike Battles acknowledged lower base oil pricing but stated the team successfully offset this by doubling the average charge-for-oil (CFO) since year-end. EVP & CFO Eric Dugas added that lower collection costs have reduced inventory value, which will benefit Q2 margins. Regarding a sale, Battles explained the significant operational dissynergies with the SK branch business would risk creating a direct competitor.

James Schumm inquired about recent base oil pricing trends, the status of SKSS segment inventories, and whether the company's thinking has changed regarding a potential sale of the SKSS business.

Answer

Co-CEO Mike Battles acknowledged base oil price pressure but said it was offset by successfully implementing a charge-for-oil (CFO) model. EVP and CFO Eric Dugas added that lower inventory costs from the CFO model create a tailwind for Q2. Regarding a sale, Battles detailed significant operational dissynergies, including shared locations and the risk of creating a competitor to its profitable SK branch business, making a separation very difficult.

James Schumm asked for a bridge from Q3 to Q4 for subsea robotics, focusing on Q4 seasonality, vessel utilization, and the expected drop in trencher count. He also sought an update on two large North Sea tenders and clarification on the new well intervention contract's 150-day minimum commitment.

Answer

Scotty Sparks, Executive VP and COO, confirmed a drop from six to four trenchers in Q4 due to seasonal weather in Taiwan and the completion of a project for the i-Plough, noting that weather-dependent rates would be lower. For the North Sea tenders, he stated Helix is active on both, with one in a 'good position,' and anticipates activating the Seawell in 2026. He clarified that the new well intervention contract's 150-day minimum commitment is over three years, with a sizable kickoff for the Q4000 in early 2026.

James Schumm asked for a sequential bridge from Q3 to Q4 for subsea robotics, focusing on seasonality, vessel utilization, and the number of active trenchers. He also sought an update on two large North Sea tenders and clarification on the new well intervention contract's 150-day minimum commitment.

Answer

Scotty Sparks, Executive VP and COO, confirmed a drop from six to four trenchers in Q4 due to seasonality (Taiwan demobilization, North Sea weather, i-PAL project close) and clarified that 'lower rates' refer to weather rates, not operational rates. He stated they are active on both North Sea tenders, with one in technical clarifications and the other in a 'good position,' anticipating the Seawell's activation in 2026. He confirmed the new well intervention contract has a minimum 150-day commitment over three years, with a 'sizeable work' kickoff for the Q4000 in Q1 2026.

James Schumm of TD Cowen questioned the margin decline in the Robotics segment, the cost structure in the shallow water business, the timing of the Thunder Hawk well intervention, and the strategy for the stacked Seawell vessel in the weak UK North Sea market.

Answer

COO Scotty Sparks and CFO Erik Staffeldt explained the Robotics margin change was due to contract mix, with fewer high-margin lump-sum projects. CEO Owen Kratz and VP Daniel Stuart noted that while shallow water costs were cut, competitive and labor pressures impacted margins. Regarding Thunder Hawk, they cited the need for long-lead items and partner preference for a later intervention. On the Seawell, Kratz stated an upgrade is not currently cost-effective given the potential for a UK market recovery in 2026-2027.

James Schumm asked for a detailed bridge for the $75 million EBITDA guidance reduction, seeking to understand the specific impacts from the UK North Sea, Robotics, and Shallow Water segments. He also requested specifics on the North Sea business, including peak vs. trough EBITDA, stacking costs for the Seawell, and the 2026 outlook.

Answer

CEO Owen Kratz and CFO Erik Staffeldt confirmed the guidance cut was predominantly driven by the decision to stack the Seawell vessel due to weakness in the UK North Sea. Staffeldt noted peak two-vessel North Sea EBITDA was historically $80-$90 million, with the trough being near breakeven. COO Scotty Sparks added that Seawell's stacking costs are under $30,000/day and the vessel can be reactivated quickly if the market recovers in 2026.

James Schumm from TD Cowen asked about several operational items, including whether the Q3 hurricane-related revenue loss would be recouped, the EBITDA impact of production shut-ins, expected Q4 vessel transit days, the driver for lower 2024 EBITDA guidance, and ROV pricing trends.

Answer

COO Scott Sparks confirmed the $10 million Q3 revenue loss was a permanent impact and would not be recouped. CFO Erik Staffeldt quantified the Thunder Hawk shut-in impact at 'at least a couple of million dollars' for Q4 and noted the Q7000 vessel has approximately 63 transit days planned. Staffeldt attributed the lower full-year EBITDA guidance to the Q3 weather impacts and production shut-ins. Sparks projected a potential 10% rate increase for ROVs and 15% for trenching in the coming year due to a tight market.

James Schumm of TD Cowen asked about the high valuation multiples being paid for Environmental Services (ES) targets and whether this trend is causing a wider bid-ask spread in the M&A market.

Answer

CEO Jon Vander Ark acknowledged that ES multiples have increased, reflecting the significant value being created in the sector, but stated he is not seeing a widening of the bid-ask spread. He emphasized that the multiple paid depends on the quality of the asset, particularly its infrastructure and permits. Republic's focus remains on unlevered cash-on-cash returns, with the valuation multiple being an output of that analysis rather than a starting point.

James Schumm of TD Cowen asked about the high EBITDA multiples being paid for Environmental Services (ES) targets and whether this is leading to a widening bid-ask spread in the M&A market.

Answer

CEO Jon Vander Ark acknowledged that multiples have risen in both ES and solid waste over the last five years, driven by the value being created in the businesses. He stated he is not seeing a widening of the bid-ask spread. He emphasized that the multiple depends on the asset quality, with infrastructure-heavy targets commanding higher values, and that Republic's focus remains on unlevered cash-on-cash returns, with the multiple being an output of that analysis.

James Schumm asked for the revenue mix in the recycling business between fee-based services and commodity price-sensitive sales.

Answer

CFO Brian DelGhiaccio explained that for the recycling book of business specifically, the mix is approximately 50-50 between fee-for-service revenue from processing and revenue from the sale of the recycled commodities. He noted that more broadly, about 60% of the company's total business has a fee-for-service structure.

James Schumm asked for an update on the truck supply chain and the company's progress on fleet conversions to Automated Side-Load (ASL) and CNG.

Answer

CEO Jon Vander Ark confirmed the truck supply chain has caught up, allowing for a return to an optimal replacement cycle. He noted the fleet is approximately 77% automated with limited further opportunity. He also stated that the company is no longer investing in new CNG vehicles, prioritizing electrification as a superior technology.

James Schumm requested an update on the second-half revenue ramp and whether EBITDA breakeven targets remain on track. He also asked about customer pushback during sales negotiations.

Answer

CEO Dustin Olson reaffirmed that a revenue ramp is expected in both Q3 and Q4. He stated that the goal of exiting Q3 at a $4M/month revenue run rate (near Ironton breakeven) is still achievable, and corporate-level breakeven in the Q4-Q1 timeframe remains in play. Olson characterized customer hurdles not as pushback on price or quality, but as the time required to navigate the internal bureaucracy and build comfort and trust with large, established global brands.

James Schumm of TD Cowen questioned the sequential dip in collection pricing, the long-term growth outlook for the Resource Solutions segment, and the trajectory for capital expenditures as a percentage of sales.

Answer

EVP & CFO Bradford Helgeson attributed the pricing dip to business mix, as lower-priced roll-off is a larger component in Q2. Chairman & CEO John Casella stated that Resource Solutions is expected to grow rapidly, with major opportunities in the Mid-Atlantic. Regarding CapEx, Helgeson explained that spending fluctuates with landfill projects and is also elevated by upfront investments in newly acquired businesses to upgrade their assets.

James Schumm asked about the sequential decline in collection pricing from Q1 to Q2. He also inquired about the long-term growth outlook for the Resource Solutions segment and the rationale behind the company's seemingly high capital intensity.

Answer

CFO Bradford Helgeson attributed the pricing dip to business mix, as lower-priced roll-off activity is higher in Q2. CEO John Casella expressed confidence that the Resource Solutions segment will continue to grow rapidly, especially with new opportunities in the Mid-Atlantic. Regarding CapEx, Helgeson explained that it fluctuates with landfill development and is also elevated by significant upfront investment to upgrade newly acquired assets to Casella's standards.

James Schumm of TD Cowen sought to clarify how much of the $50 million in annualized revenue from recent acquisitions was incremental to guidance and asked about the dynamic between lower overall disposal volumes and higher landfill volumes.

Answer

CEO John Casella and executive Ned Coletta clarified that $10 million of the $50 million in acquisition revenue was incremental to the initial guidance. Coletta then explained that weak roll-off activity, particularly in the eastern markets, suppressed transfer station volumes, which are included in the broader 'disposal' metric. This headwind made the strong performance of the landfills, driven by internalization and C&D recovery, even more notable. He also mentioned a strong seasonal uptick in activity in April and May.

James Schumm of TD Cowen sought to clarify how much of the $50 million in annualized revenue from recent acquisitions was incremental to the company's guidance. He also asked for an explanation of the dynamic between declining disposal volumes and rising landfill volumes.

Answer

CEO John Casella and Executive Ned Coletta clarified that $10 million of the $50 million in M&A revenue was incremental to the guidance provided in February. Ned Coletta then explained that the divergence in volumes was due to weak roll-off activity impacting third-party transfer stations, particularly in the eastern markets, which in turn highlighted the underlying strength of the landfill business driven by internalization and direct sales efforts.

James Schumm of TD Cowen requested an update on the 2026 spending estimate for the Chiquita landfill, a breakdown of current costs, and clarification on the recycling business model.

Answer

CEO Ronald Mittelstaedt stated it was too early to update 2026 estimates for Chiquita but noted that leachate management accounts for about 70% of current costs. He added that the EPA's role is to clarify jurisdiction, not override state laws. CFO Mary Whitney explained that most recycling is part of a broader service offering, giving the company full exposure to commodity price risk.

James Schumm of TD Cowen asked why 2025 guidance wasn't raised despite a strong price-cost spread, inquired about the volume progression for the year, and questioned the drivers of the SG&A increase.

Answer

CFO Mary Anne Whitney explained that the company's standard practice is to update full-year guidance at mid-year, not after Q1. She attributed the higher SG&A to acquisition-related expenses and incentive compensation. Executive Ronald Mittelstaedt detailed that the baseline volume outlook is around -2% after accounting for purposeful contract shedding, with the final result depending on economic activity in special waste and C&D.

James Schumm from TD Cowen asked about churn rates in non-franchise markets and the ability to sustain price increases, and questioned whether large volume diversions to the Arrowhead landfill could impact pricing in the Northeast.

Answer

Executive Ronald Mittelstaedt reported that churn rates continue to improve and are now back to pre-2020 levels, with price increase retention remaining strong at 85-90%. He explained that the Arrowhead landfill diversions are having a de minimis impact on aggregate Northeast pricing, as they primarily internalize WCN's own volumes and can actually boost local pricing by freeing up capacity for third-party waste.

James Schumm, on for Saree Boroditsky, asked for more detail on the CPG market recovery path and inquired about the company's ongoing portfolio optimization strategy, including its scope and potential impact.

Answer

President and CEO Jennifer Honeycutt outlined the CPG recovery as progressing from consumables and spare parts to equipment upgrades, noting they are well into this process. On portfolio optimization, she stated that every product line must 'earn its right' to remain, and Veralto will continuously assess underperforming lines for investment, attenuation, or divestiture to improve the company's overall growth and margin profile.